The Baby Boom generation has more members than any other generation in the history of the U.S., with the Census Bureau estimating their numbers at about 77 million. With the oldest Baby Boomers turning 68 this year, we've already started to see the impact that retiring Boomers are having on their communities and their local economies. Increasingly, fears of a Baby Boomer flight away from less attractive areas of the nation toward more retiree-friendly locations have policymakers looking closely at the potential impact on those who are left behind.
A recent report from AARP focused on the impact that Baby Boomers' retirement is having on communities within the state of New York. Supplementing statewide results released last month, AARP has started issuing more localized reports in various areas of the state, including the Buffalo and Rochester regions. Although the report is limited to the state's boundaries, AARP's findings paint a gloomy picture not just for New York State but for similarly situated states across the Rust Belt as many of their longtime residents reach retirement age and consider their options.
The economics of retirement
The Evidence of coming Baby Boomer flight plays a prominent role in the AARP report. Among those who expect to retire at some point, 60% believe they're at least somewhat likely to leave New York. When you look at the county-by-county level, the figures get even worse, with 67% of working Baby Boomers expecting to consider leaving the Rochester area and 70% either ready or strongly considering leaving the Buffalo area when they retire.
The economic impact of residents' flight from struggling cities and states can be enormous. Throughout residents' working careers, local governments must watch as payroll taxes leave the local community to fund the federal government. Workers also contribute to retirement plans and accumulate pension benefits, reducing the amount of current economic activity in those areas. In exchange, cities and states have hoped that when retirees start receiving benefits from federal programs like Social Security, they'll remain in their communities and make up for lost time earlier in their careers. They've counted on retirees spending down their savings in ways that would help their communities thrive economically.
The AARP report puts a dollar figure on that impact, estimating that those who plan to leave the state could take more than $105 billion in annual spending with them. In the Buffalo area alone, AARP estimates a potential exodus of about $10 billion.
The surprising reasons why people are leaving
If you've ever visited western New York in winter, it's not hard to imagine why retirees wouldn't want to stick around. For many, the thought of warmer climes starts to look more inviting as they approach retirement.
But the AARP survey found that their primary reasons for leaving aren't necessarily linked to the weather. Instead, financial considerations dominated the rationales for Baby Boomer flight, as many believe it's simply impossible to expect to be able to afford an independent lifestyle in their present communities. Specifically, healthcare was one of the most important considerations, with many finding it necessary to stay at home to help care for a family member in need. According to the survey, improvements in healthcare support would lead more than three-quarters of New Yorkers to consider staying after retirement much more strongly. Similar issues relating to affordable housing, accessible transportation, and employment opportunities for older residents also showed potential to entice residents to stay if policymakers could help provide them.
The specific concerns expressed by many respondents show how ill-prepared many Rust Belt Baby Boomers are for retirement. Despite the impact of the energy boom on oil and natural gas prices, half of New Yorkers believe they'll have trouble affording their basic utilities. A similar number worry about rising property taxes and their ability to keep up on a fixed income. More than a quarter of New Yorkers don't think they'll ever be able to afford to retire, and more than half expect to delay their eventual retirement.
Finding a solution
New York isn't alone in its aging population. One in seven New Yorkers is 65 or older, and that number could rise to one in five by 2035. As younger workers have concentrated in higher-growth areas in the South and West, Rust Belt communities have been in demographic decline for years. As people leave, those who are left must carry a greater share of the burden of fixed costs for public services, initiating a gradual death spiral for local cities and towns.
But the situation isn't past fixing. With the economic pressure that Baby Boomer flight is imposing on state and local governments, initiatives to support retirees through utility regulation, healthcare support, independent mobility, and senior housing are seen as helping not only the elderly, but also their entire communities.
A greater focus on what AARP calls the "longevity economy" could provide a model for other parts of the U.S. and the world facing an aging population. Until the efforts of legislators and policymakers move forward more quickly, though, the threat of Boomer flight will remain a scary prospect for the Rust Belt.
Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.