Workers expect their defined contribution plans to play a greater role in their retirement income than annuities.
By Lloyd Lofton
When you finish this article, you will be asked one question: Will you take advantage of this unique moment in history?
Social Security became law in 1935 with the first tax to fund Social Security levied in 1937. Ida May Fuller of Ludlow, Vt., received the first benefit check on Jan. 1, 1940, after she paid into the system for three years. She lived to the age of 100, receiving $22,880.92 in Social Security over 35 years.
The baby boomer market is quickly becoming the “American Silver Tsunami.” In the U.S., 76 million babies were born between 1946 and 1964. Of the women who were of childbearing age during that period of time, 92 percent had a baby during that 18-year time span. The average woman had four children, which was twice the birthrate of the prior generation.
In 1946, the first year of the post-World War II baby boom era, 3.41 million babies were born in the U.S. This works out to approximately 9,345 babies per day, 389 babies per hour and 6 babies per minute.
Also in 1946, the first servicemen started returning home from World War II and began the baby boom generation. The Levitt brothers of New York created the suburban developments of Levittown that year for returning veterans and their new families. These communities offered alternatives to cramped city locations. These homes were modeled in an assembly line manner with thousands of identical homes produced.
The boom continued through another war, the Korean War. In 1954, the year following the Korean War, 4.078 million babies were born in the U.S. This works out to approximately 11,172 babies per day, 465 babies per hour and 7 babies per minute. In 1957, the year in which the baby boom peaked, 4.3 million babies were born in the U.S. This works out to approximately 11,780 babies per day, 490 babies per hour and 8 babies born every minute.
Wouldn’t this have been an ideal time to market products these consumers would all want at the same time – such as diapers, baby food, bicycles and toys?
Women’s Wear Daily reported at the time that Americans spent a total of $225,000 on infant clothing in 1939. By 1944, that amount doubled to $420,000. In 1946, that amount reached $700,000 and that figure climbed higher the following year. The Chicago Sun-Times reported annual sales of baby food in the U.S. rose from 400,000 cases in 1934 to 2.7 million cases in 1941 to 15 million cases in 1947. Children's records sold 2 million copies in 1941 to more than 30 million copies by 1947. Half a dozen companies entered the children’s record industry in the first six months of 1947 alone. The number of toy companies in the U.S. doubled between 1942 and 1947 despite a shortage of raw materials. Juvenile furniture production in the U.S. increased by 39 percent between 1944 and 1946, and increased again by 54 percent between 1946 and 1947.
Industries were created and fortunes were made as companies positioned and re-positioned themselves to serve this demographic. Baby boomers bought mouse-ear hats to wear while they watched “The Mickey Mouse Club,” and coonskin caps to wear while they watched “Davy Crockett.” They bought rock and roll records, danced along with “American Bandstand” and swooned over Elvis Presley. They collected hula hoops, Frisbees and Barbie dolls.
Kathleen Casey-Kirschling’s birth a second past midnight on Jan. 1, 1946, was officially the first baby boomer birth. She qualified for Social Security on Oct. 15, 2007, after taking early retirement at age 62, starting the move of some 76 million aging into Social Security over the next 20 years.
On Jan. 1, 2011, the first of the boomers turned 65. Approximately two-thirds of all those age 65 and over and 60 percent of those ages 50-64 have at least one chronic disease. Approximately $8.4 trillion will be inherited by boomers from their grandparents, parents and others.
By Dec. 31, 2029, the last of the boomers will turn 65. The 65-plus population segment is projected to double to 71.5 million by 2030 and grow to 86.7 million by 2050. Possibly 80 million or more will be receiving Medicare and Social Security.
So how have you positioned yourself, or should you re-position yourself, to serve this demographic? In the underage market the question is often what they will buy. In the senior market, we know what they will buy, and the only question is “from whom?” This is the first generation to be studied so intensely by marketers, stemming back as early as the seminal Newsweek article of Aug. 9, 1948, titled “Population: Babies Mean Business.” Everything about this baby boomer demographic has been predictable. As history has taught us since the end of World War II, we know what the members of this age cohort will do as they age into the twilight period of their lives.
- We know what they are going to buy,
- We know when they are going to buy it,
- We know what the products will cost and
- We know where they will get the money to pay for the products.
So what happens when an individual reaches retirement age? We know that they will sign up for Social Security and Medicare and purchase a Medicare supplement.
Here are predictable behaviors for a man age 65 and his 62-year-old wife.
The man will take Social Security and Medicare benefits, and will purchase a Medicare supplement and final expense life insurance. The wife will have major medical/simplified issue insurance and critical illness coverage. At age 65, she will age into Medicare. If the husband dies first, the wife can choose to keep her own Social Security benefit or take her husband’s benefit. Either way, she will lose a portion of the Social Security money that was coming into the household.
In this era of longevity, it’s possible that baby boomers can average another 25 years in their post-employment lives. It’s a very real possibility that they could spend as many years in retirement as they did in the work force. Many will be looking at an encore career to help supplement their retirement.
Thanks to tremendous advances in medicine, the boomer wave isn’t just about the post-65 age group. Between 2020 and 2039, boomers will expand the 75-and-over population by 93 percent. Between 2030 and 2049, the segment of the population age 85 and up will climb by 113 percent.
Older individuals often live on fixed incomes. They can pay a sizable portion of their income in physician fees and pharmacy costs. For others, long-term care or hospice care is a major financial burden.
Baby Boomer Messaging
Market yourself as “amazing, astounding and spectacular!” and baby boomers hear “blah, blah, blah.” To stay relevant with the 76 million baby boomers, you must do three things:
The truth isn’t the truth until people believe you. They can’t believe you if they don’t know what you’re saying. They can’t know what you’re saying if they don’t listen to you. They won’t listen to you if you’re not interesting. And you won’t be interesting unless you say things imaginatively, originally and freshly.
Now here’s the question for you to answer: Will you take advantage of this unique moment in history?
Lloyd Lofton, CSA, LUTCF, is the chief operating officer of American Eagle Financial Services Inc., Smyrna, Ga. Lloyd may be reached at email@example.com.