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That Wave of Retirees? Not So Big

Business Week, 5/15/08

Abstract:

Last October, Kathleen Casey-Kirschling made headlines as the first of an estimated 78 million baby boomers to file for Social Security benefits. Born on New Year's Day, 1946, in Philadelphia, the retired teacher seemed to herald a gray tsunami of Americans born from 1946 through 1964 who would soon be exiting the workforce.

Companies from cruise lines to retirement communities and financial consultants have been planning for this mass retirement. They hope to profit grandly by selling goods and services to tens of millions of relatively young boomers with bulging nest eggs and decades of free time ahead.

But demography is not destiny—and it may not even make for a good business plan. It looks like fewer of those 78 million will be either rich enough or young enough at retirement to meet the expectations of businesses catering to boomers released from the workforce. This shortfall, and how it may dash such hopes, is the focus of a new study co-authored by Kevin P. Coyne of Atlanta's Coyne Partnership. In coming decades, "the size and growth rate of the U.S. retirement market will be much smaller than is widely believed," he says.

Other experts are reaching the same conclusion, at least for the short term. "It's no secret that some are delaying retirement," says Bruce Schobel a vice-president and actuary at New York Life Insurance and a former adviser at the Social Security Administration. After all, boomers face falling stock and housing values plus skyrocketing health-care and energy costs. These are all reasons to stay on the payroll. Meanwhile, stock losses have led 14% of retirees to consider returning to work, according to the AARP.

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