Who’s A ‘Boomer’?

By Jim McNiven

If you are part of the BoomersWork operation, then you are most likely over 50 and probably older than that. You know what a ‘Boomer’ is, somebody in the rough age group as you. It has not been a pejorative term, except maybe to those who are not Boomers. In fact, it may be a downright positive term to those who qualify, as Boomers, as a whole tend to have a disproportionate influence on society. Let’s explore what this is all about and why it means you will probably find yourself in perpetual demand as the economy picks up.

There is a lot of pop psych commentary on generations. There is the ‘Greatest Generation’, followed by the’ Baby Boomers’, then ‘Generation X’, followed by ‘Generation Y’, the ‘Millennials’ and, I expect next, the ‘Mobiles’. None of this is what I am talking about.

The Boomers have a particular characteristic that none of the other ‘generations’ has. It is defined by something we can measure. During the Depression and World War II, people either put off having many children or the menfolk, especially, but not exclusively, were away fighting in Europe or the Pacific. The war ended in mid-1945and soldiers began coming home and, by the end of 1946, births were beginning to increase. As the postwar prosperity in North America continued to build, families made up for lost time.

There is a concept called the age cohort. If you remember your schooldays, there was a cutoff date for birthdays beyond which you couldn’t be admitted to Grade 1. It was normally the end of September or mid-October. That set the limits to a lot of things in your life if you were a couple of weeks past the date. That cutoff created cohorts, people who all shared a common characteristic, in this case all in the same grade. Demographers use a similar age cohort when they look at social trends, like who is working and who is not.

The uniqueness of the Boomers lies in the growth in births through an 18-year period. Like that school cutoff that left your buddy a grade behind you, it is somewhat arbitrary. Since the birthrates started rising at the end of 1946, the Boomer generation’s beginning was set in 1946. If we look farther along the calendar, we will find that the Pill was cleared for use in Canada in the early 1960s, so the end of the Boomer period was set at 1964. The decline in the birthrate started earlier than this, but 1964’ll do. Today, in 2013, the oldest Boomers turn 67 and the youngest 49.

So, why will Boomers stay in demand? It is probably not what you would think.

If Boomers are characterized by being born when a lot of other people were, all of the other ‘Generations’ noted above consist of people born when not so many were being born. There is a concept that shows this, called the fertility rate. This is the number of children that would be expected to be born of an average woman in her period of fertility, roughly from 13 to 43 years of age. During the Baby Boom years, the fertility rate was generally above 3. The replacement rate, not surprisingly, is 2.1—one for mommy, one for daddy and 0.1 for accidents, etc. In the late 1960s, the Canadian rate fell to below what was required for replacement and has wobbled around 1.4—1.6 ever since 1971, 42 long years.

Now, you can’t go on not replacing the population for that long without something happening. First, any growth in our population comes as a result of immigration. Second, if you go back to the ages of Boomers, you will see that a lot of them are of retirement age, which today in Canada, is around 62. If we did not have enough babies for 42 years, then the crowd of young workers is a lot smaller than the older crowd heading for the workplace doorway. As this goes on, the number of unemployed may shrink, or not, but the number of jobs going begging will rise.

 I was discussing these things with a local businessperson, when he complained that none of the young people wanted to work anymore. He had only a couple of applications for an advertised job, when he used to get 10 or more. I tried to explain that the other 8 weren’t ever born, but he was having none of it. As it sinks in to employers, Boomers willing to work, on whatever schedule they want, will become really popular, replacing all those lazy, unborn kids.

This is a really serious problem. If you have ever seen Galen Weston advertising Loblaws’ baby foods and referring to a crowd of babies around him in their highchairs as the ‘Class of 2025’,you will know that it won’t be solved soon.    

Financial woes affecting planned retirement years

An article on postcrescent.com offers some interesting American statistics and commentary on those who are approaching retirement this day and age.  Some of the most startling:

• Most workers in a survey by the Employee Benefit Research Institute say they have virtually no savings or investments. And 37 percent of those surveyed in the 2012 Retirement Confidence Survey think they will have to wait until after age 65 to retire. 
• 34 percent of older Americans used credit cards to pay for basic living expenses, such as mortgage payments, groceries and utilities, according to research conducted AARP. As a result, they had average credit card debt of about $8,248. About half of the people over 50 in the survey were called by debt collectors, the study says. 
• New data from EBRI show debt has actually increased for retirees 75 and older, including housing debt. Craig Copeland, senior research associate, says it’s not clear why, but it may be because of health care costs.

More and more Boomers are not only going back to work to fight off boredom, but sadly out of necessity in a lot of cases.

Read the entire article here.

Boomers Go Long, But are they Falling Short? (PRESS RELEASE)

BMO says Boomers Working Longer to Bolster Retirement Savings Need to Be
Better Informed

TORONTO, April 15, 2009 - According to a new research study from the BMO
Retirement Institute, there is a strong sentiment among Canadian Boomers that
setting retirement clocks back a few years may be the best option to secure a
steady income stream. And while the research indicates people are accepting of
this notion, many may be making this decision without having all the necessary
information.

The study reveals:
• 31% of Canadians who plan to retire in the next 5 years are considering
delaying their retirement date
• Retirees are also thinking about returning to work. For those that are
considering it, 41 per cent definitely intend to return to paid work within the
next year.  
• More than two-thirds of respondents were accepting or happy about
delaying retirement
• However, almost half of pre-retirees say they do not know how much they
will receive from their personal savings and investments

“Money is the main reason people are working longer or returning to work.
Staying mentally active is of secondary importance, but money is by far the top
concern. However, many retirees and pre-retirees are making moves to bolster
retirement savings by working longer without a clear understanding of their
retirement income gap; the difference between how much is needed and how
much is available from various sources including personal savings, employer and
government benefits,” said Tina Di Vito, Director, Retirement Strategies, BMO
Financial Group. Di Vito also heads up the BMO Retirement Institute, a think tank
set up by the Bank to provide leading perspectives around retirement issues.
How Much, How Long and in What Capacity?

The study indicates that:
• Over 30 per cent say they do not know how much they will receive from
the Canada Pension Plan (CPP)/ Quebec Pension Plan (QPP)
• In addition, 42 per cent of pre-retirees and 59 per cent of retirees say they
have not spoken with their financial advisor about the potential impact that delaying retirement or working longer will have on their financial/retirement plan.

“How Boomers choose to go about remaining or re-entering the workforce will
shape their retirement lifestyle and a financial advisor can provide a realistic
perspective on how such decisions impact income in retirement,” said Di Vito.
“It is vital for Boomers to know where they stand financially and understand the
impact working longer will have on their savings so that they can determine how
long they need to continue to work, and in what capacity, to achieve their
personal retirement goals. In some cases, Boomers may discover they need to
work fewer years than anticipated to realistically meet their retirement goals.”

Making an Informed Decision
The BMO Retirement Institute has also just released a report Boomers Revise
their “Retire-By” Date as Financial Landscape Changes. This report details
various factors that should be considered so people can make an educated
assessment about working longer, including:

• Plan and Save - More burden of funding retirement has shifted to
individuals and away from government and employers. So a combination
of government and company pensions, personal savings, home equity and
insurance products are necessary.
• Healthcare - Many future retirees have not set aside enough funds to deal
with rising healthcare costs. It may be prudent to stay working to ensure
continued healthcare benefits and look for companies that have a
comprehensive benefits package.
• Inflation - Living longer puts pressure to save more and comes with other
financial risks. Even a relatively low inflation rate of 3% can significantly
reduce purchasing power over a 20-30 year period.
• Withdrawals - withdrawing money during a period of declining markets can
greatly reduce how long retirement savings will last. Instead, reducing
withdrawals during the first few years of retirement, as a result of working
longer, can significantly extend the duration of savings.

BMO Financial Group offers a simple online calculator to help pre-retirees and
retirees get a clear understanding of how key variables such as current age, life
expectancy and style of investing can impact one’s retirement savings. For more
information please visit: www.bmo.com/RetirementCalculators

About The BMO Retirement Institute
The BMO Retirement Institute, launched in April 2008, provides insight and
financial strategies for those either planning for or in their retirement years. The
Institute was launched to help pre-retirees simplify the complex dynamic between
personal finances, personal relationships and retirement lifestyles.
(www.bmo.com/RetirementInstitute)About the BMO Retirement Institute Study
A Harris/Decima online poll was conducted for the BMO Retirement Institute
between Feb. 26 and March 4, 2009 and is based on a sample size of 1,006
randomly selected retirees 55 years of age or older who indicated they “definitely
or probably will return to work” and pre-retirees who are planning to retire in the
next five years.

Rethink what you'll need for retirement

An excellent article in The Globe And Mail on Thursday offers insight into retirement planning for Boomers, especially those that are re-joining the workforce.  It does a good job of detailing action items like:

• Are you saving enough?
• Do not overestimate market returns
• Follow asset allocation retirement strategies
• Determining post-retirement essential and discretionary income 

A choice quote from Brenda Dalglish's story:

‘Aspirations plus financial situation divided by reality equals fulfilment in retirement.’

Read the full article here.

Can There Be a New, Same-Old, Same-Old?

By Jim McNiven

Let’s pretend that Iran makes some kind of deal with the US in the next year or so on its nuclear ambitions and it gets the sanctions regime that is in place relaxed a bit. Also, maybe post-Chavez Venezuela gets its oil export ‘house’ in order. Then what for energy?

Since the 1970s unpleasantness over oil, the game has been pretty much the same. Something happens to cause the spot oil price to peak and the consuming countries all have a slowdown in their economies. This leads to a drop in price and then prices bounce around a narrow range for some years before the next crisis. We got to $140/bbl in the last run-up and then prices fell back to $80-90.

A lot of the oil producing countries have government budgets that are predicated on at least $80/bbl. Hovering around that bottom would put serious stress on those regimes. What they will do is not unlike what Atlantic lobster fishermen do when the price drops for their catch: they try to catch more to make up on volume what revenue’s been lost on price. In spite of OPEC, these countries cheat. That drives down the price even more and a contest develops between those who need the cash and those who are the higher-cost producers to see who will give up first.

Of course, if oil is already near the government budget bottom, then having the Iranians and the Venezuelans, and even the Iraqis bring new production to market would just add pressure to an already messy situation. Complicating this is the decline in US oil imports as the North Dakota fields come on stream. Then there is the Keystone XL pipeline, designed to take Canadian crude south to the Gulf of Mexico and the longer-term Northern Gateway pipeline that will take Canadian crude to the Pacific and its markets, along with the doubling of capacity of the existing pipeline to Vancouver.

Right now, some of this Canadian crude is being sold into the US. What we have to realize is that the oilsands activity is respectable with the price for that crude not being that high. The main oil pricing point is called ‘Brent’ after a field in the North Sea. The Brent price is the world price. Then there is another price at Cushing, Oklahoma, called the West Texas Intermediate, or WTI. (Don’t ask…) The WTI is a lot lower than Brent because the western oil from wherever (Canada, west Texas, North Dakota) can’t get out of that area easily. There may be a glut of WTI while East Coast refiners are buying oil at the Brent price. (Again, don’t ask…) Finally, oilsands crude gets the WTI price, but that includes the pipeline charges, so the world price could be, hypothetically, $110, the WTI price, $95 and the Ft. McMurray price at the pipeline, $75.

If Canadian crude could be exported from the Gulf of Mexico, as well as Kitimat and Vancouver BC, the upside would be really something. No discounted WTI, but a discounted Brent price would be charged for it. That’s what Keystone XL and Northern Gateway are all about.

Now, this scenario does not even take into account what is happening to natural gas and solar, as well as to US regulations on gas mileage. First, when shale gas started to be found and exploited in large quantities in the US, the Obama administration ignored the ‘Pickens Plan’ that promoted the legislated use of natural gas as a replacement for coal and gasoline. I don’t think this will go on much longer. For a long time there used to be a rough 7:1 spread between the price for oil and natural gas, but that is really broken today and is upwards of 20:1 now. The spread may never ‘normalize’, but gas is too cheap for North America not to begin to use it. It may be that the pipeline from the Maritimes to Boston will be reversed and hooked to an export terminal in Saint John or eastern Nova Scotia, but continent-wide, gas will come into its own. Boone Pickens probably won’t get any credit, because he was 5 years too early.

The US mileage targets probably can’t be met through more standard engine technology. The hybrid gasoline/electric car may be the only reliable alternative, unless it is the all-electric. Car companies have an interest in the gasoline engine because so much has been invested in it over the past century, but if they can sell electric ones, so be it. A car’s a car.

The real pioneer here is billionaire Elon Musk, producing Tesla electric vehicles in California. Recently, a reporter drove a Tesla 400 miles from Lake Tahoe to LA, stopping at 4 charging stations (read electric ‘gas’ stations) to get relatively quick recharges. But, as the saying goes, ‘the pioneer is the guy with arrows in his back’. If not Musk, someone will get the electric personal transportation system right.

Then there is solar. My understanding is that the price of electricity produced by solar panels has come way down. My wife’s niece and her husband just got their first power rebate cheque for producing, through solar panels, more power at their home, near Boston, than they consumed, including charging their Prius car.

It’s hard to conceive of $200/bbl oil happening, with what’s coming in terms of supply and where alternatives are either very cheap or getting very competitive. It is even hard to see how $100/bbl oil can be maintained.

James D. McNiven is Professor Emeritus at Dalhousie University and Senior Policy Research Advisor with Canmac Economics Ltd. He was the Fulbright Research Professor at Michigan State University’s Canadian Studies Center in 2010-11. 

Until his retirement from Dalhousie, he held the R. A. Jodrey Chair in Commerce in the School of Business Administration and was a Professor of Public Administration. From 1988 to 1994, he was the Dean of the Faculty of Management at Dalhousie.  Prior to that, he was the Deputy Minister of Development for the Province of Nova Scotia (1981-88) and the President of the Atlantic Provinces Economic Council (1977-81).

He has been the CEO of a small technology company and has been a member of a number of corporate and government boards, including the Blue Cross of Atlantic Canada and the federal government's International Trade Advisory Committee. He was a member of the federal government's Royal Commission on National Passenger Transportation. 

Dr. McNiven has a PhD from the University of Michigan.  He has written widely on public policy and economic development issues and is the co-author of three books. His most recent research work has been about the relationship of demographic changes to Canadian regional economic development. He also has an interest in American business history and still continues to teach at Dalhousie on a part-time basis.

His email address is j.mcniven (at) dal.ca.