Baby boomers are often described as a generation which ardently values individuality. It is ironic, then, that "boomer" has become a generic description, one that now blandly describes a group rapidly approaching retirement age. Not surprisingly, this generalization creates an oversimplification, one that for the purposes of this article will be referred to as generic boomer thinking. This thinking narrowly focuses the boomer-related marketing and consultative efforts of insurance and financial services professionals, limiting their attention to retirement-specific products.
Admittedly, the following questions, which many professionals in the field have been asking, are important: "How are boomers different than seniors, and how will they purchase retirement products differently?" Certainly it is necessary and valid to recognize that delivering retirement products to the baby boom generation will require new thinking and a new approach. Unfortunately, merely asking how boomers differ from seniors does not account for the diverse nature of the boomer population, and therefore limits the communication and marketing opportunities with the millions of prospects and customers who comprise this generation.
By also considering how boomers differ from other boomers, including purchasing habits, financial advisors can prepare an entire portfolio of products tailored for millions of interested consumers, and avoid leaving significant opportunities untapped.
Who are the boomers?
Certainly the baby boom generation is not sneaking up on financial advisors. Most professionals in these fields can likely quote the following boomer basics:
- There are approximately 78 million boomers, or individuals born between 1946 and 1964, and this generation is approaching retirement.
- Boomers will be on the receiving end of a multi-trillion dollar transfer of wealth, which creates opportunity for financial and insurance agents.
- Boomers and current retirees view retirement from very different perspectives, as many boomers expect to work longer or retire to a more active lifestyle.
- Current levels of retirement savings may not be enough for many boomers to afford adequate health care or replace income at desired levels, and prevailing wisdom says we will see demand for long term care policies and annuities rise as a result.
- Age 62 is still four years away from receiving full Social Security benefits for people born between 1946 and 1954.
- Conventional wisdom says boomers plan to put off retirement longer than preceding generations as they look for new career challenges or continue in roles they enjoy.
- Conventional wisdom also holds that boomers are nervous about having resources to fund retirement, which would indicate they might continue working, especially since most are at a point in their careers where earning has peaked. A December 2006 study by The Center for Retirement Research at Boston College found that "a quarter of all boomers currently in their 50s will lack the resources needed to retire at the age similar workers have in the past and, in response, will want to stay on the job at least two years longer."
Who else are the boomers?
This is not to say any of the commonly reported boomer information is unimportant or untrue ... clearly, it is neither. However, it is critical to consider the entire breadth of the generation, particularly the micro-population of boomers actually approaching retirement.
Take a moment to consider the characteristics of the entire boomer population and how these can impact the financial and insurance purchase decisions made by this group:
- According to the U.S. Census Bureau, there are more than 30 million members of the boomer generation currently age 49 or younger,
- The class of 1964 included baby boomers. So did the class of 1982.
- Boomers born in 1946 voted for or against Richard M. Nixon in 1968. Boomers born in 1964 didn't vote in a Presidential election until Ronald Reagan was running for his second term in office.
- The last of the boomers didn't turn 21 until 1985.
For this article, mature boomers are defined as those born between 1946-1951; younger boomers as born between 1959-1964; and those born between 1952-1958 are middle boomers. It is helpful to consider key events that marked each decade from the past 60 years, noting the age of different boomers at the beginning of each period.
Although mature boomers turned 21 during a time of great tumult, their formative years were marked mostly by economic expansion and technological innovation. They were on the leading edge of space travel and witnessed great social hope. Manufacturing and urban development saw post-war resurgence and bedroom communities developed, offering an alternative to purely rural or urban upbringings.
Though the technological advancements seen by mature boomers were still manifest for middle boomers, their social experience was very different. Middle boomers reached 21 at a time when Watergate marked the culmination of a decade of social turmoil. War in Vietnam and a cultural war within the United States had been waging for much of their lives. The economy had also entered a slow period, leading to crisis levels in the mid 1970s.
Now contrast mature and middle boomers with younger boomers. Younger boomers turned 21 at a time when the economy had been rebounding and expanding, the country had seen a decade of relative peace and personal computing was changing the way they thought about the future. The service economy saw continued expansion, driving an expectation among younger boomers that white-collar employment was attainable.
This information does not capture the demographic differences within the boomer population. Factors such as real income, total number of households, number of dual income families, average age of pregnancy, life expectancy, available health care, education levels and divorce rates all changed significantly from the Silent Generation to the Boomer Generation, and then between mature and younger boomers.
The demographic differences combined with the obvious environmental differences faced by each sub-group resulted in a generation whose product requirements cannot be succinctly and generically described by one term.
So what does this mean to your business?
The intent here is not to debate the reality or importance of the mass shift in retirement requirements. In fact, there are many shared experiences which, along with differences, shape attitudes and buying behaviors. For example, there has been a significant decline in the number and amount of defined benefit plans, while there has been a significant increase in defined contribution plans. This has resulted in a tremendous change in the amount of risk taken on by this entire group as they plan for, yes, retirement.
Again, much of this is not new information. But while the data isn't new, the conversation certainly can be. A different perspective on boomers should leave us asking how the segments of this population consume both retirement and non-retirement products, and how does this impact the way insurance and financial advisors counsel their clients?
Here are a few examples to consider:
- Growth in real income + increased life expectancy + the desire to maintain an active lifestyle = boomers should be buying second homes and purchasing cars at rates above the previous generation.
- The number of households held by those age 45 to 54 rose from 14.5 million in 1990 to 23.4 million in 2005, according to the Census Bureau. Add to that the fact that a National Vital Statistics report found that the average number of births for women age 30-40 climbed steadily from 1965 through 2005. Millions of boomers still have children at home, and many can still benefit from college savings planning.
- Thirty million boomers age 49 and under represent a significant disability insurance opportunity.
- Most boomers are not close to qualifying for Medicare. As such, many still require managed care alternatives.
- Younger boomers still need life insurance for the same reasons as non-boomers: income replacement, final expense coverage, creating wealth for heirs, or creating a source of savings.
- Middle boomers have an additional reason to buy life insurance, according to the Insurance Information Institute: covering the Social Security "blackout period," or the time from when the youngest child leaves high school until the survivor applies for deceased spouse-based benefits at the minimum age of 60. If we assume someone is widowed at age 52 and has no children in high school, this "blackout period" leaves an eight-year hole in the household's income.
The baby boom generation is a complex collection of consumers. Try to prevent generic boomer thinking and remember that there is more to the boomer opportunity than selling retirement products. While it's true the shift from asset accumulation to income distribution is beginning for mature boomers, that time is still far off for middle and younger boomers. This younger population is making financial and insurance product decisions every day that should be contributing to your bottom line.
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