'Twixt & Between Series, Part 2: The ageless boomer

'Twixt & Between Series, Part 2: The ageless boomer
Maturing consumers find new life—and new avenues of spending—as they transition between retirement and the rocking chair

By Alison Embrey Medina, Senior Editor
October 01, 2008

This concludes the two-part series, 'Twixt & Between, which has examined emerging consumer segments migrating through new, transformative life stages. The first installment focused on the rise of the 20-something twixters, while this final article now sets its target on the boomer segment as they redefine the retirement age.

As some 78 million American baby boomers are reaching or approaching retirement age, a noted trend is beginning to emerge—boomers ain't done yet. The generation born between 1946 and 1964, in fact, are just getting started on a brand new chapter. They have redefined every life stage they have passed, and are now fighting common perceptions of what it means to be "old." Sixty, after all, is the new 40.

Members of the "Grayest Generation" are entering retirement age at a feverish pace—to the tune of about 8,000 a day—as the oldest of the generation turn 62 this year. But unlike previous generations, "retirement age" for the boomers no longer means a time to count your chips, cash in and move to Florida. Boomers are working on through the prime of their careers. Some are entering partial or phased retirement, switching to a personally fulfilling second career or focusing on philanthropic endeavors. They are enjoying time with their children, grandchildren, aging parents and extended family, and are spending time and money to feel as youthful and vibrant as they can—for as long as they can. They are embracing sustainability, health and wellness, and choosing experience over possessions. They are, simply put, enjoying life.

Companies from pharmaceuticals to cruise lines to retirement communities are preparing for this mass retirement—called the "gray tsunami" by some—as boomers begin entering retirement age en masse. But as boomers face skyrocketing health care costs, traditional pensions becoming fewer and farther between and stock values continuing to fall, many would-be retiring Americans are continuing to clock in well beyond their expected retirement years. According to a MetLife Foundation/Civic Ventures Encore Career Survey, 79 percent of boomers between the ages of 50 and 59 intend to work past the traditional retirement age for the pay and benefits.

This generation is working longer, not necessarily just to get by, but also to be able to assume the quality of life they have come to enjoy in their working careers. Perhaps the song "My Generation," by '60s rock band The Who, may have summed up the boomers' outlook on life best: "I hope I die before I get old." A new life stage is emerging in the decade (or two or three decades) between traditional retirement age and before infirmity sets in—re-routing the path from retirement to the rocking chair.

The wealthiest generation

Boomers spend more than $2 trillion annually on consumer goods and services—and they are just now at the peak of their earning years. "That's about $400 billion more than any other generation, driven largely by the fact that there's just so many of them," says Matt Thornhill, president of The Boomer Project, a Richmond, Va.-based research and consulting firm that focuses on marketing to baby boomers. "That $400 billion—that's more than Wal-Mart sells in a whole year. It's not a small amount by any stretch."

The average annual household after-tax income of boomers is $64,080 for those 45-54 and $55,844 for those 55-64, according to the Demographic Profile of American Baby Boomers produced by the MetLife Mature Market Institute. Younger boomers (born 1956-64) spend most of their money on their children and their mortgages. Older boomers (born 1946-55), many of whom are emptynesters, put their money into upgrading their homes and on clothing, spending 13 percent and 11 percent more than average on women's and men's apparel, respectively.

These silver consumers, while wealthier than any previous generation, also have the highest possibility of outliving their financial assets due to increased life expectancy. About 19 percent of men and 33 percent of women who survive to age 65 will live to age 90 or older and will have to support themselves for almost 30 years, according to "Working Longer: The Solution to the Retirement Income Challenge," by Alicia H. Munnell and Steven A. Sass. The authors also estimate that people who retire at age 65 today can expect Social Security to provide the equivalent of only 39 percent of their incomes after deductions are made for basic Medicare contributions.

While the earliest a person can start receiving Social Security retirement benefits remains age 62, the amount received each month would be less than if that person waited until they reached "full retirement age." For the boomers, full retirement age now hovers between ages 66 and 67, depending on the year of birth, which leaves the "65 and ready to retire" mindset a thing of the past.

Marketing a business that leverages this huge group as they navigate a new phase of life is all about understanding where the boomers are coming from—and where they're headed. "It's not yet retirement, it's not really sitting on the sidelines—it's just the third quarter of a four-quarter-long life," Thornhill explains. "They're going to spend time and money trying to be as vital as they can at mid-life, and retailers and businesses who try to tap into that are the ones who are going to be successful."

Surviving the Golden Years

As boomers enter their so-called Golden Years, financial woes from rising costs and demands on savings may provide somewhat of a financial wake-up call—staving off retirement further. Traditional retirement pensions are continuing to disappear, with more and more retirees relying on stocks and investments for income. In 2005, according to the Employee Benefits Research Institute, 63 percent of workers in the private sector worked for employers who offered only 401(k) or similar plans, versus traditional pensions—and that percentage has only increased.

Another deterrent from early retirement is the threat of health care costs. In 2006, only 35 percent of American employers provided post-retirement health care benefit programs—down from 66 percent in 1989—and it can be assumed that number is lower in 2008 as more companies veer away from pension plans. Out-of-pocket health care costs will continue to match rising medical costs, with Medicare premiums also continuing to upswing.

Boomers who do retire run the risk that they will not be able to afford the standard costs for health insurance and medications. "If you quit your job before becoming eligible for Medicare, it's almost impossible to get health insurance that doesn't totally wreck your finances," says Susan Bergman, an analyst with New Orleans-based Marigny Research Group Inc., who specializes in generational and cultural subgroups. "[Private insurance coverage] can cost up to $1,000 a month. You've spent your entire career having health insurance, and now you're really stuck."

Additionally, Boomers are increasingly taking on the caregiver role in their families, lightening their wallets by financially supporting children, grandchildren and/or aging parents. Many have kids enrolled in colleges (which have faced rising tuition costs), and others looking forward to emptynesting are having to financially support their offspring as they move back home. In a recent AARP survey, nearly four in 10 adults age 45 and older said they had helped a child pay bills or expenses. Among retirees, one-third said they'd helped their children pay bills, and 8 percent said they'd helped an aging parent pay bills or expenses. On top of that, boomers have had a higher divorce rate of any previous generation—at 14.2 percent—which has left more boomers dependent on only one household income.

The result? Aging baby boomers are working longer and retiring later, delaying the need to tap into 401(k)s and I.R.A.s and therefore increasing the future income they can produce.

The second act: Boomerpreneurs

Although boomers may not yet be ready to retire, that doesn't mean they're not ready to give up the daily grind. They are the generation that invented the 40-hour workweek—and many, though they have defined themselves by their careers, are looking for a change. Enter the "encore career"—a new job trend that combines income, meaning and social purpose, and typically aims to provide a dose of personal satisfaction by "giving back." They include jobs in the education, non-profit and medical sectors, such as teachers, nurses and social entrepreneurs. The MetLife/Civic Ventures Encore Career survey found that 6 percent to 9.5 percent of adults ages 44 to 70—about 5.3 million to 8.4 million people—are pursuing encore careers with a positive social impact. Even Bill Gates left his full-time helm in the software world to start his new career as a humanitarian—pledging millions to fighting malaria in African nations.

The same generation that wore flowers in their hair and marched on Washington for peace are back—and they're creating positive social effects in their older years. A Nicholas D. Kristof column in The New York Times eloquently phrased it this way: "The bright-eyed idealists are peering through bifocals." In their version of retirement life, this generational segment is often seeking philanthropic and community-serving work that is more fulfilling in nature, versus lucrative. "Boomerpreneurs" are opening animal shelters, starting nonprofits and organizing community fundraisers. "The boomers who arrived on the scene by igniting a sexual revolution could leave by staging a give-back revolution," Kristof writes. "Boomers just may be remembered more for what they did in their 60s than for what they did in the '60s."

Embracing vitality

The health and wellness segment has been completely reinvigorated, as boomers feed their need for anti-aging and youth-extending products—staving off "old age" for as long as possible. While the plastic surgery market is booming, the injectables and procedures industry is seeing phenomenal growth, as aging consumers realize these cheaper and less-invasive procedures can subtly disguise the effects of aging.

The ability to get a Botox treatment when you stop in at Wal-Mart is probably not in the far-too-distant future, Thornhill jests. A lot of that need to fight aging stems from competition in the workplace, adds Bergman. "They want to look natural—but they don't want to look young," Bergman says. "The idea is not to look like a 20-year-old; the idea is to look healthy, fresh and rested. 'I want to look my age, at the best my age can look.'"

General exercise and health foods are also on the rise among the boomer population as they look toward their "wellderly" years. Fitness centers and personal trainers are targeting boomers by emphasizing strengthening joints or overall wellness, versus emphasis on losing weight, Bergman says. The boomers also essentially invented the organic foods movement, as they were the first generation of organic farmers pushing pesticide-free produce to the masses.

The life-long learning and brain-fitness movements have also gained momentum, thanks to the boomers' increased recognition of mental fitness, or "staying sharp," says Gene Cohen, Ph.D., director of the Center on Aging, Health and Humanities at George Washington University and author of "The Mature Mind." Aging Americans have begun to recognize the importance of activities to keep them mentally in the game. They are going back to school to get advanced degrees or study something new, or learning new trades like cooking, photography, ballroom dancing, foreign languages or how to play a musical instrument.

Keeping a sense of social vitality has given impetus to the term "aging in place"—in other words, staying put in your later years versus buying a condo far off in some sunny climate. There has been a trend toward emptynesters selling the big house and maybe buying a condo or loft in a mixed-use village center in the same city, where lawncare is provided and pedestrian-friendly living allows for less auto dependency. "They (boomers) decrease or eliminate the commute, they have a way of continuing to do business from the home or elsewhere, and they still have access to amenities nearby—everything is more compact, which allows them more time for more experiences."

While the classic, palm-tree-laden retirement community is not where boomers are ready to see themselves, active-adult, over-50 living communities mixed in suburban areas are growing in popularity. "Apart from moving to Florida or Arizona, starting in the 1980s a trend has emerged to develop active-adult communities where people have always lived," Cohen says. "They move into a different setting that is more easy to manage, but they have their entire social network right there still in tact."

While these consumers might be aging in place, they are traveling around the world. Sites like Elderhostel.org, which offers thousands of educational tours and adventure travel options, have picked up steam as older Americans look to make the vacation more than just an excuse to sip piña coladas. The new trends of "volunTOURism" and "eco-travel" have also picked up, sending travelers abroad to turn their week's vacation into a philanthropic mission. "Second careers or getting a more flexible work schedule allows them more free time," Bergman says. "So the trend is that they are taking shorter vacations, more often. This allows them to really mix work and leisure."

The marketing message

Marketers have had their heads in the sand for far too long, ignoring older consumers in lieu of youth, or demeaning them with clichéd images of what it means to be old. While the days of "I've fallen…and I can't get up" advertisements that patronize older consumers are long gone, marketers still have a ways to go to really grab the attention of the segment. "If you decide to market to only younger adults, you're basically giving up 60 percent of the market," Thornhill states. "Bottom line, you need to figure out how to market to boomers."

Increasingly, retailers are placing less emphasis on age to segment consumers, and more emphasis on common traits and psychographics. Brands that market to an ageless target are the ones that are actually having the most success with boomers, Thornhill says. "You could argue that Apple is targeting a lot of their products toward the youth, but in reality they're not," Thornhill explains. "They're targeting to people who have that 'Apple attitude,' and want that Apple experience. They don't really care how old you are. They've sold 100 million iPods—there's not 100 million teenagers in America. It's brands like that, that find a way to cut across all generations and all life stages, that are successful."

Targeting life stages, versus age groups, is key in retail. Boomers, who vary in age from their early 40s to early 60s, can be part of any number of life stages—and age doesn't really matter to them. The average age of a boomer who is a grandparent is 54 years old, and that new role equals dollars spent, as these grandparents—especially new grandparents—try to figure out how to have experiences with their grandkids, Thornhill emphasizes. At the same time, emptynesters might be looking to redecorate rooms previously vacated by college-bound children, and caregivers—as more and more aging parents need looking after—might require an alternate marketing message.

The retail dilemma

In the first part of this century, Chico's Fas Inc. staked its claim on the middle-aged woman, concentrating on clothing that fit its target customer's mature body with stylish and functional fashions. After seeing 113 consecutive months of same-store sales gains through 2006, in the last two years, the company's results have softened, often blamed on a migration toward younger, tighter-fitting fashions that came in after the departure of founder Marvin Gralnick.

The Chico's misstep marks a common trend in the marketplace—a lack of merchandise that is fashionable and functional enough for this on-the-go generation, and at an affordable price point. They don't want to look juvenile by dressing like their daughters, but they don't want to dress like their parents either. The Gap launched a line of retail stores, Forth & Towne, specifically targeted at the female boomer, but shuttered all doors within the first year of operation. "There's more than just identifying a target audience to be successful in retail," Thornhill says. "They ended up bagging the effort, but I don't think they bagged the effort because there wasn't a marketplace. There's clearly a marketplace out there."

Both Talbots and Ann Taylor, two brands historically targeted at the mature, professional woman, have also seen a steady decline in sales—but have decided to fight back. For the first time in a decade, Talbots unveiled its fall and holiday lines at Fashion Week in New York this summer, showcasing more contemporary outfits. Ann Taylor is also trying to up its lifestyle appeal with the recent addition of more casual, stylish clothing. Brooks Brothers and JoS. A. Bank have also added more casual and lifestyle apparel to appease the modern male boomer no longer interested in wearing a suit and tie every day.

A staple success story among boomer clientele, Eileen Fisher is a $254 million brand with near constant 15 percent to 20 percent annual growth for the past five years. The brand's forgiving silhouettes and simple, classic styles are a rare find in retail. "Special sizes" comprise more than a quarter of revenues. The company's published mantra—"to inspire simplicity, creativity and delight through connection and great design"—strikes a chord with its loyal boomer customers.

On the retail front, brands that build experiences into the store environment and product mix are getting the attention of the boomers. Sur La Table, a retailer of high-end kitchenware, teaches cooking classes at its stores every night, offering an experience related to its culinary merchandise. Supermarkets hosting wine and cheese tastings, department stores offering personal shoppers and sporting goods retailers featuring in-store test zones all give that experiential impact. "Boomers are at this stage of life where they've kind of accumulated enough 'stuff,' so now they want to accumulate experiences," Thornhill reiterates. "Retailers and brands that can offer up an experience to a boomer—that's where they are going to spend their money."

The Orvis Co. Inc., a Sunderland, Vt.-based outdoors retailer with roots in fly-fishing, has gone beyond selling apparel and equipment in its stores. The retailer now sells the entire active-adult lifestyle, offering fly-fishing courses and seminars on-site, as well as full adventure-travel vacations via its Web site. Customers can choose their destination by trip type, from fly-fishing and wingshooting trips to African safaris, Antarctic nature cruises and Patagonia walking expeditions.

Whole Foods Market, Trader Joe's and other likeminded organic and natural foods retailers are definitely huge with boomers. "It's not necessarily because they're boomer-centric, but because their philosophy tends to go along with where boomers are going now," Bergman says. "They're looking for lower prices, but things that are still luxurious—it's a 'practical wellness' kind of trend."

Boomer's health needs, both now and in the next few decades, point to a bright future for the drug and pharmacy sector. Drugstores are implementing in-store health clinics, offering $4 generic prescriptions and are targeting the "mass medicated age" that is on the horizon. "Things that used to be ailments are now this really great way to improve your life and stay young," Bergman explains. "Viagra is one that is crushingly obvious, but the overactive bladder syndrome is my favorite. These used to be incredibly embarrassing things that we wouldn't talk about, and now, it's just what we are. We're getting older, we wear glasses, we take medicine. It celebrates their ability to stay youthful, while getting older."

Preparing for an older tomorrow

Whatever the mindset of boomers today, the mindset of tomorrow might be a whole new ballgame as this generation moves through the next few decades. "I think retailers need to wake up and smell this coffee," Thornhill says. "Right now in America, there are approximately 36 million people age 65 and older. Twenty years from now, we're going to have 70 million people who are 65 and older—twice as many as we have today."

Training, customer service and creating an environment that will make it easy and accessible for these older consumers—point-of-purchase experiences, lighting, point-size on packaging, etc.—will be essential. "Be ready for them, and start accommodating them today," Thornhill states. "They'll be your sugar daddy—or your 'sugar granddaddy'—for a long time if you appeal to them now."

(A PDF of the two-part 'Twixt & Between Series, complete with photos as the articles appeared in the magazine, is available for purchase at www.ddimagazine.com/specialreports.)