Calling World’s Baby Boomers! (Part 1)

I am a baby boomer, steeped in the music of the Beach Boys, the 1st Quarter Storm, and Liberation Theology. Our coffee shop’s mascot is affectionately called Captain Pot. Throughout my history, the US has dominated the Global economy, today its US$13.8T GDP is 25% of the world’s total.

In the early 20th century, world history has been earmarked with significant US events - magnificent and horrifying – each changing the course of following decades: the atomic bomb’s invention, the Apollo moon landing, Microsoft and the Internet. Her military might is another factor: her defense spending alone (US$528.7B in 2006) outmatches China’s and Russia’s, combined (US$84.2B); nine times more than the closest, the UK (US$59.2B).

America is therefore shapes the modern world: historically, socially, and economically; the primary military power in this post cold-war era.

A memorable part of US history is the baby boom era: a 20-year period from 1946-1964, featuring significantly increased birth rates. The first "boom" in the US came in 1945, when births jumped from 2.86M to 3.4M the following year, thereafter steadily increasing annually, exceeding 4M in 1964. The period ended in 1965, when births dropped from 4.03M (1964) to 3.76M (1965).

World War II's end also brought economic prosperity, enjoyed by US baby boomers. The middle class swelled to 60% of all Americans by the mid-50's. Raised on TV, they gained liberal idealism, openly discussing issues like homosexuality and abortion. A 42% dropout from formal religion was observed; rock and roll became a primary expression choice. This “counterculture” generation manifested its ideologies in “Flower Power,” “peace, man,” and “make love, not war.”

Boomers Gloom?

The global economic tsunami of high oil and food prices, the subprime crisis, tightening credit policies, and in some countries, a growing wage-price spiral, now finds their future imperiled.

Averaging 60 years old, many US boomers are sensing fiscal insecurity, bringing about retirement doubts. Polls show 11% of retirees planning on postponing retirement, having invested their savings (401K) and pensions with unscrupulous investment bankers unable to deliver on unrealistic promises, like 14% returns, early retirement, and non-erosion of principal.

With pending retirement facing depleted finances, their survival essentials have disappeared. Healthcare goes from expectation to option. The housing crisis and tightening housing credit policies makes it harder for boomers to sell their equity-eroded homes. The alternative – renting – will further diminish income flow (from their tiny pensions) leaving little for anything else, especially for bare necessities, making living in retirement homes close to impossible.

Japan also has its baby boomer retirees: about 7M people in 2007 reaching mandatory retirement age of 60, with an approximate financial asset of JPY130Trillion, to be spent mostly on housing, travel and retirement homes.

Why are we so concerned about the retiring Baby Boomers? If only 5% of the total 94.7M US and Japanese retirees - 4.7M - retire here, this represents clear entrepreneurial opportunities for the Philippines. The Philippine Retirement Authority (PRA) has created the Special Resident Retiree’s Visa (SRRV), mandating a US$20,000 deposit (if over 50) and US$50,000 (if over 35) into accredited banks. This deposit can only be withdrawn, if invested in approved projects, like house and lot purchases. At US$20,000 each would result in US$9.5B. Their spending an additional US$1,000/month, would earn us another US$4.7B monthly.

Unlike the US and Japan, the Philippines shows a constant boom, averaging a 2.5% birth rate in 47 years, regardless of economic atmosphere. A growing population has a plus side. It means a growing supply of English speaking labor, steeped in the tradition of TLC of our elders. Our country also has comparatively cheap basic goods and services, caregivers and housing facilities, meaning a better absorptive capacity than the developed world institutions, creating for the country a huge, self-replenishing potential market.

We can offer sunshine, seafood, smiling caregivers and specialized hospitals

RP: Asia’s Potential Golden Pond

Acknowledging this, President Gloria Macapagal-Arroyo declared retirement industry a “key flagship project” - led by Private Sector, strongly supported by Government. It will create options for Filipino and foreign retirees. The 2006 Philippine Retirement Industry Investment Summit (PRIIS) outlined possible benefits from participating in this industry. The country aspires to become an ideal retiree haven to retirees from the US, and other baby boomer G8 nations.

A great gap separates aspiration and execution however, because there is no meaning unless PRA is empowered. Rejuvenated by young, active Technocrats, these can become the core elite of PRA retiree attachés in Embassies. Using Pilot programs, a group of 12 attaches with salaries and budget of say, US$4 million, can target the US, Japan, Shanghai, Korea, Taiwan, and Europe, hitting the projected US$44B by 2015. That’s less than a 1% expense. Further, Congress could incentivise successful efforts, following the Customs and BIR models.

The next article will further explore the retirement industry as a source of tremendous business opportunities for the Filipino entrepreneur.

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