The Baby Boomers Enigma: Preparing an Unprepared Generation for Retirement
Baby Boomers-born between the years 1946 and 1964-are the wealthiest generation and yet the least prepared for retirement. They will live longer, but are no strangers to chronic illnesses. They love technology, but they use it on their terms.
As the world's largest generation ages, benefit administrators and employers face significant challenges in helping them navigate the new health care consumerism dynamic. As almost 10,000 Boomers reach retirement age every single day, the pressure continues to mount.
To lead Baby Boomers down a better path to retirement and long-term wellness, it's important to first understand what motivates this eclectic generation of more than 80 million individuals.
Where Boomers Started
Baby Boomers came of age in an era marked by intense social fragmentation. As teenagers and young adults, many of them fought in the Vietnam War (or protested it), got caught up in "Beatlemania," were engrossed in the works of Jack Kerouac and Allen Ginsberg, questioned their parents' traditional values and religious viewpoints, and fought for social justice in the world.
This confluence of global trends, events, and conditions during their formative years shaped Baby Boomers' perspectives on important issues-from religion and politics to personal finances and health and wellness. Though incredibly diverse, Boomers collectively thought of themselves as a unique generation-very different from those that had come before them.
Marketers and brands, eager to engage this burgeoning demographic, soon realized this was true: Baby Boomers were highly adaptable, saw the glass as half full, recognized their incredible opportunity to affect change, embraced optimistic, idealistic messages, and fought the good fight.
The good in the world-motivated them, and as such, "fear tactics," particularly about their future finances and health, were largely ineffective. This remains true today.
The New Retirement
Baby Boomers have fundamentally redefined every life stage they have touched-youth culture, corporate culture, and now, retirement culture. Adventurous, young-at-heart Boomers are changing what it means to age in America. As we continue to live longer (Baby Boomers have a life expectancy of 84 years), it has become clear that retirement is no longer a destination; it's an entire journey-often 20 to 30 years long.
It used to be that places like Boca Raton and Palm Springs competed for high-end retirement dollars; now they are competing with zip lining in Costa Rica. Instead of gated senior communities, recent retirees are headed to non-traditional destinations such as Austin, Texas, and Madison, Wisconsin to participate in growing art and culture scenes.
Rather than spending the day on the golf course, more and more recent retirees are contemplating encore careers where they can focus on their legacy and passions. And theoretically, they have the resources to do so.
This generation is the wealthiest ever-forecast to peak at almost $26 trillion in financial assets in 2029 before starting to gradually taper off in 2030. Now, this optimistic, idealistic, competitive and early adopting generation is intersecting with longevity. As a result, Boomers, their employers and the country as a whole are completely and utterly unprepared to pay for their retirement.
A Generation in Crisis
A reporter in Kansas may have described the Baby Boomer retirement crisis best, calling it "the country's biggest and most predictable train wreck." Today, just 24 percent of Baby Boomers are confident they will have enough savings to last throughout their retirement years.
Unsure of how much money they will need post-retirement, they've saved very little - one in four Boomers have less than $5,000 saved for retirement. Even worse, 45 percent of Boomers report not having savings for retirement at all.
Of those with savings, nearly half have less than $100,000-an amount that may seem adequate at first blush, but in actuality would generate less than $7,000 per year in retirement income. Despite this sobering reality, Americans over the age of 50 control 70 percent of our country's wealth and make up the majority (51%) of all consumer spending based on the most recent U.S. Consumer Expenditure Survey.
Baby Boomers are still spending their money: spending the most online of all generations according to Forrester, increasingly using their mobile phones to shop, and steadily increasing discretionary spending since bottoming out during the 2009 bust according to Gallup.
They are also waiting longer to retire-some out of necessity for a continued paycheck and/or health benefits, others for the sense of purpose or community their jobs provide them.Grossly unprepared for retirement, many Boomers are starting to think of the future with growing concern about health care expenses.
They are taking notice of widespread changes in their employer-sponsored retiree health programs, and there is a growing understanding among Boomers that they will not be able to rely on employer-sponsored benefits alone to fund their post-retirement care.
The "Booming" Gap Between Health and Preparedness
Making matters worse, the American Hospital Association (AMA) predicts that by 2030, approximately 60 percent of Baby Boomers will experience more than one chronic health condition. By that time, 14 million Boomers will be living with diabetes. Nearly half will be afflicted with arthritis. And one out of three will be considered obese, which can often lead to a number of other chronic conditions, from high cholesterol to heart disease.
Demand for health care services will rise dramatically in the coming years. In fact, the same AMA study shows the number of doctor visits for adults of all ages has increased by 34 percent in the last decade. By 2020, Boomers will account for four in 10 of such visits.
Similarly, this demographic will make up a greater proportion of hospitalizations as they live longer but have multiple, complex conditions. As a result, there is a growing urgency for Boomers to get engaged in their health and wellness options as they approach retirement.
Health plans that encourage this active involvement and engage in two-way dialogue will be best equipped to serve the needs of the Baby Boomer generation in the next several years.
Making Technology Work for Them
Baby Boomers grew up with technology: They were in teens or in their early 30s when the first IBM PCs and Apples appeared, and have been using technology to better their lives ever since. As such, Boomers were also early adopters of the online health movement. Today, they are 98 percent more likely to visit health websites than the average Internet user.
As strong, informed consumers, many Boomers consider these websites helpful, supplementary resources that enable them to ask more precise questions when visiting their doctor. Additionally, they provide instantaneous access to a "second opinion," as well as breaking news on new medical discoveries and treatments relevant to their own chronic conditions and personal needs.
Boomers are also increasingly accessing and digesting health and wellness information on their mobile devices. eMarketer estimates that 87.4 percent of Boomers will have a mobile phone this year-close to the figures for millennials (95.1 percent) and Gen Xers (94.4 percent). Studies show that Boomers are open to a number of different health care technology initiatives-digital record-keeping, telemedicine and remote diagnostics, remote/automated monitoring, chip implants and home-installed sensors, to name a few.
Yet, despite familiarity and high usage rates, Baby Boomers want to bring their own values to technology-and they have high expectations. They are not willing to change the way they live to fit technology. A study of Boomers by Microsoft and AARP notes, "Boomer ideals were forged in an era when human rights and individual freedoms were central concerns, and Boomers apply that perspective to technology as well.
They fear that their children, perhaps unwittingly, allow technology to shape their lives rather than using technology to help create the lives they want. Boomers want technology to fit the lives they have made and the values they hold dear.
These deeply rooted attitudes drive Baby Boomers to seek out better tools that can assist them through their health insurance and benefits selection and enrollment experience, simplify health care transactions and claims processes, and keep them informed of personalized medical updates and information on an ongoing basis.
Likewise, benefit administrators and employers must consider these behaviors when devising their organizations' retirement plan programs, and seek to leverage tools that can offer a fully integrated, engaging experience while automating and simplifying processes for employees.
Turn That Train Around
As this realization grows, employers are turning to defined-contribution health plans as a way of helping employees navigate the health care system. Rounding out the new retirement planning mix, health care spending accounts (HSAs) offer consumers a more flexible way to help ease the increasing burden of paying for health care, and offer both short-term and long-term tax advantages.
Yet many questions remain, and benefits administrators and Baby Boomers alike are still learning how to navigate new programs like HSAs to best accommodate rising health care costs while compensating for the elimination of the pension benefit. As the "train" approaches and retirement looms, there are three critical trends to keep in mind.
First, Boomers are living longer than ever before but face significant health issues. Second, and contrary to popular belief, Boomers fully embrace technology and are open to utilizing it extensively to manage their health care needs. And, third, effective health care initiatives for Boomers require long-term engagement and an integrated experience.
The Baby Boomer generation broke down barriers and blazed new trails for generations to come. It's now our job to ensure these integral members of our society are fully prepared for the next chapter of their lives as they enter their retirement years.
Today, finance, health care, and technology are fast converging. Our collective ability to take advantage of this convergence will play a significant role in changing how Baby Boomers approach retirement planning and how they will navigate the ever-changing health care landscape.