Born 1946-1964 (Sometimes listed as 1943-1964)

Almost exactly nine months after World War II ended, “the cry of the baby was heard across the land,” as historian Landon Jones later described the trend. More babies were born in 1946 than ever before: 3.4 million, 20 percent more than in 1945. This was the beginning of the so-called “baby boom.” In 1947, another 3.8 million babies were born; 3.9 million were born in 1952; and more than 4 million were born every year from 1954 until 1964, when the boom finally tapered off. By then, there were 76.4 million “baby boomers” in the United States. They made up almost 40 percent of the nation’s population.

Many people in the postwar era looked forward to having children because they were confident that the future would be one of comfort and prosperity. In many ways, they were right: Corporations grew larger and more profitable, labor unions promised generous wages and benefits to their members, and consumer goods were more plentiful and affordable than ever before. As a result, many Americans felt certain that they could give their families all the material things that they themselves had done without.

BABY BOOMERS TODAY

Today, the oldest baby boomers are already in their 60s. By 2030, about one in five Americans will be older than 65, and some experts believe that the aging of the population will place a strain on social welfare systems.

As of 2016, the number of baby boomers ranged from 74.1 million to 81.3 million, depending on whether the generation begins with the birth year 1943 or 1946.

Healthcare

The density of Baby Boomers can put a strain on Medicare. According to the American Medical Student Association, the population of individuals over the age of 65 will increase by 73 percent between 2010 and 2030, meaning one in five Americans will be a senior citizen.

Baby Boomers and Retirement

The first of the baby boom generation became eligible to retire in 2012. Today, with approximately one-third of them already at or over traditional retirement age, the boomers will be the first generation to truly blaze the trail through the landscape of retirement in the 21st century. And in many ways, the way they spend their post-work years will be different from their parents’, those members of what’s often called the greatest generation.

Why The Boomers’ Retirement Is Different

Much Longer Retirement

Many people in previous generations worked as long as they could and few were fortunate enough to have a retirement that would be considered “golden” by today’s standards. America’s post-World War II prosperity made things better for the greatest generation, and there were plenty who were able to retire at the official age of 65 – and expected to die about five to seven years after that (based on life expectancy tables at the time). In contrast, a large percentage of the 77 million American baby boomers are going to live anywhere from 10 to 25 years longer than their parents did; those retiring in their 60s can expect to live about 25 years more, at least.

Higher Expectations

Not considering tours of duty in Europe or the Pacific, how much traveling did past generations of retirees do? Boomers’ parents were Depression-era babies who practiced frugality and continued to pinch pennies throughout retirement. In stark contrast, boomers want their retirement to includ e the lush life, travel, relocation, new experiences and challenges. Those who reach retirement age now are often physically healthy enough to run marathons, build houses and start businesses. Many of them are beginning to migrate to small towns that can offer things not commonly found in retirement communities, such as employment and education opportunities. Other boomers are choosing to move into urban areas to take advantage of amenities such as public transportation and cultural attractions. All this is fine, but it is expensive. Therefore, boomers need to plan for a much more costly retirement than their parents ever would have expected.

How Boomers Can Prep for Retirement

We’ve already noted some of the non-traditional plans baby boomers have for retirement. One idea might be the most untraditional of all: Don’t retire. Or at least, delay doing so beyond the proverbial age 65 or 66 (depending on birth date). Whether that means working longer, consulting or finding a part-time gig, being part of the workforce can help boomers financially and emotionally. “Rather than ‘retiring’ from work, boomers should consider working more independently as they age,” says CFP Roger Whitney of WWK Wealth Advisors, a Fort Worth, Texas financial planning firm. “This extra income during the early years of retirement can have a huge impact on staying financially healthy. In addition, the mental, social and physical benefits can lead to a happier life.”

Some baby boomers are already doing this, either out of desire or out of financial necessity. This often creates a dilemma for employers who do not relish the prospect of having to pay higher wages to their older workers for an extended period; some economist also fret that, by keeping younger workers from finding jobs, it has a negative effect on the economy.  At the same time, employers do not want to see their most experienced employees leave to form either their own companies or to work for the competition.

Finances permitting, boomers should also waiting to take their Social Security benefits until they reach 70 years of age. By postponing, they will receive 132% of their original monthly stipend.

In estimating their retirement needs, baby boomers and their families would be prudent to consider that Medicare, the federal government’s health insurance program for those aged 65 and over, suffers what some experts consider an alarming gap: It does not cover long-term nursing home care in most cases. While Medicaid technically does, there remains a significant caveat. The program enforces strict asset rules that restrict all but very low-income seniors from receiving nursing home care benefits. In most states, “countable assets” that exceed $2,000 – about the price of a used 15-year-old Toyota Camry – are enough to disqualify someone.

And in terms of investment strategy, retirees (or those about to be) should be asking for a sustainable cash flow from a diversified portfolio producing dividends, interest, capital gains and return of principal. They should set that portfolio’s stock-to-bond mix based on their capacity, their need and their desire for risk, not current cash flow. It should be e v a luated and adjusted periodically, based on the total return, within the acceptable risk parameters) and the established withdrawal rate – rather than just on income and the hunt for higher yields. Empirical evidence shows that a dividend-focused investment strategy does not have a higher return than a total return strategy. In addition, a focus on dividend stocks usually increases risk because it decreases a portfolio’s diversification.

Boomer Effect (Baby Boomer Factor)

The boomer effect refers to the influence that the generational cluster born between 1946 and 1964 has on most markets. This term first gained traction in technology and generally referred to the importance of simplifying interfaces for consumer electronics to encourage the wealthy baby boomer generation to upgrade. Since then, it has spread to describe everything from the way boomers have changed how food is marketed to the impact on the financial services sector as boomer’s shift priorities late in life.

The Boomer effect is sometimes called the boomer factor or the boomer shift.

BREAKING DOWN ‘Boomer Effect (Baby Boomer Factor)’

Baby boomers hold a large amount of the wealth in North America, making them a prime market segment. As they have aged, the baby boomers have shaped the focus of companies. The obvious effects includ es the wide-range of anti-aging products, real estate aimed at people seeking to live independently longer, more investment in replacements, transplants and other medical technology – like no other generation before them, the baby boomers are sticking around.

This is also having an effect on labor markets as boomers have stayed around longer working and holding onto jobs that would otherwise be filled by the next generation. And this has generally been positive for businesses as studies have shown a productivity drop when boomers retire due to the loss of organizational intelligence. However, delayed retirement is only pushing the productivity reckoning further into the future.

Investing In the Boomer Effect

The baby boomers collectively have created trends that disproportionately benefit particular industries, so an investor can position a portfolio to take advantage of the boomer effect. Unsurprisingly, most of these opportunities are in the medical or medical services sector. Orthopedic manufacturers, affordable care homes, medical device makers, and pharmaceutical makers will see already strong demand grow as more boomers push the limits of old age.

There is a larger question of what happens to the wealth – how many boomers will spend it and how many will pass it on – but that particular boomer effect has yet to be measured.