People retiring in the early years of the 21st century, the so-called baby boom generation, have witnessed a
revolution in the world of finance and investment during their working years. The forces of globalization assure that
their children, now in their earning years, face a future just as dynamic.
Deregulation of the securities, banking, and savings industries, starting in the 1970s, made a vast range of financial
and investment products and services available to people at all economic levels. It also led to abuses and financial
losses that required government intervention and a modernization of investor safeguards.
Merger mania in the "roaring 1980s" saw many of America's best-known corporations in hostile takeovers or
leveraged buyouts financed by junk bonds, giving rise to defensive tactics known by such colorful names as the
"poison pill," the "Pac-Man strategy," or the "white knight.'' Insider trading scandals were one result, but another was
the innovation of investment techniques designed to capitalize on the profit opportunities created by corporate
The 1990s brought corporate downsizing and restructuring, massive stock buybacks, strategic mergers on a global
scale, and a prolonged bull market fueled by corporate profitability, low inflation, and sustained economic growth.
With globalization, the world's economies, more free of trade and economic barriers, have become more
interdependent and in some ways more vulnerable. On the eve of the new millennium, political and economic turmoil
in Russia, floundering Asian economies, and a recession in Japan threatened markets in North and South America
and challenged the confidence of a new European Monetary Union with its common currency, the Euro, and its
promise of expanded financial markets.
The computer and advanced communications systems have created both greater simplicity and greater complexity in
the more unified world of finance and investment. By linking markets and processing massive information, these
systems have given rise to investment vehicles, transactions, and methods of managing risk not previously
The generation produced by the baby boomers must plan its personal finances in an economy offering less assurance
of future financial security. The restructurings of the 1990s made corporations more efficient but took their human
toll, just as the demographics that earlier created surpluses in the Social Security system became less favorable for
future recipients. The enormous growth of 401(k) and individual retirement accounts addresses this problem but also
points to its gravity.
The introduction of Roth IRAs, the lowering of long-term capital gains tax rates, and other provisions of the
Taxpayer Relief Act of 1997 and the IRS Restructuring and Reform Act of 1998, also recognize the increasing
importance of self-reliance in personal financial planning.