Friday, November 10, 2017
Changing Demographics: The Baby Boom Gap
As the Baby Boomer generation ages into retirement, it will have a profound effect on our economic situation. Baby Boomers, those born between 1946 and 1964, have already begun to retire with the youngest of that generation being 53 years old. Over the next 10 years, almost all the Baby Boom generation will be at age of retirement and the subsequent “brain drain” on employment will affect us all. Roughly 10,000 people turn 65 every day, so are we ready for that as a society? Are they ready for that as individuals? There are several concerns and considerations we all need to understand in order to make this transition work. In this post, I will go over the effect of the aging Baby Boomers on society and themselves and what we can do to work through this bubble. The Baby Boomers have given much to our society and now it might be time to look after their needs.
The Boomer Brain Drain
As our society ages, we will be losing some of the most talented and skilled workers we have. The Baby Boomers grew up in an era where you gained employment, grew with the company, and stayed there for 20, 30 or even 40 years. Over that amount of time, a great amount of knowledge has been acquired through being on the job. Much of that knowledge cannot be taught in school and that leaves employers scrambling for replacements. When the topic of jobs is brought up with some people claiming there are not enough of them, I disagree. I believe we will soon have too many open jobs and not enough skilled people to fill them.
It is important for young people to gain the knowledge through on the job training, so they can fulfill these roles as the Boomers exit into retirement. That also means that a shift in educational standards must take place, making it easier for young people to gain the necessary knowledge to perform these tasks. Boomers will play an important role in this transition, hopefully imparting their knowledge to their replacements. Employers will also have to look at this opportunity as an important transition and not as a chance to underpay a younger worker.
Millions of Baby Boomers Retiring Will Shape the Economy – The Globe and Mail
Boomers not retiring on track will affect us all
There is a growing trend of people working into their late 60’s and well into their 70’s. There are reasons for this trend beyond the love of work. Some do enjoy what they do and don’t wish to stop, but for others, it is out of necessity. Now because the Boomer generation is so large, we see an exodus of many Boomers into retirement, but many others staying on the job. A growing number of Baby Boomer’s are not on track with their savings goals and it is making their retirement delayed past the age of 65. This is having a two-fold effect on the workforce and the Boomers themselves. First off, the jobs they have are not becoming available to younger workers. This hurts the younger generation.
Another troubling fact is that Boomers are going into retirement age with debt at an alarming rate. In 2012, a staggering 42% of the people over 65 still had debt. This is almost double the number it was 15 years earlier. It is important for the younger generation of Baby Boomers to truly understand the importance of being debt free by retirement time. It is also important for those heading into retirement to understand the importance of using a budget for their day to day lives. When a person retires with debt, they do not retire and put money back into the economy. What this means is that indebted retirees do not benefit themselves or others, just the banks. A thriving retired class is necessary to allow spending to continue and when they are not it means less work and a weaker economy for all of us.
Mounting Debt Faced by Canadian Seniors – CBC
Health and longevity are a great concern
While an aging population is good for jobs in the healthcare field, it does come at a cost. The first and most important cost is to the person themselves. Back in 1990, the life expectancy for males in Canada was 74 and females 81 on average. Fast forward to 2012 and the life expectancy for males has jumped to 80 and females 84. What this means is that retirement is lasting much longer than before. While it sounds crude to say people aren’t dying soon enough, it has some concerns for them and others. First, people living longer means they must have more saved for retirement. Calculations used to be made using the age of 80 as the death benchmark, assuming most people didn’t live past that age. Now it is imperative to have calculations made to the age of 90-95 so that retirees don’t run out of money in their older years. This makes the need to be debt free and saving aggressively even more important.
Also, while people are living longer, it doesn’t mean that those years are completely healthy. Retirees are spending much of their saved money on health care related costs. A typical healthy 65-year-old couple is likely to spend $245,000 on health care in retirement. Those costs may rise as you age, with those 85 and older likely to spend one-third of their income on medical expenses. This sobering data is on the minds of boomers. Among those with a savings goal, two-thirds have factored in future health care costs. It is important to understand the challenges that will be faced from living longer. It is also important for Boomers to have candid and frank conversations with their loved ones about how they are preparing for these future considerations.
Life Expectancy is Growing in Canada – CBC
While we enter the era of Baby Boom retirement there are many factors to take into consideration. Health, wealth, debt and employment are all going to be affecting the Boomers. As the generation has grown up, society has shifted its targets around the Baby Boomers needs. From the popularity of tennis in the 80’s and golf in the 90’s to hearing aids and long-term care today. We owe a great deal of gratitude to the Boomer generation and it is important for us all to look at how they will transition into old age.
Thanks for tuning in for Baby Boomer Week at Budget Boss and don’t forget to join us next week as we discuss a new topic on personal finance. If you have any questions about your own financial health shoot me a message at joe@budgetboss.ca. Have a great weekend friends!
“Since people are going to be living longer and getting older, they’ll just have to learn how to be babies longer.” – Andy Warhol
Email – joe@budgetboss.ca
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