Live Long and Prosper: The Rules for Retirement Have Changed

Baby boomers are currently facing a struggling economy, less healthcare coverage, higher costs, a longer retirement, and want to know how they can plan for their future during these uncertain times.


The Baby Boomer generation has defined itself by continuously defying expectations. In 2008, the first of this generation turned 62, which officially qualifies them to receive social security benefits. Nearly 79 million baby boomers (born between 1946 and 1964), control much of the nation's personal wealth and are currently retiring at a rate of about 1 every 8 seconds. Their transition into retirement is shaping up to be an unpredictable journey as this generation faces a set of unique challenges.

Important Factors That Will Shape Boomer Retirement:
Accumulated Wealth:

  • $12 trillion currently in retirement accounts [1]
  • Estimated 401(k)assets: $1.75 trillion [2]
  • Total amount of assets expected to roll over into IRAs in 2008: $301 billion [2]
  • Average individual amount rolled out of 401(k) plans: $334,176 (as of 2006, the latest data available)[2]

There are nearly 3 million 62 year-olds in the US today, and many will be receiving their retirement assets in a lump sum. Very few of these individual are used to managing such large sums and will need guidance as they decide to access the money the have built up in their 401(k)s. They face an overwhelming array of investment options and are bombarded by every conceivable kind of financial institution, all vying for their retirement money.

People Are Living Longer :
Due to consistent medical advancements, and healthier lifestyle choices, today's retirees face the longest retirement of any generation. They will need to live off of their retirement assets for 30-40 years. The Center for Retirement Research currently estimates 61% of households are “at risk” of being able to maintain their current standard of living after they retire.

Healthcare Costs are Rising While Fewer Companies Providing Retiree Coverage :
Retirees used to be able to count on employers to provide health insurance until Medicare kicks in at age 65 , but in 2007 only one third of employers offered retiree health insurance.[3] As healthcare costs continue to skyrocket, there are questions about whether Medicare and Social Security will even be around by the time the younger boomers reach retirement. A March study by Barclays Global Investors concludes that Medicare simply is not sustainable because its long-term expenses currently outpace its revenue by $70 trillion. They estimate that future middle and upper income retirees could face medical and insurance costs that will reduce their income buy as much as 20%.[4]

Current Economic Woes:
With soaring gas and commodity prices, stagnant growth, and declining housing and stock markets, the current economy is a scary place to contemplate retirement. Homes are among the generation's biggest and most important assets. As home values across the nation have plummeted, so has homeowner confidence. Only 18% of workers polled in the Employee Benefit Research Institutes' 2008 Retirement Confidence Survey were “very confident” about saving enough money for a comfortable retirement. That is the steepest annual decline in the survey's 18-year history, and down sharply from 27% last year. [5] With all of this uncertainty, many workers don't know exactly when to retire, are concerned about their future, and don't know where to turn for trusted advice. This is where credit unions can step in to help.

What Does This Mean for Credit Unions?
Baby boomers are currently facing a struggling economy, less healthcare coverage and higher costs, a longer retirement, and want to know how they can successfully retire. Credit unions need to publicize that they are able to offer guidance and services to members who are considering retirement. The best thing that credit unions can do for younger boomers is to find out what their goals for retirement are, design a plan to help them meet their goals, and help facilitate their achievement over time. For older boomers, and retirees, credit unions need to focus on the often overlooked area of post-retirement planning and how members can withdraw their savings, minimize taxes, and make their funds last.

Credit unions are not only competing with banks in the retirement arena, but also increasingly successful brokerage firms. Less affluent individuals are often in most need of guidance, might be overlooked by the other firms, and present an excellent target for credit unions. Offering financial counseling and advice, trust services, IRA accounts, and reverse mortgages can help you effectively serve and retain your members for life.

Related Resources
If you are interested in learning more about how credit unions can effectively serve baby boomers during this critical transition period , Callahan will be hosting a webinar about this topic on July 17th . Join other credit unions for a live discussion about the strategies that they have successfully deployed.

Sources: [1] Celent's Retirement Income Distribution and Planning report
[2] Kathy Chu, “Now What?” USA TODAY, January 17,2008. (USA Today research, Census Bureau, Employee Benefits Research Institute, Cerulli Associates)
[3] Sandra Block, Early retirees try to fill gap in health coverage, USA Today, January 15, 2008.
[4] Walter Updegrave, “Retirement: Why Your ‘Number' Doesn't Matter. Money Magazine, June 20, 2008 .
[5] Ben Rooney, Retirement Wake-up call, April, 9, 2008.