Financial Realities to Hit Retirement-Age Baby Boomers
For the developers of active adult communities, the 78 million baby boomers who are fast approaching their mature years are likely to provide some formidable challenges, according to speakers at last month’s “Building for Boomers & Beyond: 50+ Housing Symposium” in Phoenix. For a start, the vast majority of them aren’t planning on a traditional retirement, don’t want to move far from their existing home and don’t have the financial means to be able to live without a paycheck.
Baby boomers are responsible for half of all discretionary spending in the country today and have annual discretionary income of $750 billion, said LeRoy Hanneman, CEO of Element Homes and former president and CEO of Del Webb Corporation, “yet too many are unprepared financially for retirement.”
Only one in four of the boomers has invested assets of more than $100,000, one in three has less than $50,000 and by the time they reach retirement age, only one out of every two will have accumulated enough money to be able to support their current standard of living, Hanneman said.
“Nearly one out of two boomers believe they will outlive their money,” he said, “although that is a common fear among seniors.” Nevertheless, “there are interesting adjustments to be made.”
Only 15% expect to relocate to a place more than 150 miles from their current residence, Hanneman added, so the majority can be expected to consider “reasonably-priced active adult offerings within their own area.”
Setting 1943 to 1960 as the birth years for the baby boomer generation, which is a few years earlier than most demographers define it, Neil Howe, author of “Generations,” said that the oldest members of this group are relatively well off financially, but on average the net worth of boomers is trailing down and there is an “enormous drop-off” in the affluence of those who are age 45-54 compared to those who are 55-64.
“Late-wave boomers are much more likely to borrow against equity in their homes,” Howe added.
The baby boom generation is characterized by a growing ethnic minority share, a weakening middle class and a swiftly rising retirement age, he said. The median retirement age today is 62-63, he said, but only 10% of the people who are now in their 40s expect to be retiring that young.
“There is no date when they have to buy your home,” Howe said, so a soft sell is the best approach for baby boomers. “Bring them over to a place that has nice homes and leave the decision to them,” he advised.
Among the points that Howe said builders should stress to capture this market:
- An authentic lifestyle experience, “something signature about the place” and the use of “rediscovered” materials. Boomers are in a “search for something original, something that can’t be reproduced, or at least that mimics it.”
- Cultural leaders and a strong influence in marketing, boomers are looking for “what’s good, true and honest.” Brand marketing will resonate with inner-oriented boomers, who regard the meaning of the product as almost more important than the product itself. Advertisement of a product should emphasize “how good the people are who made it.”
- Informality and spontaneity are appealing in smaller, more intimate spaces conveying a message that “I am doing it my way here.”
- With an increasing dispersion of income within the baby boomer group, many will be at the high end of the market, stoking demand for customization and boutique niching.
- The housing should accommodate a busy lifestyle. Baby boomers have a healthy work ethic and “don’t want to get away from it all.” They like being serious, being engaged and they don’t understand the concept of “people with nothing to do.”
- Housing should also be able to accommodate extended families, with 25% of people in their 40s saying they want to have their children living with them some of the time.
- Hook-ups to information technology are vital, as are a natural and walkable setting; amenities geared to the boomers’ celebration of the cult of the body and belief in the spiritual approach to healing; and proximity to cultural hubs and opportunities to continue life-long learning.
To be avoided are:
- Large-scale development that seems overly planned.
- Large clubhouses that presume boomers are predisposed to sociability, when actually they don’t want to take part in many community activities.
- The suburban look, the appeal of price and ostentatious luxury are all turn-offs.
- Conventional financing.
- Age restrictions or marketing that implies retirement will be unwelcome. “One-third of the people coming into Sun City are still working. Words implying ‘senior’” create an image boomers don’t like to see in the marketplace.
“Don’t adapt a conventional product” to the active adult market, Hanneman said. “It won’t work. The purchase is not driven by job or family concerns and you have to deliver more of what they desire than their existing home. Tweaking existing product will lead to failure.
“The historical model of working to 65 and then retreating to the golf course is no longer a realistic dream for many” baby boomers, he said. Boomers “will pursue new career paths and a desire for learning.”
Hanneman cited survey research by Pulte showing that the household features preferred by boomers include: a laundry room; wiring for Internet access; a room that can function as a den, study or office; a covered porch; an entertainment space or family room; a large, eat-in kitchen; environmentally friendly features; and an alarm system.
“Boomers live large even if they have to struggle to afford it,” Hanneman said, and their lifestyle is lavish compared to their parents.
“Buyers want the whole package, which is often more important than the home itself,” he said. “They need a safe, secure and friendly environment.”