Boomers postpone retirement, agents be ready

Baby Boomers continue to put off retirement, and their financial insecurities are also being felt across succeeding generations as more people face job uncertainty and the need to deleverage from their piles of debt.

Only 14% of American workers are confident they will have enough money to retire comfortably, according to the 2012 Retirement Confidence Survey (RCS). This is reflected in their plans to retire later in life, as it has become increasingly difficult for workers to save and invest for their Golden Years. 60% of workers report the total value of their household’s savings and investments is less than $25,000, according to the RCS.

Saving for retirement not on your radar? You’re not alone: 56% of workers report they have not tried to calculate how much money they need to save to retire comfortably.

For the past 30 years, savings at 10% of annual earnings was considered sufficient for retirement planning; for the next 30 years, savings of 20% of annual earnings will be needed to accomplish the same end result. It all has to do with interest rates over the long haul. Rates are cyclical over the long term, and have run at around 30 years from peak to trough and back to peak throughout the 20^th century.

first tuesday take: As retirement is postponed, two scenarios arise in the real estate market, and agents can prepare accordingly depending on the area serviced.

First, homeownership is an important ideal imbedded in the mindset of the Boomer generation in the guise of the American Dream, and most Boomer homeowners will pursue some form of ownership after retirement. Thus, Boomers will exchange their sprawling suburban houses for smaller, compact homes closer to their children and grandchildren. This likely means a senior migration to urban condos, or alternatively to retirement communities in temperate climates once the market improves enough for Boomers to receive a higher price for their property.

Related articles:

Aging generation, budding market

Boomers retire, and California trembles

When Boomers do attain retirement, corresponding with our evolving economic recovery, there will be a perfect storm for home exchange called the Great Confluence, likely occurring around 2020. This will occur as members of Gen Y (those born in the 1980s and 90s) purchase their first homes in tandem with Boomers moving to smaller residences, creating a situation similar to the 1980’s apartment and single family residence (SFR) boom (and subsequent overbuilding problem).

Second, for Boomers unable to purchase after retirement, many will find a new home with their children. Multi-generational housing is a common economic fix for distressed seniors who were unable to save for their retirement, and members of Gen X (those born in the 1970s and 80s) often compensate by purchasing a home with space for their parents to retire. Casitas, or freestanding “granny flats” on a SFR property, will be a popular choice for families seeking to house their elderly parents as permitted by state law.

Related article:

Multi-generational housing is a temporary fix for economic woes

Agents servicing both types of retiring Boomers can prepare for the Great Confluence by offering relocation services to Boomers who move within their community – 50% of seniors who move relocate inside their communities. Many who choose to leave their community depart California altogether, seeking a state or country with a lower cost (standard) of living. Brokers can benefit from these relocations by assisting seniors to locate reputable, established brokerages in those other states and setting up fee sharing arrangements.

Re: “The 2012 Retirement Confidence Survey: Job Insecurity, Debt Weigh on Retirement Confidence, Savings” from the Employee Benefit Research Institute