"The Demographic Shift in the Diocese of Toronto"
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More Retirement Boomers
Think About Retirement
This huge population explosion changed the way we've come to think about retirement. Many of the safety nets that were in place for previous generations disappeared as the boomers neared retirement. A new income-generating strategy was needed, one that was very different from that of the boomers' parents. In this article, we'll review some of the reasons that retirement planning has shifted focus and discuss one possible solution. (For more on the changing face of retirement, read The Generation Gap.)
Older Boomers
Improvements in healthcare and lifestyle mean baby boomers who reach 60 in 2007 can expect to live an average of another 22.5 years. In some cases, retirement could last four decades or more. This longer life expectancy means retirement income must last longer than for any previous generation. With the increase in cost of living, boomers and those that come after them will likely need to save more than any previous generation to finance retirement. Compounding this situation is inflation, which has averaged about 3% per year in recent years. (in the recession of 2008 and 2009, the inflation rate in both the U.S. and Canada has fallen below 2%.) What you could buy for $100 in 2004 costs $108 in 2007. (To keep inflation from whittling away at your savings, read Curbing The Effects Of Inflation.)
Expensive Lifestyles
Gone are the days when retirees were satisfied with just "getting by" in retirement. Now, boomers see retirement as an opportunity to pursue hobbies and live lifestyles that they put on hold because of work, or simply because they were cautious about depleting their nest eggs. For many, retirement is the time to buy trendy gadgets, take trips to favorite destinations and generally enjoy the fruits of their labor. Boomers also want a more active lifestyle in retirement than previous generations.
Anyone for Tennis?
More travel, golf, tennis and volunteerism will mark the retirement activities of the boomer generation. More activity means more spending. And for many, buying that luxury car is an indulgence that can no longer be put on hold. This change in lifestyle will undoubtedly cost more than the low-key pre-retirement boomer lifestyle. The High Cost of Health Care A longer life expectancy also means increasing healthcare costs. Medicare premiums continue to increase each year as do the costs of private insurance. Employers are limiting their offerings of health insurance benefits for retirees. In the past, companies would provide health insurance for retirees and their families; now most larger employers are minimizing contributions to retiree healthcare insurance, or eliminating the benefit altogether.
1 "Boomers: Twisting The Retirement Mindset" (August 7, 2007 By David Rando, JD, CLU, ChFC)
Getting by in retirement.
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