You have no doubt heard of the “Baby Boomers”, those individuals born between 1943 and 1963. I have written about them and also about their offspring, generation X and the ones after that named generation Y.
This is a topic that interests me with a great deal of enthusiasm. The baby boomers are coming to the age of retirement. I am starting to see in my business many older people move into retirement villages. These seem to be great ideas and serve a fantastic purpose for what they provide. I am constantly reading and today Icome across an article that I want to share parts what it was saying.
Following World War II, Australia’s population grew at record levels. Australia was not alone in this phenomenon. The United States, New Zealand and Canada all experienced Baby Booms at a similar time.
The Baby Boomers are an important phenomenon to understand. They have had dramatic effects on society and will substantially impact the way the stock market performs over the next 20 years. For this reason, it is important to understand some of the background on this interesting group of people.
As mentioned, the Baby Boom was experienced in various countries around the world. Part of the reason for the “Boom” was that these countries were immigrant receivers and immigrants tend to be in their 20’s, the prime childbearing years.
At its peak in 1957, the US boom hit 3.7 children per family. Canada hit its peak in 1959 with Canadian women averaging 4 offspring each; that was over 479,000 new births that year alone! Australia’s boom was not quite as big as the Canadian or US booms; however, we still have a disproportionate number of people who are today in their 40’s and 50’s. Following the Baby Boom, we had a Baby Bust. Far fewer children were born during the late sixties, leaving Australia with an asymmetrical population graph.
The Baby Bust group, born between 1964 and 1976 are a much smaller group than their predecessors and are commonly referred to as Generation X.
Baby Boomers are a very significant and important group. It is not that, individually, they aren’t any different than any other group who preceded them; it’s just that there are so many of them. Due to their large numbers, Baby Boomers have had a significant impact on our society, making substantial changes as they grew. They have changed the economy, driven housing and other markets and transformed social attitudes and lifestyles.
In Australia and North America today, the fastest growing industries, apart from technology, are financial management, leisure activities and health care. It is very easy to see why. Boomers have been working all their adult lives, usually for someone else. They have raised their children and are now focusing on their retirement. They have had a magnificent time. They have not endured wars, or a depression like their parents and grandparents. They have enjoyed fantastic luxuries such as cars, world holidays and computers. They have been at the forefront of the age of discovery.
Unfortunately, the majority have not prepared themselves financially for their retirements, believing instead that like their parents, they would enjoy a comfortable pension from their employers and/or government.
The stark realities are now coming to light. Everybody, especially the Boomers, must take responsibility for their financial futures. Our government will simply not be in a position to provide adequate pension incomes for a growing number of retirees. Today, for every person who is retired, there are four people working, providing income to the government. By 2025, there will be only 2 people working for every retiree. What’s more, the Boomers, as they start to retire, will live longer than any group before them, well into their 70’s and 80’s on average. As a result, it is up to each of us as individuals to take responsibility of our own personal financial planning.
The Australian government has made substantial improvements and preparations for the growing populations. They have introduced a compulsory superannuation scheme that all employers and employees must participate in and which is gradually rising in required contributions, but it will be too little, too late. The key to investment growth is time, a luxury many Boomers no longer possess.
Consider this fact, that at a return of 8% per annum, net of tax, an investment of $30,000 would require over 15 years to triple in value, not even considering the effects of inflation. Most investment strategies commonly promoted to the public boast returns of 4% to 10% per annum. We often see managed funds, superannuation schemes, bank term deposits and property investments offering such results. Many people consider these returns appropriate and even good! Unfortunately, many members of the public require a much greater return on their investments to adequately improve their financial positions before they retire (if they can ever afford to!).
There are going to be so many opportunities open up in the next few years in the void of this huge population group. Its an exciting time for a Gen Yer and a Gen Xer coming up.
very interesting and vdery clever – Deon how will all this financial upheaval on babyboomers in your view effect future financial decisions?
Deon, you’ve hit on a pet subject of mine! The influence of baby boomers especially as it pertains to the housing market in NZ. Buy two bedroom single level brick townhouses a flat walk to shops now! That will be the big growth market in the next 15 years. Forget 3 bedroom rentals on big sections!
Baby Boomers are the most selfish generation of our time. Less money in their bank accounts after the collapse of the sharemarket and fund management companies will mean a huge loss of inheritance wealth for the following generations. Baby Boomers want to have their cake and eat it too (they will still want their overseas holidays (SKI trips – Spend Kids Inheritance) and toys.
Something has to give, and it will probably be the future generations that feel the loss.
There may be a return to the workforce or a delaying of retirement because the nest egg has been diminished. Some sectors will see unemployment rise, as older retired age people compete for the easier part time cleaning, lawn mowing, DIY, preschool teaching, and childcare jobs type jobs.
PS YAY for OBAMA!
Peter – I think David has summed up a part of what I feel as well. The market for smaller easy care properties close to the shops or hospitals is becoming more and more every day popular.
As rude as this may sound but generation X to me doesn’t have much influence at all in the present state of the world. (I could be completely wrong though).
I see in the next few years a huge shift in the way companies are run, the way politics are run, the way real estate runs, the way the economy is run. The influence from generation Y is going to be phenominal. There will be huge voids in the employment sector – the baby boomers are going to retire but in the mean time are holding onto their jobs very closely. I went to Picton last week and saw all my old work friends and they are still doing the same old thing. These people are well into their 60’s and some of them 70’s. The baby boomers are very strong and hard workers and many of them will work till they cant work no more. And tha day will come and it will come fast when they cant work no more.
When this happens there will be a huge crash in the so called high priced properties which many baby boomers own now. A lot of it will be passed down through inheritance etc which will create a group of wealthy people that don’t appreciate the assets. Which will see many of them probably flogged off for less than true worth or let go. Generation Y’s influence in the job market will fill this void but there will not be as much drive and passion as did the baby boomers had.
A lot of gen Yers will be given wealth. By getting given the wealth they haven’t had to work hard for it. This is translating to very poor work ethics and no loyalty within companies. As I said above when I went back to Picton after 5 years of not been there the old guys were still at it where many of my college friends have had 6 or 7 jobs and still have no direction. This is because of the reliance of wealth from their parents and grandparents to bail them out when it goes to poop. I read a book a few weeks ago that in the states the average Generation Y person will have 20 odd jobs before the age of 25.
There is trouble brewing in the air. Generation Y is hard working but if there isn’t anything substantial in it for them then they will not do the hard yards. (I am generalising here though). Baby Boomers are hard working and devoted to their companies. This mental shift of the generations needs to be looked at now. I see it in the navy (my previous job). Young people go in and out of there faster than they can train the new ones at the moment. But the older one like my uncle have been there for years (uncle 44 years now). There is no dedication to a company or a job. its go where the light looks better.
I have gone off a little but its something I am passionate about as well. Please elaborate on what I have said if you agree or disagree I would love to know what others think.
Deon
There is alot to appreciate in what you have to say – the psyche you talk about may well be in play I am really not sure about that – but financial security has definitely been adjusted (financial company collapse alone) and therefore some type of readjustment on financial instruments and needs will occur – longer employment definitely, move to cash from other assets where posssible definitely, high dividend plays likely and so on – I like what David said on housing opportunities, its a subject I will be looking to investigate the subject further
I’m with Swiggs on this one, I think he has the situation pegged. Add to that- Gen Y I think will be very successful, I really see a work ethic in those who are coming into the work force, not that X didn’t have one, it’s just more focused and happy or something. We have a lot of adult retirement in my area but people really don’t want to think about that until late 60’s unless there are health issues- boomers are eating healthy, doing yoga, skiing, they won’t go down quietly. I agree too, many of us are selfish, it’s not good.
thanks for the comment Jodi. I am of a generation Y and i see two types of people in my age group. The ones who want it all for nothing, and the ones who are going to dig in and do the hard yards and fast to get to the top. I feel im on the later part of that. I am very driven. Just need more focus and direction which will come soon I hope