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Companies from RV manufacturers and cruise lines to retirement communities have been planning for the Baby Boomer mass retirement. They hope to profit by selling to tens of millions of relatively young boomers with large nest eggs and decades of free time ahead.
But this may not make for a good business plan as fewer of the 78 million boomers will be rich enough or young enough at retirement to meet those businesses catering to boomer retirees. This shortfall is the focus of a new study co-authored by Kevin P. Coyne of Atlanta's Coyne Partnership. In coming decades, "the size and growth rate of the U.S. retirement market will be much smaller than is widely believed," he says. Other experts are reaching the same conclusion.
Boomers face falling stock and housing values plus skyrocketing health-care and energy costs. These are all reasons to stay on the payroll. Meanwhile, stock losses have led 14% of retirees to consider returning to work, according to the AARP.
For financial and social reasons, the propensity to delay retirement is increasing, Coyne says. The total number of retirees over the next two decades will grow by less than 3% per year, on par with the overall population, and could fall to as low as 1%, he says. By 2017, this will lead to some 5 million to 10 million fewer retirees than some marketers have been counting on. According to the Bureau of Labor Statistics, 54% of 60-to-64 year-olds are in the labor force, up from 47% since the last business-cycle peak in 2000.
With divorce rates up, more boomers are depending on one income. Many have children just entering college. And a greater number of women now hold white-collar jobs, which are less physically taxing and so easier to stick with than jobs women held in the past. What's more, boomers make up the first generation to fund retirement partly from finite pools of savings instead of wholly from guaranteed-for-life pensions.
Source: Demographics, BUSINESSWEEK, May 26, 2008
