By Christian Mullins
In October 2007, America’s first baby boomer filed for early retirement Social Security benefits, leading to a plethora of news stories that focused on the 80 million or so ‘boomers’ and what their retirement would mean to the U.S. economy. This also marked the first time I personally heard the term ’silver tsunami’ (first coined in 2003), which gives anyone with a little imagination a vivid picture of future struggles regarding the economy, workforce, and Social Security Program. I won’t get into all of the doom and gloom scenarios, as this FOXNews article does a nice job laying it out, but people have been retiring in America for a long time, and this just didn’t seem very significant to me.
In fact, it seemed to me that many Americans approaching retirement age would work later into their 60’s and even 70’s. I believed that more Americans enjoyed their later working years (the largest paychecks usually come at the end) but, more importantly, many Americans approaching retirement can’t afford to do so.
Last week, BusinessWeek ran an article that seemed to put any remaining concerns regarding those ‘tsunami-ing boomers’ at ease. Using four separate government sources, The Coyne Partnership, Inc., a strategic consulting firm, is the first company known to have actually analyzed, then published, the retirement numbers. Here’s what they found:
If the trend to work longer stops today (it been increasing since 1994), the number of ‘true retirees’, which excludes those that were never in the workforce, will reach 46 million in 2017. Assuming that trend doesn’t change significantly, the number of true retirees will only be 36 million. Today, there are 35 million true retirees, essentially making retirees a zero growth market. If older Americans that have never worked are factored in, the number will only increase about 3 million (14 million now vs. 17 million in 2017). At its best, the number of retirees will increase less than 1%. Their worst projections place the year to year increase at 3%. Hardly worth the concern it’s been receiving.
While there are 78 million boomers, 15% of them never entered the workforce. Considering that another 18% never had more than part time careers, this averages to about 2.6 million possible retirees per year. Accounting for the trend towards working past 65, Coyne writes, the number of retirees may be significantly lower in any given year.
What does this all mean for the credit union industry? Any fears you may have regarding Boomers retiring in droves are likely overblown, unless you credit union spent vast sums of money preparing products for a retirement market that won’t significantly change. Cold weather credit unions can brace themselves for any Boomer exodus by investing in shared branching. Warm weather credit unions will benefit from increased membership if a relocated member’s credit union doesn’t offer it.
Money will continue to shift between accounts, but that should benefit credit unions. Most financial planners suggest that the closer you are to retirement, the safer your funds should be. This should move quite a bit of money out of the stock market (that’s another issue) and into more secure holdings, increasing the demand for a credit union’s share certificate and other guaranteed products.
With Generation X reaching their peak as borrowers and Generation Y borrowing earlier, combined with the Boomers retiring at a rate that won’t significantly disrupt the workforce, it looks to be business as usual for the foreseeable future.
By Christian Mullins
Posted by christianmullins
