Representative Paul Ryan's (R-Mich.) recent 2012 budget proposal to replace Medicare with a different health plan for those under age 55 serves as the latest example illustrating the notion that "baby boomers" are not a single generation.
Those younger ones in that wide demographic trend, the second-half boomers, have long felt like the neglected younger brothers and sisters, quietly following where their elder generational siblings have led. Now, however, when it comes to retirement, the more appropriate analogy would compare them to late arrivals to a party after the retirement cake and ice cream have long been devoured.
Dubbed "Generation Jones," this increasingly vocal generation includes some 50 million second-half boomers who were born between 1954 and 1965. And according to social commentator and business consultant Jonathan Pontell, they have very little in common with the first-half boomers with whom they have been lumped.
Demographically, there was indeed a boom in babies between 1946 and 1964. But Pontell coined the term "Generation Jones" to distinguish second-half boomers as a separate generation. "Generations are defined by the common attitudes and perspectives created by shared formative and life stage experiences," he says. "And Generation Jones really is a distinct group separate from the [older] baby boom generation."
The key aspect for advisors is this: When it comes to planning for their retirement, these now middle-aged adults bring both a different psychographic profile and a different economic reality that are likely to make their version of retirement very different than that of older boomers today.
A Different Perspective
To understand the argument that the baby boomers really are two separate and distinct generations, you have to look beyond the demographics to examine the psychographics. During their impressionable adolescent years, first-half boomers' views of the world were shaped by the flourishing prosperity of the 1950s. That idealistic optimism was put to the test during the often violent '60s and early '70s when world political events combined to create a common antagonist against which early boomers could rally. Even today leading edge boomers will often recall their "glory days" of activism. They were part of the action, revelers of the Woodstock experience, witnesses to the Kennedy and King assassinations, and active in both sides of the Vietnam debate.
By contrast, the Jonesers were just kids at the time. (Disclosure: I'm in this group.) We watched as the idealistic optimism of our formative years gave way to a cynical pessimism. We became disillusioned over politics (via Watergate, the Cold War and the Iran Hostage Crisis,); the economy (via stagflation, gas lines and a flat stock market); and even our home lives (via rising divorce rates and the emergence of HIV and Aids.)
While older boomers developed a tremendous expectation and grand desire to change the world, we Jonesers inherited a world that was tired of change.
According to Pontell, those expectations were left largely unfulfilled and have left this generation with an unrequited, "jonesing" quality of constantly wishing for something more. "Jonesers have youthful dreams they've never been able to fulfill," he says.
This 18-year difference between the first boomers born in 1946 and last boomers born in 1964 has also translated into very different economic experiences. Whereas first-half boomers benefited from the high interest rates of the early-1980s when CD rates were at 13%, they also suffered through inflation and mortgages of 14% as they were buying their first homes during the same period. By contrast, second-half boomers were still in high school during this rise in U.S. interest rates.
For investors, the unprecedented economic bull run of the 1980s and e_SSRq90s created massive amounts of wealth. Indeed, the two decades from Jan. 2, 1980 to Dec. 31, 1999, the Dow Jones Industrial Average soared from 824.57 to 11,497.12, a nearly 1,300% increase. While economists attributed this increased wealth across the board to all baby boomers, first-half boomers saw the greatest benefit.
These leading-edge boomers were at a stage in their lives when they had already purchased homes or begun accumulating financial assets that could benefit from these rising values. Second-half boomers, who reached these life-stage milestones 10 to 15 years later, ended up paying higher prices. So while leading-edge boomers were able to purchase assets at the bottom and ride them all the way to the top, Jonesers were only able to get in well after prices had already begun to rise, and saw only a fraction of the gains that leading-edge boomers experienced.
Looking to the future, it's likely Generation Jones will face a very different retirement scenario that even now is creating new challenges for advisors. As a generation full of unfulfilled dreams reaches that reflective stage of midlife, emotions are beginning to influence decisions and often wreak havoc on the best financial plans.
If we assume that Jonesers will be working longer than current retirees—due to the well-documented lack of savings, decline of employer pensions and the 800-pound gorilla that is our collective entitlement programs—what will that mean for those who previously anticipated a normal retirement age and envision their retirement as time to fulfill those youthful dreams? Will we tell them to continue to place those dreams on hold until they finally cross the retirement finish line? Or should we be helping them reevaluate and reexplore their options now with the idea of pursuing those dreams while continuing to earn an income?
As a client's human capital becomes more and more critical to their retirement plan, helping them use their human capital in a personally fulfilling way will be key to developing a plan they will be motivated to stick with. Just as the expertise of an attorney or CPA is often critical in managing the client's financial capital, career counselors, adult education providers and entrepreneurial assistance will be critical in helping clients manage their human capital.
And while no one can predict the future of health care, Representative Ryan's proposal clearly demonstrates that retirement health care is on the negotiating table. With estimates of non-covered medical expenses currently ranging from $200,000 to $500,000 over the course of the average retirement span, planning for potentially higher health care costs takes on increased importance.
Perhaps most important, advisors need to recognize the full challenges our clients are facing. We need to be willing to change the conversation away from traditional discussions of retirement to conversations that include both "doing what you've always wanted to do" and continuing to earn an income. Finding the solution to that may be your greatest challenge.
Keith Weber is the founder of Weber Consulting Group, a financial advisor training, coaching and practice management consulting firm focused on providing life planning skills to advisors.