Revising Retirement

Boomers not expected to fade quietly into their golden years but will probably work longer to prolong Free-spending lifestyles

By: Janet Engels 

With the debate beginning to rage over a potential retooling of Social Security, many experts are overlooking a bigger societal sea change - namely, that most aging baby boomers have no plans to retire at the typical time, or in the typical way. 

Myths about this generation - and about retirement itself - are dissolving before our eyes. 

Instead of rushing off like their parents to a relaxed schedule of golf and cruises, the baby boomers appear more interested in prolonging their free-spending lifestyles as long as possible. Doing so translates into them working later in life than any generation in U.S. history. And that's not what sociologists were predicting in the 1970s, the 1980s or the 1990s for this generation. 

In any case, working later won't necessarily mean working harder. Many will work only enough to supplement their income. For many, that may be a flip-flop of priorities in their lives. Instead of spending 70 percent of their time working and the rest playing, in the new retirement, they plan to spend 70 percent playing and 30 percent working. 

This surprising trend, if it comes to pass, won't be the first curveball that baby boomers have thrown the experts. Amid the heated debate over potential changes to Social Security, there is an underlying issue that is likely to have a much greater impact on retirement in the U.S.: Baby boomers have no plans to retire in the traditional "golden years" manner their parents spent years saving for and dreaming about. 

In fact, boomers are redefining retirement just as they redefined culture, business and lifestyles from the 1960s until today. 

An RBC Dain Rauscher report, called As Boomers Age, Stock Opportunities Arise, has analyzed this group and identified changes that are altering retirement plans and the fortunes of companies that cater to this niche market/demographic. As a group, this is a high-spending, intelligent bunch. They are finding that the only way to pay for their wants is to work later in life than any generation in history. 

You have to remember that boomers are a mass of contradictions. They care about working out, but they drink more than previous generations. They are vain, but they spend less on clothing than their parents - unless it's at a sporting goods store. And, while they have smaller families, they are deeply committed to their pets. 

There are also significant differences between older boomers (born from 1946 to 1955) and younger boomers (born 1956 to 1964). Older boomers are set to retire in the next decade and will need more extensive health care services sooner. And the oldest of the boomers could be able to retire to the Social Security system of their parents while younger boomers may face changes that could limit their options. 

Social Security isn't the only institution that will be altered by the more than 76 million boomers nearing retirement. The RBC Dain report finds even greater impacts on a range of industries and businesses. 

Health care. Despite what they may think, boomers are aging just like every other generation. Only about one-third of boomers are satisfied with their physical health, according to a recent survey. But they may be able to do something about it. More medical devices, drugs and products are available than ever before, many of them to keep the boomers' lifestyles intact. 

While Social Security has received a lot of attention, Medicare may be a bigger short-term problem. It currently represents about 12 percent of the federal budget and could soar to 30 percent when boomers retire. As a result, the pharmaceutical industry could be at the greatest risk of regulatory changes to keep costs down and limit growth. 

Senior living. Boomers already spend a greater proportion of their income on housing than previous generations. A survey by Harris Interactive found that 59 percent of boomers ages 44 to 56 plan to purchase a new home for retirement. Boomers are not necessarily going to flock to Florida or Arizona like many in their parents' generation did. They will either stay where they are or move to newer, developing destinations in the West and South. 

As they age and transition into communities that fit older lifestyles, they will continue to outspend their parents' generation, boosting the revenue of companies that provide assisted living or tailor services to these communities. 

Vanity. Boomers are more concerned about their looks than any generation before. 

More than half of boomers told a Yankelovich survey they want to look younger than their actual age. And they are doing something about it, creating a $10 billion industry. In 2003, the total number of cosmetic surgical procedures rose 12 percent, and nonsurgical procedures rose 22 percent. Some procedures grew more than 100 percent in 2003. The end for this market is not yet in sight. 

Leisure and travel. When Yankelovich asked about spending in retirement, 66 percent of boomers said they would rather spend money on things that will "enrich their lives." Our research says travel, leisure and recreation will be the major beneficiaries of the boomer drive to have satisfying retirements. 

Gaming equipment firms and casinos will continue to benefit from a group that loves to take risks. Gambling was a $61 billion industry, outstripping sports, music, theme parks and video games - combined. 

The bottom line to all this is that, for boomers, any potential shortfall in Social Security is probably already being factored into their retirements. The "Pepsi Generation" is not going to fade away. It's going to go down swinging. 

Janet Engels is the Director of Private Client Research at RBC Dain Rauscher.