Redefining Retirement: Baby Boomers’ Game Plan
25% of America’s population is about to exit the workforce, changing retirement as we know it.
For decades, the retirement of the baby boomers — those born between 1946 and 1964 — has been a hot topic. Today, it’s no longer a matter of discussion — it’s here. Every day, 10,000 Americans turn 65, a trend that will continue for another 5-6 years. Roughly 25% of America’s population is now on the verge of leaving the workforce. That’s a movement with profound economic consequences. Of national significance, retirees do not contribute to the economy in the way workers do. They don’t produce anything, they spend less, and they’re more likely to depend on others, including the government, to support themselves. In the individual sense, the loss of self and the burning “what now?” question weighs heavy. This is particularly true for those that owned their own businesses. Let’s examine where the boomers stand financially (and somewhat emotionally) and how, as advisors, we can best guide their next steps.
To put it bluntly, baby boomers are ill-prepared financially for retirement. Not only did they fail to save in ways their parents did, but the most recent financial crisis wiped out millions of dollars in retirement savings and real estate values they did have. The stock market did rebound, but has not restored the nearly 25% loss in savings that some people realized. Harris Interactive Polls reveals the bleak picture: a whopping 40% of people age 46-65+ have no personal savings, and 47% have no retirement savings. This is a particularly troublesome prospect given that boomers can expect to live into their 90’s.
So can the baby boomers even retire? Maybe, but often not in the way they picture, and usually not in the way their parents did. The reality is that living 30 years after leaving the workforce is expensive. Part of our job as advisors is to reconcile their expectations with reality. Our goal is to come up with a workable solution, even if that may look very different from original expectations.
More than anyone else, CEOs identify with their work. In fact, a great deal of who they are and their sense of self is tied directly to their companies. This makes advising for retirement all the more complicated. For those of us in the business of advising during the sale of businesses at retirement, untangling the personal side of the business is just as important as sorting out the finances.
But sort out the finances we must. Boomers have a disproportionate amount of personal wealth tied up in their businesses and very few have any idea of how to walk away from it. A 2008 study by White House Advisors (Atlanta) reveals that while 96% of Boomer CEOs say an exit plan is important, yet 87% don’t have one. At the same time, the sheer number of businesses going up for sale (the result of this huge population retiring) is driving some pretty steep competition and price warring. Many business owning boomers are hugely disappointed by the dollar figures in front of them.
The baby boomers have given those of us in the business of consulting and advising a huge opportunity to not only sort out their finances and sell off their businesses for the most money, but to redefine what “retirement” looks like in new economy. Much of retirement and financial planning is storytelling, and we have an opportunity to reshape the narrative. Boomers as a whole do not have the money to sustain themselves 30 more years without working another day while living on the beach in Florida, but so what? The truth is, 65 isn’t as old as it used to be. This generation of seniors is better educated and less disabled than the previous one. They still have gifts to share. Helping boomers identify the knowledge and skills they’ve developed over the years, and how to move that into a new role — as consultant, as part-time advisor, et al, is our best approach. Life goes on — Let’s redefine how.