Baby Boomer Myth

Fears of imminent boomer mass retirement overblown: demographer Foot
Friday, September 30, 2005TORONTO (CP) – Worries about an imminent mass retirement of the baby-boom generation are overdone, but most of the boomers are entering their peak investment years, says demographer David Foot.

He also told the Investment Funds Institute of Canada convention Thursday that governments are spending on child care just as the number of small children is dropping, and are fretting about health-care costs which are about to decline for a decade.

And financial service providers who depend on 20-something people to design web pages primarily used by people over 40 are likely failing to communicate with their wealth-management clients, said the country’s best-known expert on population trends.

Much has been made of the fact that the oldest boomers are about to turn 60, Foot observed. But the bulk of the members of the Canadian boomer generation – born between 1947 and 1966, peaking in 1960 – are in their 40s: “they’re not retiring for at least another 15 to 20 years.”

The Canadian health care system is currently labouring under the demands of a previous large generation born during the Roaring ’20s, he said.

These parents of the boomers are 75 to 85, the peak age for medical spending, Foot observed, but will be followed by the tiny cohort of people born during the Great Depression of the 1930s.

And with the average Canadian woman now having only 1.5 children after a 1990s drop in births, the government “is finally getting around to negotiating very serious day-care arrangements just when the demand for day care in this country is plummeting.”

Fears of a looming labour shortage are equally misplaced, he said, caustically juxtaposing business predictions of a lack of workers with exploding college enrolments: “You look at these two articles on the same page of the newspaper, and you say: ‘Well, I guess business doesn’t think they’re ever going to graduate.’ ”

In the next five or 10 years “we’re going to have plenty of bright, young, beautiful, aggressive and well-trained workers,” he said.

“Now is not the time to raise immigration levels in this country – and that is not an anti-immigrant comment; I am an immigrant,” said the English-born, Australian-raised Foot, who became suddenly famous with his 1996 book Boom, Bust and Echo, arguing that two-thirds of everything can be explained by demographics.

The boomers, one-third of Canadians, continue to drive “the megatrends for all businesses” and increasingly are “vigilante investors,” he warned the mutual fund industry conference.

“In your 40s, you sort of buy mutual funds to get your feet a little wet in the stock market and spread your risk because you don’t have very much to invest,” he said.

“In your 50s, you’ve got more and more money, and increasingly you’re leaving mutual funds behind and start investing on your own.”

Most of the boomers, still in their 40s, have yet to come into their heaviest investing years.

But people’s “technology skills congeal around age 30” and Internet use declines with age, he noted.

“I actually think the very first question on any website should be: If you’re under 40, click here; if you’re over 40 click here,” he said.

The under-40 website should throb with elaborate graphics – “the very thing that when a 60-year-old tries to access it, it crashes her aging computer,” while the over-40 site should feature large print and easily downloadable content.

“Let’s get it clear: in your 20s you have no money to save; in your 30s and 40s the kids eat you out of house and home. You don’t save for your retirement until your 50s.”

And it’s a myth that people older than 50 invest conservatively, Foot said.

“When do you put most money into risky assets? In your late 50s and early 60s – this is when you maximize stocks in your portfolio. This is when you can afford to take the most risk. This is where the front end of the baby boom is today.”

Insights from demographer David Foot:

“If you’ve had a one-child policy for 25 years, you’re going to run out of young workers. That means China is no longer going to be a low-cost producer. China is going to run out of young workers and wages are going to go up quite dramatically.”

“There’s always going to be lots of young workers in India. India will remain a low-cost competitor; China will not. These two countries are heading into two entirely different futures.”

“The (U.S.) president’s state, Texas, looks much more like Alberta: it is much younger (than the rest of the country), and this is why a president from Texas will never understand how important health care is in Massachusetts, or a politician from Alberta will never get elected in Nova Scotia.”

“A hundred million people in Mexico, 60 per cent of them under age 30: a great place to sell lots of cheap beer. Now, if you don’t create jobs for these young people, either they’ll leave, or they’re going to tear your country apart. . . . NAFTA was a very convenient way to move manufacturing jobs down into Mexico. It was actually an anti-immigration policy for the U.S.”

“You need to divide the housing market up. . . . Small condos for young consumers, the children of the boomers coming through, will probably do all right. The big-box house in the suburbs, I’m not terribly optimistic on this one. . . . But vacation properties for people in their 50s and 60s, you haven’t seen anything yet.”

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