Boomers Are Doing U-Turns On Aging, Retirement
Over the past four years, insurance and financial services marketers have been quietly dropping boomer lingo from materials they aim at the baby boomer market, or those born between 1946 and 1964.
Instead of saying, for instance, “retirement planning for boomers,” they use nongenerational terms like life stage, life cycle and wealth planning.
The reason? Boomers, especially older boomers born from 1946 to 1954, have increasingly been linked, in everyday parlance, with seniors, elders, mature people, and the gray-haired set–and boomers are said to not like that. Some boomers dont mind being called “prime of lifers,” says Jeff Sadler, a co-founder of the Center of Senior Studies, but they shun references to aging.
The drop-off in boomer nomenclature has been accompanied by a reduction in boomer marketing units and boomer specialists. The shift has been so pronounced as to make some observers wonder whether the financial services industry is actually abandoning this market.
To find out, National Underwriter went to demographers who track this age group and the industries that serve it. Their thoughts appear in this article. The piece is part of NUs ongoing look at the pending financial plight of boomers and the financial industrys response to it.
The demographers say this: The financial industry has not abandoned the boomer generation. In fact, a few firms are actually targeting it, albeit by marketing to its needs rather than its age group moniker. But, they say, the individuals in this generation face crisis-sized financial issues as they move into retirement, and the industry is not doing enough to get ready to help them meet these needs.
The industry needs to address both younger and the older boomers, says Matthew Greenwald, president, Matthew Greenwald & Associates, Washington, D.C. He cites three reasons:
Together, boomers form a gigantic population, numbering 77 million. (“The number used to be 76 million,” he says, “but immigration trends have pushed that up to 77 million.”) In the 1990s, a lot of financial companies targeted the top 10%, or high-net-worth, part of this market, he says, but “the next 70%, or the middle market, represents a huge market opportunity.”
This age group is “reasonably affluent,” Greenwald says. Thats especially true of older members, he adds, but the younger members–born between 1955 and 1964–soon will become affluent, too, as their 401(k)s grow and as they come into inheritances. That means they will have need for financial advice and products.
Boomers will live longer than their parents, have fewer adult children to care for them in old age, and be unable to rely on traditional pensions to fund their retirement. These trends also suggest boomers face multiple financial issues the industry can meet, he says.
“Society needs to focus on these trends in the regulatory structure, benefits structure, financial outlook and financial products designed for this market,” Greenwald says.
Do it as politicians do, he suggests. “Focus on the issues and needs of the group, not on the age of the group. For instance, dont talk about boomers; instead, focus on accumulating money for retirement, drawing down income during retirement, living too long, managing money without earning it, and responsibilities to children and heirs.”
“Preparing for retirement is the number one issue for boomers today,” agrees Charles Hurst, director of research and database marketing for Age Wave Impact, Emeryville, Calif.
Unfortunately, he says, a lot of boomers, and the advisors who serve them, dont know how to deal with it.
In the 1990s, he explains, “boomers thought they could just keep on working to finance their advanced years, if necessary. Some were also counting on the transfer of wealth from inheritances.”
But the stock market downturn of the past two years has changed things, Hurst says. Boomer assets have shrunken, and so has boomers confidence in their ability to keep on working to make up for shortfalls. Now, he says, boomers are increasingly questioning whether they will have enough money to finance their retirement.
In a sense, that is a positive development, Hurst says, because “boomers are at least aware of some of the problems they may face in retirement.”
The oldest boomers, now turning age 57, may even be facing a crisis, Hurst says. For instance, if they have lost their jobs, they may be unable to find comparable work elsewhere or they may not be able to earn enough to rebuild what they lost. For them, a less than comfortable retirement may lie ahead.
Skilled and professional older workers, who can find new jobs, have a better chance of recouping losses than their unskilled peers, Hurst says. And younger boomers, who have more years to work, should recover, too, he says. But even these more fortunate boomers may face a crisis, he warns, because “many do not know whether they can afford to retire, how to go about setting up an income stream, and how to plan for it now.”
Further, even though many have 401(k) plans, research shows many boomers are not saving nearly enough for retirement, Hurst says. In addition, “a lot of boomers are confused about what to do with the money they do save.”
Thats right, says Borden Ayers, principal of The Diversified Services Group Inc., Wayne, Pa. “In addition, many boomers dont know how long they will live or what their lifestyle will be. Its daunting to deal with this alone.”
This is aggravated by the fact that boomers generally have not taken a long-term approach to their finances, Ayers adds.
“Studies we did of consumers throughout the 1990s found that everyone was pretty complacent about their retirement future, especially the younger people. The stock market kept going up, so they thought they would be able to retire earlier than their parents and take more investment risks than their parents. They focused on accumulating wealth, and the financial services industry focused on providing products that would help them do that.”
Now, though, boomers are becoming aware they need a long-term strategy for their retirement, he says.
He, too, terms their predicament a crisis, “because they dont know what to do and because little is being done about it.” They especially dont know how best to draw down income during retirement, he adds.
Simply put, boomers need advice in these areas now, while they are still working, Ayers insists. Greenwald concurs: “This is the time; the industry should develop those relationships now.”
Some asset allocation engines do exist; some financial advisors do retirement income planning, and a few insurance companies have debuted modernized income products and services, Ayers allows.
“But the large majority are still focused on building and marketing asset accumulation products,” he says. Very few have tackled the retirement income issue.
Some advisors say they have all the products they need for boomers, Ayers points out. But he says a lot of them do not know about the newer product designs, and many lack sufficient education in helping clients structure retirement income.
Some companies do want to develop more products and services for this market, he notes. But many, pointing to the economy, say they cant allocate resources to this right now, he adds. The rating analysts compound this hesitance, Ayers says, because “they downgrade companies if the ROI is not there” right away.
Boomers will soon start pulling money out of their 401(k)s, Ayers points out. If financial providers do not have rollover products (such as modernized income annuities) ready to offer at this time, and if providers do not offer income education and advice to such workers, he cautions, “the insurance industry will miss the market. The money will go somewhere else, outside of the industry.”
It might go into systematic withdrawal plans offered by securities firms, for instance, or into trusts at a bank.
Many boomers are uneducated about what to do with their 401(k) money, Ayers stresses. “They dont think of it as an alternative to a pension. They think of it as personal wealth, like money in the bank from which they will take interest but not principal.” If the industry does not educate these individuals on how to use 401(k) money to create their own pensions, Ayers says, the money will be forever lost to the industry and the individuals will be making financial decisions that may not support the kind of retirement they desire.
In a go-go stock market, someone might be able to live off interest earnings and Social Security, he explains. But in a down market, that may be impossible for many to do.
Bottom line? “The industry needs to step up to the plate and educate workers and their advisors about what they are likely to need in retirement,” Ayers says. “It also needs to spend some money to research and develop products that meet the retirement needs of this market.”
The boomer market? No, he says, in step with the trend to de-boomerize discussion. “Were talking here about the pre-retirement market.”
Reproduced from National Underwriter Life & Health/Financial Services Edition, October 28, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.