The extent of insufficient retirement funding and poor exit/succession planning appears to have been laid bare over the past few months, with a number of studies pouring cold water on broader expectations for the retirement plans of the Baby Boomer generation. Seemingly gone is the concept of the “golden retirement”, where this the most prosperous and wealthy generation in history was to leave the active workforce on or before age 65, accessing their flourishing superannuation nest eggs and equity to fund their future years of endless leisure time.
For example, a report from Suncorp Superannuation released in late November 2013, titled Rise of the Grudge Workforce, found that a quarter of Baby Boomers (some 1.3 million) have insufficient funds to retire and will be forced to work into their eighties just to continue to make ends meet. According to the report, only 1 in 5 Baby Boomers have saved enough to retire to this point, and 52 per cent will be working beyond the official retirement age of 65.
If they can find work, that is. And if their bodies continue to hold up to the demands of the job.
Then there’s the recent MGI report Surviving not Thriving, which paints a similarly bleak picture for the retirement plans of thousands of Baby Boomer business owners. In this study, 58% believe they will be working beyond 65 years of age (up from 45% in 2010), and the same proportion indicate that younger generation family members are not interested in becoming successors. Interestingly, 34% indicate that they are not currently in a position to fund retirement, a smaller percentage than that of the Suncorp survey of employees, but still significant. So not only is the retirement plan heading for the shredder, the succession plan (for the 45% that actually have one) is heading towards a similar fate.
What I find fascinating about these two statistics is that they appear to blow a huge hole in the assumptions being made by marketers, strategists and visionaries about the impact the mass Baby Boomer generation retirement will have on Australian society. In the original vision – depicting retirees seeking a life of significance and experience, instead of the more archetypal golf and gardening – volunteering, charities, travel, tourism, entertainment and the like stood to benefit most from the influx of well-resourced (in time AND money) adventure-seekers. In their book Generation Ageless, authors Smith and Clurman suggest “a word to the wise: Do not plan around the expectation that Baby Boomers will retire in the manner of the generation before them“.
Instead, the Suncorp report suggests that “volunteering could become a thing of the past”, as “elderly Australians are forced to work for money, rather than to help the community”. And with discretionary cash in short supply, travel aspirations may have to be held firmly in check.
So what can be gleaned from these two bodies of research? First of all, it is incredibly difficult to make long-range forecasts based on expectations about post-retirement Baby Boomers. Yes, the demand for aged care services (both in-home and in-facility) will continue to increase by virtue of a burgeoning proportion of the population in the “aged” category and longer life expectancies. Yet any other corporate plans relying on the altruistic motivations of Boomers need be reviewed for the accuracy of their underlying assumptions.
Furthermore, the retention of experience in the workforce is quite the double-edged sword. On the one hand, older workers enduring well beyond retirement age could be seen to be keeping jobs that could otherwise go to younger workers, where high-range unemployment has myriad social consequences. The MGI survey offers a glimpse of opportunity here, though, finding that 40% of the businesses expected to remain in family ownership will appoint an external CEO rather than a family member. Perhaps a rise in “grey-collar” CEO recruitment in the family business sector is looming?
On the other hand, older workers are more likely to remain committed to their employer, work hard and understand that promotions do not happen just because they have mastered their current task (take note, GenY-ers!).
From a business owner’s perspective, these insights demonstrate yet again how important it is to plan effectively and review regularly. Not only does the greying workforce affect organisational strategy (including recruitment and retention), but continues to delay the long-projected deluge of privately-owned businesses seeking external buyers. Perhaps also, the manner of how business owners will eventually make their exit stage left is not quite so cut and dried as the expectation of a trade sale or family successor. Are we to see management buy-outs (MBOs) become more prevalent, as Baby Boomers delay their retirements long enough to implement a longer-term transition of ownership to employees? Maybe we will see more Non-Executive Director (NED) business owners, who step out of the day-to-day running in favour of a management structure but retaining sole or majority ownership for the longer-term, and the income stream it provides.
It is safe to suggest, whichever way you cut it, that Baby Boomers will not be retiring automatically at the age of 65 (or before), so we won’t be seeing a mass exodus from active participation in the workforce or business ownership as originally forecast. If we can construe anything from these recent studies, it is that many hundreds of thousands of Boomers will remain in active roles as business owners or employees well beyond the official retirement age, many because they simply cannot afford to walk away.