“The pig in the python,” demographers call them: America’s baby boomers, 76 million strong. Born between 1946 and 1964, the healthiest, best educated, and most prosperous generation in history, they have reshaped American society at every stage in their turbulent lives.
Now, as the oldest of them move into their sixties, they are changing America again. They’re reinventing retirement, in part by choice and in part by necessity, with consequences that will reverberate far beyond their individual lives.
Most of them expect to keep working for many more years. But they want something more than more of the same. They’ll work to preserve their assets and gain additional income, for the intellectual stimulation or the social interaction or to keep learning and growing. But they want all the promised benefits of retirement, too, including more flexibility, more control of their time, and more time for family and friends, grandchildren and travel, old hobbies and new interests.
The challenge—for them as individuals, and for their employers and advisors—will be to design a way to work that makes that possible.
The Boomer’s Dilemma
By 2025 the national age profile will match that of retirement haven Florida today, with roughly one out of five Americans over 65. But sixty and seventy will look and behave differently. Today’s 70 year-old is as vigorous as the 50 year-old of the last generation, while today’s 50-year-old in good health stands an even chance of living to be 100, according to the World Health Organization.
Boomers overwhelmingly have positive expectations of what retirement will be like, according to a study by corporate builder Dell Webb. Seventy-five percent say they will be happier after they retire, and more free to be themselves. They just aren’t sure how they’ll pay for that new freedom. Only a third thinks they’ll have enough money to live comfortably once they reach retirement age. One-fourth expects never to have enough money to retire at all. The rest aren’t sure what to expect, but none expect that social security will meet their needs.
They’re right to be worried. The average balance in 401(k) plans in pre-retirement households (ages 55–64) is only $55,000, while the nation’s savings rate hovers near the lowest point since the Great Depression. So the Boomers will need to work. But they’ll want to work differently, to satisfy both their financial and personal needs and their retirement desires, and all at the same time.
The AARP study of Working in Retirement found that 69% of individuals between the ages of 45 and 74 who were either working or looking for work plan to continue to work in some capacity in retirement years. While financial need was the primary incentive they gave, these workers reported that they like work and enjoy being productive and feeling useful. A 2005 study conducted by the Heldrich Center for Workforce Development and the Center for Survey Research and Analysis likewise found that 77% of Boomers expect to work in some manner in their “retirement” years, including 15% who expect to start a business. A similar survey conducted by the MetLife Foundation and Civic Ventures discovered that half of all Americans ages 50 to 70 want to work, specifically helping others.
As they move into their sixties the Boomers have opportunities beyond anything any earlier generation in history could have imagined. They can invent a retirement life that will include a variety of work options that keeps them active, productive, and energized. But it will take focus, energy, and courage to turn their opportunities into reality, along with support from employers and advisors.
The Employer’s Imperative
The aging of the Boomers presents complex challenges to the corporations and universities who employ them. Many face the prospect of watching their most valuable assets walk out their door for good when they hit retirement age, taking much of the organization’s knowledge and skill base with them. They will need to develop policies, procedures, and programs that let their most valuable older workers forge a new kind of connection with the organization within the framework of a working retirement.
Other employers will face the challenge of keeping their organization fully staffed as the pool of available workers ages. US Bureau of Labor Statistics data show that highest growth in the available workforce over the next ten years will be among 55–64 year olds (52%) and among over 65 year-olds (30%). In the same timeframe, employment among 35–44 year-olds will fall by 10%.
Immigration and outsourcing will not be sufficient to close the expected workforce gap. Instead employers will need to understand the demographic trends within their organization, and muster the resources to meet them. Success will depend on the development of individual services and group programs for older employees, customized to meet larger strategic objectives and to reflect pension policies and law, health care options, company policies and corporate goals.
The Advisor’s Mandate
Professional service firms have a particular responsibility to help Boomers smooth the transition into a working retirement. The need is clear: fewer than 4 in 10 high net worth Boomers currently have any professional assistant helping them address the financial issues they will face in retirement, according to a study conducted by The Phoenix Companies. These wealthy Boomers feel a need to “assure a comfortable standard of living during retirement,” but they also want to retire from full time work early, the study continued. Who will help them find ways to maintain and enrich their life styles in retirement?
The opportunity is clear. By helping new and potential clients address their needs and concerns about a working retirement, wealth managers, lawyers and financial planners can build broad and deep client connections—and help their clients keep their asset pools healthy at the same time. Such services build more than good will. They build a competitive differentiator, and a powerful marketing and branding tool.