The Pig-In-The-Python Fallacy
The oldest of the Baby Boomers, those Americans born between 1946 and 1964, turn 62 this year while the youngest turns 44. Because of the relative size of this age group (75.7 million people or a little over 25% of our population), these people will have a tremendous impact on our retiree population over the next 21 years when the last of the Baby Boomers will reach age 65.
In 2007 there were about 37 million Americans age 65 or better (13% of the population). On the other hand, there were about 90 million Americans, mostly Baby Boomers, between the ages of 42 and 64 (30% of the population), all of whom will reach age 65 by the
year 2029. This means that in the next 21 years, more Americans will turn 65 than have reached that age in our 200+ year history.
This coming “age wave” of retirees does not mean that in 2029 there will be 127 (37 + 90) million American age 65 or better. Unless there is an unexpected medical miracle in the next 21 years, a lot of these people will die. In fact, the U.S. Census predicts that in 2030 there will be “only” 71.5 million American age 65 or better. While far short of 127 million, 71.5 million retirees in 2029 is an amazing change from today. It means that there will be almost twice as many retirees then as there are today. This population bulge is often referred to as a “pig-in-a-python”.
The image that this term conjures up is a temporary increase in our retiree population so that the number of retirees will return to “normal” once the Baby Boomers die off. However, as shown in the distributions of populations by age shown below, this is not the case. Both the age distribution of the 2007 population younger than 42, and the 2029 age distribution of those younger than 65 are relatively constant and flat. This indicates that the number of retirees (those Americans age 65 or better) after 2030 will remain relatively constant.
Among other things, this “leveling off” of the number of retirees means that the coming rapid increase in the number of retirees is a one time phenomenon. Since the number of retirees will remain relatively constant after 2030, accommodations that will be needed for Baby Boomer retirees (e.g., retirement housing) will not continue as the Baby Boomers’ children begin retiring in 2030. Thus, the potential economic bonanza that accrues to state and local economies from retiree attraction and/or retention will take place over only over the next 21 years. Those states and communities that fail to act decisively to attract Baby Boomer retirees will fall to those that do and may never catch up. – Gene Warren
Baby Boomers Will Create a Boom in the Mature Housing Market
Baby Boomers have always been more mobile than their parents, the Silent Generation. This is probably due, at least in part, to our vastly improved highways and air transportation after World War II, and in part to the homogenization of our regional cultures due to the spread of television. An important manifestation of this increased mobility is the greater willingness of Baby Boomers to relocate after they retire. While only an estimated 8% to 10% of the Silent Generation relocated upon retiring, it is estimated that 20% or more of the Baby Boomers will choose to move when they retire. This change in mobility will create a boom in the mature housing market as Baby Boomers retire during the next twenty two years.
In 2007 there were an estimated 37 million people age 65 or older living in the U.S. If, as estimated, 10% of these people moved after retiring then today there are about 3.7 million retirees who relocated. On the other hand, in 2007 there were about 91 million Americans between the ages 43 and 64 who will be retiring over the next twenty two years. If, as expected, 20% of them relocate after they retire, then as many as 18.2 million retirees will relocate by 2029 (the year the last of the Baby Boomers turn 65) and will purchase a new home.
By the time all the Baby Boomers retire in 29 years (22 years from 2007) most of the Silent Generation who relocated after retiring will be dead or in assisted living facilities (the youngest of them will be 87 years old). Thus some of the 18.2 million retiring Baby Boomers who relocate will undoubtedly purchase their houses. However, even if the residences of all 3.7 million currently relocated retirees are purchased by relocating Baby Boomer retirees, there will be a shortage of mature housing. How big will this shortage be?
Nationally there are about 1.65 people per retiree household. That means that in 2007 there were about 2.25 million houses occupied by relocated retirees. This will, however, fill only a fraction of the 11 million homes that will be needed by relocating retired Baby Boomers. At a minimum, retiring Baby Boomers will need about 8.75 million new homes over the next 22 years, or almost 400,000 new houses each year for the next 22 years. However, these 8.75 million houses are just the houses needed by relocating retirees.
Because of their spending, each retiree household creates an average of at least 1.5 new jobs in their local economies. This means that the 11 million Baby Boomer retiree households that relocate to a new community will create another 16.5 million new jobs in these communities. If, as expected, most Baby Boomers relocate to smaller communities when they retire, it is likely that these communities will not have enough current residents to fill all of these new jobs. Thus, relocating retiring Baby Boomers will attract lots of relocating workers, all of whom will need a place to live. Assuming 3 out of 4 younger households have two wage earners, this will create a demand for an additional 9.5 million new homes. Consequently relocating retiring Baby Boomers will create a demand for at least 18 million new homes over the next 22 years, or about 825,000 houses per year.
All of this is well and good for burgeoning Baby Boomer retirement destinations, but what about the houses retiring Baby Boomers will leave behind when they relocate? Fortunately, the younger, working population is maturing at about the same rate as the Baby Boomers are retiring, so these younger workers will more than fill any housing void created by relocating Baby Boomers.
The bottom line is that the desire of retiring Baby Boomers to relocate after they retire will create a demand for over 18 million homes over the next 22 years, or almost a million new homes a year. There is no other way to describe this other than, true to their name, Baby Boomers will create a housing boom. – Gene Warren
Tourists First, Retirees to Stay
Why do people travel? Generally speaking people travel for business, visiting family/relatives, and tourist destinations. When tourists hit town they typically demand services such as hotels, shopping and dining, and the amenities offered by the local attractions. Economically speaking tourists generate dollars for local government coffers by paying sales, bed and special taxes. Thus tourists are a boon to the local economy. For instance, Thomas, Warren + Associates (TW+A) reported the net tourism tax benefit for the state of Arizona to be $679 million in 2000.
Retirees are also a boon for the local economy. In fact TW+A found the net tax benefit to Arizona from retirees to be $1.4 billion in 2000. That is just about double the dollar amount that tourism collected. What do retirees demand when looking for their perfect place to retire? Just about the same things those tourists do. More importantly, retirees looking to relocate visit more frequently than most tourists. TW+A has estimated that retirees looking to find a new place to settle down make between 3 and 5 trips lasting from 5 days to 2 weeks. Additionally, of retirees looking to relocate only 1 in 10 actually moves to the community. That means a total of between 150 and 700 bed nights can be expected for each retiree household that relocates to a community. Not only is that a lot of bed tax revenue, but it is also a lot of local economic stimuli from the goods and services consumed. In essence retirees looking to relocate are tourists.
Convention and visitor’s bureaus and tourism offices should align their efforts with those interested in attracting retirees as economic development. To date few governments have a good understanding of how beneficial retirees can be to a community, and that relocating retirees are essentially permanent tourists. I encourage the local governments to ‘double dip’ for economic development by coordinating their retiree attraction effort with their tourism effort.
– Alan Church