Boomers across the nation are facing a harsh reality of declining home value, rising debt, and depleted savings as they approach retirement age with little time remaining to recoup their losses, and the senior housing industry might not want to consider this generation to be their big break, according to a healthcare consultant during Life Services Network’s annual meeting, held last week in Chicago, Ill.
“Don’t count on boomers as the next big customers,” said Andy Edeburn, a healthcare consultant at Minneapolis, Minn.-based CliftonLarsonAllen LLP, during his presentation.
He pointed toward the 32% of fifty-plus homeowners who say their home value has declined substantially in the past three years, according to an AARP survey, and the 25% who have exhausted their savings. Credit card debt is a factor for nearly a fifth of this age demographic, too.
Nearly four out of ten of high net-worth Americans approaching retirement admitted in a February 2012 survey released by Nationwide Financial that they haven’t discussed their retirement with a financial advisor at all, despite nearly half of the survey participants saying they are “terrified” of what healthcare costs may do to their retirement plans.
While this can serve to indicate boomers may not be the next target customer, as they might not financially recover in time, this won’t necessarily be the case.
“The best prospects for a senior living community tend to be planners, those that have always hedged their bet by making good fiscal choices,” says Ken Curnes, Senior Vice President, Planning and Strategy, at advertising and marketing firm GlynnDevins. “The decision to move to a senior living community as a plan to enhance their quality of life and have a defined plan for future healthcare needs is often just the latest of many considered choices they have made in life. That same mindset would most likely have given these individuals a buffer against the recession as their portfolios would most likely have been balanced and/or more conservative by nature.”
When will the “silver tsunami” hit?
Something else to consider is the fact that the first wave of boomer consumers likely won’t hit for about 10 more years, Edeburn pointed out during his presentation.
This number could in fact be much larger, according to Ryan Frederick, founder of consulting firm Point Forward Solutions, LLC. Right now, the median age of consumers moving into retirement communities is about 83 or 84 (although some communities say their incoming resident age has stayed at about 78 for the past few years, even though the average age of independent living residents has risen to early- to mid-80s).
The oldest boomers are aged 66 or 67, and if the average age of incoming residents doesn’t change at all, says Frederick, that means there’s still a good 15 years before boomers start moving into retirement communities.
Further, he points out, if the average incoming age continues to rise, the industry could be waiting nearly 20 years for the first boomers to start arriving.
Evolving senior living model
This raises another issue. “Separate from their ability to pay for things, how do we know what people are going to want, 20 years from now, given what we know of the boomer generation?” Frederick says. “I don’t think we know what people 20 years from now are going to want… What we do know is probably what they’re not going to want.”
It might be similar to how cellphones evolve, he continues. Think of what a cellphone looked like 10 years ago compared to what they’re like today. “It’s a lot different now,” he says—and it’s hard to comprehend what new technological developments might look like five years from now, let alone 20.
With dual issues of affordability and an extended consumer timeline, Frederick emphasizes present-day preparation.
“You need to have a viable enough product right now, in order to still be around when the boomers hit. You need to be thriving and existing now,” he says.
And that’s what many are doing. “From our work with many senior living organizations, we not only see a recognition of [the evolving model], but many examples of how it is already being executed in community design, delivery of services, and evolution of organizational cultures,” said Curnes. “We see those most responsible for acting on this—from owners to developers to architects to lenders—clearly have an understanding of how the product needs to evolve. Some are more visionary than others, but… the field of senior living is clued into this.”
Written by Alyssa Gerace