Baby Boomers' retirement will be nothing like their parents and this could be said of nearly every generation. However, Boomers today face fundamental challenges to the American retirement paradigm that has held firm for the past 75 years.
Most consumer research on retirement focuses either on retirement aspirations of the more affluent, the sliver of Americans that control most of the country's assets, or on the dearth of retirement savings across the general population. The Center for a Secure Retirement's March 2011 study of middle-income Boomers, those earning $25,000 to $75,000 annually, reveals how conceptions of one's retirement age, activities and legacy are fundamentally changing.
The Silent Generation, those born between 1925 and 1945, grew up in the shadows of the Great Depression and World War II. The worldview of many in this age group focused on hard-work, frugality, savings, and protecting one's family. In 1935, the Social Security Act established funding and an expectation of retirement beginning at age 65.
At that time, less than half of the population reached this age. Retirement was viewed as an opportunity to travel and spend time with one's children and grandchildren, often passing along an oral (rather than monetary) legacy.
Baby Boomers' childhood memories are less likely about economic woe and war than about prosperity and growth. Advancements in education, healthcare, technology, and infrastructure created a world of abundance for boomers.
The increase in life expectancy has been profound. A Boomer born in 1960 is likely to live 10 years longer (to age 70) than a parent born in 1930. What had been an uncertain retirement dream has become a retirement privilege of five or more years. And this trend is expected to continue. Britain's department of Work and Pensions notes that baby girls born in 2011 have a one in three chance of reaching age 100.
Demographic Cross-Currents
The clash among these demographic trends and out-dated retirement expectations results in three challenges for Boomers and the financial professionals that advise them. First, a longer life does not necessarily mean a healthier one. Second, Boomers must re-evaluate the balance between work and retirement. Finally, for most middle-income Boomers, leaving a legacy must be redefined beyond solely monetary measures.
While Boomers are living longer, they are not living healthier. Rates of heart disease, cancer, stroke, diabetes, hypertension and obesity have all increased between 2000 and 2009 for individuals age 45 to 64. Today, 5.4 million Americans are living with Alzheimer's disease. By 2050, as many as 16 million Americans will have the disease.
In light of these trends, the Center for a Secure Retirement study found that 81% of middle-income Boomers expect that their retirement will be a time for staying physically fit and healthy living, which corresponds to the top worry of 80% of Boomers— uncovered healthcare expenses.
