For many Baby Boomers the word “retirement” evokes images of 50-something parents hanging it all up to relax and enjoy life. It appears that Baby Boomer Retirement Living will look very different for a number of reasons.
World War II and Companies in USA
During World War II, much of the world’s manufacturing capacity was turned into rubble. As companies rose to fill the needs of the world, U.S. manufacturing jobs grew. The middle class was born as rising wages for blue collar workers helped usher in an era of prosperity.
Even without a college education, many of our parents earned enough to raise a family on a single income. Unions grew strong and negotiated forcefully for wage and benefit increases that helped keep our parents loyal to their employers.
Baby Boomer Retirement Living and Their Children
Interest rates and home prices were low enough that many blue collar workers could afford to build new homes in the suburbs. Their wives often stayed home and cared for their Baby Boomer children who went to brand new schools, played in safe parks, and rode bikes on streets that weren’t clogged with traffic.
While most of our parents hoped that their children would attend college, many good paying jobs that didn’t require a degree were available as Baby Boomers came of age. As many quickly left home after finishing high school or college to start families of their own, many of our parents were able to save for retirement during their peak wage earning years as they were often done with child, mortgage and education expenses.
In the early 1980’s, the government battled price and wage inflation by raising interest rates. For our parents who were able to save some money by then, the benefit of earning 15% or more on those savings for years cannot be ignored. Many retired with a nicely padded bank account due to the government’s efforts to stem inflation.
Many of our folks lived in the same house for years and for the most part, the value of those homes rose. Real estate often proved to be a good, if often only one-time investment for our parents. With mortgages often paid in full by retirement, the proceeds from selling a home often provided a major portion of retirement savings.
For many of our parents, retirement was largely funded by generous pension plans that included health insurance. There were no concerns about Social Security or Medicare going under and for many, those programs adequately boosted personal savings and private pensions to help create a comfortable retirement filled with choices and leisure.
Baby Boomers benefitted from the prosperity enjoyed by their parents even though our sheer numbers meant that we would always have to compete with each other for jobs, housing, good colleges, etc. We grew up largely during a time when fathers worked and mothers stayed home, when jobs weren’t sent overseas, when blue collar workers could buy or build their first home in the suburbs, and when children could get a college degree without incurring hundreds of thousands of dollars of student loan debt.
Many blessings have been showered upon Baby Boomers even as our sheer numbers have brought untold benefits to our economy. Our buying power has created huge demand in all areas of our economy. But the world has also changed substantially during our lives and our “normal” would have made our parents’ knees buckle.
Home prices rose quickly as 76 million people came of age and sought to get into the market. Many Boomers couldn’t afford to follow their parents’ path of buying or building a nice home in the quiet, safe suburbs because homes cost far more than they had when their parents came into the marketplace. Instead, Boomers often bought “starter” homes, lived in them a few years, and then parlayed increasing values into better homes in nicer areas. Rising home prices often required buying and selling several times before achieving the dream home in the preferred neighborhood.
As interest rates exploded in the early 1980’s, mortgage rates also rose, pricing many out of the market. For those who could still participate, more income went to housing costs than ever before. Waiting until you could “afford it” wasn’t wise because prices were rising so fast that waiting might price you out of the market for good. Those who jumped in rode a wave of ever increasing prices, rapidly growing equity, and as they parlayed and moved to better homes in nicer areas, rapidly rising mortgage costs. For many Boomers, the cost of housing continued to rise during their wage earning years.
Most Boomers found it impossible to stay in one job for an entire career like our fathers did. As jobs disappeared and new ones took their places, our responsibilities and the skills required also changed. We adapted, retrained, and went back to school to meet ever changing workplace challenges and take advantage of new opportunities. We’ve embraced new technology and increased productivity to remain employed even as employers have become far less loyal to their employees.
Unions fell out of favor during our careers and their protections were lost to many Boomers. Defined benefit pension plans helped keep our fathers’ retirement dreams safe. For Boomers, those dreams became less certain as defined contribution plans shifted the responsibility of creating a financially secure retirement from employer to employee. The traditional “three-legged” stool of retirement income – personal savings, defined benefit pension plan, and social security – had become a little less stable.
IRA’s and 401K’s were designed to bridge the gap and help us create the wealth required for a secure retirement income stream but the stock market collapse of 2000 wiped out more than half of many Boomer retirement accounts. A rising market helped many regain lost ground but the economic tsunami of 2008 put many Boomer portfolios under water again. As retirement nears, the faithful continue to invest but see their efforts bear little fruit. As our government tries to spur our broken economy, interest rates remain historically low and Boomers are not earning enough interest on their savings to have a positive impact on their financial health in retirement.
Home values which had soared during most of our lives have now dropped over 50% in many markets. Many Boomers find themselves “under water” on their mortgages and owe far more than their homes are worth today. With loan requirement growing more stringent, those who would buy are often prevented from doing so. Most Boomers hoped to sell their homes and use the proceeds as a large portion of their retirement savings and can now ill afford to sell. Their homes, once major retirement savings vehicles, have become depreciating assets that are threatening their financial futures and reducing their retirement options.
Being the sandwich generation has also had an impact on Boomers’ ability to save for retirement. Their children are often still living at home well past the time that Boomers went out on their own. Boomers may also be helping their elderly parents. The strain to their financial health cannot be overstated as they continue to help pay for tuition, rent, food, etc. and perhaps help their parents with medical or other bills and home health care costs during the years that they should be saving for retirement.
The recent economic turmoil has cost many Boomers their jobs. As some of the highest paid employees, they were often severed as companies sought to cut costs. While unemployment for younger generations is far higher, unemployed Baby Boomers remain on the sidelines for over twice as long and a large percentage of the “99’ers” (those unemployed for over 99 weeks) are Baby Boomers.
Out of work during what should be their highest wage earning years will change their retirement outlook – likely for good. As they draw down what savings they had, including their IRA’s and 401K’s to pay living expenses, their ability to retire comfortably may be lost. With few employers anxious to add older workers to their payrolls, the ability to grow their savings will disappear. Throw in the uncertainty over the future of Social Security and Medicare and you can see that Boomers do not have the same certainty about their retirement as their parents enjoyed.
The “three legged stool” of retirement income – pension, savings, social security – has had its legs cut off for many Boomers. Self-funded pensions decimated twice in less than a decade in volatile financial markets, personal savings rates that were low by our parents standards now strained by unemployment or expenses that our parents often did not have later in life, and Social Security and Medicare funding issues all serve to make retirement look far different for Boomers than for our parents’ generation.
Perhaps the silver lining is that for many Boomers, retirement dreams did not include idling away their remaining years living off of their investments and other income streams as they walked the beach or played 18 rounds seven days a week.
Many look forward to retirement as a time when they can do other things that interest them. For many, a hobby may well become a business and a source of retirement income. For others, a new career helping others may be on the horizon. Still others will share in the classroom what they have learned over a lifetime. Others will finally take their inventive idea to the marketplace or create an innovative new product or service to fill an unmet need. Hopefully, they will hire other Boomers to work for their companies.
Boomers have spent their lives driving demand in the marketplace due to their huge numbers. As we age, we will continue to demand new products, services and features that will help us stay active, healthy, alert, and able. We will seek out and purchase products and services that will help us age in place, make life easier, more convenient, more satisfying, help us stay in touch with families, and remain safe. Those who tap into those wants and needs will find a marketplace that is receptive to their offerings.
There is a lot of opportunity knocking and Boomers may well fill some of those needs during “retirement” as entrepreneurs. Statistics show that the fastest growing entrepreneurial segment is the over 50 crowd and there is little reason to expect them to sell or close their businesses just because they reach the “magic” age of 65. They will likely continue to produce products and jobs for many more years. Boomers have always been a driving market force. Why expect anything different as we “retire”?
About the Author: Shelly Scribe writes for www.myboomer2boomer.com, an information and resource site designed to help Baby Boomers find and support Boomer Entrepreneurs and other Boomer Friendly businesses, employers and products.