Why Your Credit Union Should Rethink The Most Valuable Generation

Credit unions may think they have boomers figured out, but this generation of retirees is a group of surprising contradictions.

 
Yun Ma

By Yun Ma

 

In their quest to attract millennials, credit unions shouldn’t neglect the interests of 79 million baby boomers, those born between 1946 and 1964. Boomers not only make up 26% of the US population, but a recent Nielsen survey also calls them the “most valuable generation,” citing their collective affluence, purchasing power, and, despite a common misconception, adaptability to new trends.

The boomer generation is particularly valuable to credit unions, accounting for almost 40% of cooperative members nationwide. Boomers are generally more financially stable, and they are on track to inherit $8.4 trillion, $2.4 trillion of which they have received already.

“Replacing boomer retirees with younger generations of members is just not possible in the short term,” says Jeff Hunt, consumer program manager at CUNA Mutual Group, a credit union service organization specializing in insurance. “Generation X is too small and financially stretched, and Generation Y is too far away from their peak borrowing and earning years to fill the gap.”

Not Ready To Retire

In a milestone for their generation, the oldest boomers reached the traditional age of retirement — 65 — in 2011. Every day, 10,000 more boomers turn 65. By 2030, the entire generation will be age 65 or older, constituting 18% of the US population, according to the Pew Research Center.

But just because boomers are eligible to retire doesn’t mean they will. In fact, in a report from the Pew Research Center, 57% of boomers say their household finances have worsened in recent years. Compared with investors of all ages, boomers are the most likely to have lost money during the Great Recession. As a result, the number of older people in the workforce is growing at a faster pace than the number of younger workers. Among boomers between the ages of 50 and 61, six in 10 say they may postpone retirement.

Recent findings of the Employee Benefit Research Institute conclude the same thing: Americans aren’t saving enough to retire. Research director Jack VanDerhei has an even more dismal prediction. “With baby boomers and Gen Xers, 44% of them will run short of money in retirement,” he told MSN Money.

At Oregon Community Credit Union ($1.1B, Springfield, OR), senior financial consultant Cathy Stoppel arranges retirement seminars for women twice a year, each event drawing 75 to 90 attendees.   She sees inadequate retirement savings as an overriding concern of the people at these events. “A common theme is members want to know how they’re doing for retirement. Are they saving enough?”

At the same time, retirement itself is changing. As financial writer Kerry Hannon, author of Great Jobs for Everyone 50+, told NPR, “Baby boomers are either continuing to work much longer or approaching work not as an afterthought but as a pillar of their retirement plans.” She also notes, "Unlike many of our parents, most of us don't have pensions to fall back on to fund not-working for a decade or more."

One partial explanation for their lack of retirement savings may be that many boomers just don’t feel old. A Pew Research Center survey advises, “Don’t tell boomers that old age starts at 65. The typical boomer believes that old age doesn’t begin until 72. About half of all American adults say they feel younger than their actual age, but fully 61% of boomers say this. In fact, the typical boomer feels nine years younger than his or her chronological age.”

Credit unions marketing to boomers shouldn’t just assume that a conservative approach is the way to go. Boomers don’t necessarily see themselves fitting into the traditional, staid view of retirement, where retirees enjoy lazy mornings sleeping in before playing golf at sunset, as most generic retirement ads would have you believe.

As an NPR article points out, “Maybe we should retire the word ‘retire’”.

A Plan For Paying Down Mortgages

For boomers who own their own homes, an overwhelming majority is firmly ensconced there. In addition, according to a Metlife survey of 65-year-olds, 83% have no plans to move from their current residence.

Since 1989, the number of Americans between the ages of 55 and 64 who still have a mortgage has risen from 49% to 63%. During that time, the median mortgage balance has tripled to $85,000. Boomers are slower to pay off their mortgages than earlier generations of retirees. Having an outstanding mortgage and inadequate retirement savings has become a serious concern that some credit unions are trying to address by offering short-term mortgages to boomers nearing retirement.

The National Institutes of Health FCU ($569M, Rockville, MD) offers a five-year, fixed-rate mortgage with boomers in mind. “We call it our Goodbye Mortgage because it’s perfect for our baby boomer members who want to get out of debt before they retire,” president Juli Anne Callis has said. She notes that boomers have more financial resources than younger generations to pay a bit more every month and retire the debt sooner.  

CitizensFirst Credit Union ($370M, Oshkosh, WI) offers a flexible mortgage plan specifically for members within five to 12 years of retirement. Like a countdown to retirement, the plan calculates the remaining payments so that members have paid off their mortgages by the time they retire.

Mortgage manager Ken Bucksnes explains further: “Members can select a schedule that coincides with when they want to retire and have their mortgage paid off. They can select anywhere from a five-year fixed-rate to a 12-year fixed-rate mortgage.” The five-year plan has an annual percentage rate of 2.6%, and the 12-year plan is 2.95%.

More Tech Savvy Than You Think

Although the boomers’ parents may be uncomfortable with technology, the same can’t be said of boomers. A Pew Research Center report found that younger boomers, those ages 45 to 55, are almost as likely to be online (and using a home broadband connection) as younger adults. Meanwhile, older boomers, ages 56 to 64, are more likely to be online than those age 65 and older.

Roughly half of younger boomers actively use social networking sites. The growing number of boomers socially networking actually outpaces younger age groups.

When it comes to their banking, boomers don’t necessarily rely on traditional channels, including waiting in lines at branches. Not only are they receptive to using another channel, many boomers even embrace it. Consequently, credit unions would be foolish to rule out boomers as users of either online or mobile banking, or any other tech-based services.

Boomers may need some initial guidance to get the hang of new technologies, but as many credit unions are discovering, this generation is a quick study.

 

 

 

April 22, 2013


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