Boomers at Halftime

by David Cork

Has our largest generation, the baby boomers, suddenly started to age rapidly? We see it all the time in the media with phrases such as ‘approaching retirement’ or ‘becoming cautious as they age.’ Just last week there was a wonderful illustration of this theme in a book review in the Ottawa Citizen. The author was commentating on the perfect timing of his new book on how to conduct a well-organized estate sale. His reasoning was simple: for the sake of our offspring it is much wiser to hold an estate sale as you downsize before you pass away. His optimism in the timing stemmed from his belief "in another ten years, the aging baby boomers will be dying and downsizing."

Now I appreciate that when authors have a book to promote they need a catchy hook to attract the interest of potential readers. But I think it is also the job of the media to challenge some of these statements, particularly if they misrepresent the facts.

Perhaps this theme catches my eye because I write on demographic issues and I see this recurring theme all too often. We are being led to believe that our largest generation is on the verge of retirement. My favorite depiction of this occurred in the Wall Street Journal five years ago. It was a full centre spread. I've forgotten the product but the message was clear. On one side was a full-page picture of an adorable baby with the caption, "You know those 76 million babies born between 1946 and 1964…". On the other side was a full page picture of a gruff older-looking man with the caption, "Guess what, they're not babies anymore."

What caught my attention was how they were characterizing the baby boom. This gentleman was clearly well over sixty and yet at the time the oldest members of his generation were in their mid-fifties.

I'm amazed by these statements because we can all do the math. In Canada the baby boomers are characterized as those born between 1947 and 1965. The last of the boomers don't hit forty until this year. The median age, and this seems to always surprise people, is forty-seven. Those statistics allow us to make more factual statements in reference to the demographic realities in Canada.

The boomers are not aged, they are not on the verge of retirement and they are not slowing down. Keep in mind the boomers left adolescence late, they graduated late, they married late, and reproduced late; they are hardly going to retire and die early. I believe the way to notionally characterize the boomers is that they are at 'halftime'. The boomers have headed intothe locker room of life and they are pondering what they've experienced and plotting strategy for the second half.

Regardless of how the first half has played out there are always things we have learned and can reflect on and hopefully respond to.

Great coaches can react to what they've seen. The less skilled coach tries to motivate the troops with more of the same to carry the day. And let's be clear, they need a coach. So what have we learned from our largest generation as they gird themselves for the second half?

Well, we learned they have a keen interest to plan for future affluence and security. The lucky ones that were able to participate in a pension are well on their way to achieving their goals. The balance of this generation has had to try their hand at self-directing their retirement affairs with mixed results. It turns out that the notion of self-direction and human nature often don't go together.

Fear and greed can get in the way and human instincts cloud our ability to cope with these common afflictions. Think of the oft-quoted motherhood statement on successful investing: buy low and sell high. Sounds simple enough but it's a tough decision to buy assets that are out of favor and sell our winners to do so. We need to act in a counterintuitive way, which sounds simple enough but is not always easy to do.

So what is the recipe for future success given what we've learned? Boomers should first focus for a moment on their real estate endeavours. They have been passively brilliant with their housing because they take a long-term view. In contrast, when it comes to the stock market, their retirement needs are years away and yet they manage the challenge with a very short-term outlook. As a result they are often actively under-performing.

Second, they need to establish a process that leads to success. All too often in our haste to race into the investment markets we forget to establish what our long term goals and objectives are. Of all the difficult activities done in society, how many do we embark on without a plan? Investing for retirement is one of the most crucial activities for all Canadians and it requires a series of specific actions. We need to create a plan and stick to it.

Last, we need to be patient, which is a tough thing to do. It may in fact be against our nature. Think back to basic psychology 101 and those instincts we inherited from our distant ancestors: fight or flight. In the markets the fight is being stubborn when we should cut our losses. Instead, we often want to buy more. The flight instinct is to cash when the going gets a little rough. We need to learn the non-instinctive trait ‘sit tight’ and diversify, diversify, diversify.



David Cork, a director at ScotiaMcLeod, is the author of the best-selling “The Pig and the Python” and has just published his newest book, “Bulls, Bears and Pigs”.