Just as the Baby Boom generation changed American culture in the post-World War II era, the first wave of Boomers reaching retirement age are changing how and where Americans spend their post-career years.
It's a common perception that when Americans reach retirement age, they move to warmer, more senior-friendly environments far from the hustle and bustle of cities.
However, a 2005 study based on the 1990 and 2000 census reveals that for the decade before the turn of the century, the overwhelming majority of American retirees prefer not to move if they could avoid it, and have become more stable as they age, choosing to remain in their current homes or the same general vicinity.
In 2000, 41.5 million out of 46 million people (90.6 percent) aged 60+ remained in the same house or county, and the report identified this group as "residentially stable". Less than 10 percent percent of the 60+ population (referred to as "residentially mobile") moved across state or county borders. Reasons for this decision range from proximity to children and financial situations to community attachment and availability of amenities.
But with the Boomer generation (born between 1946-1964) preparing for retirement, this trend is set to change— and change dramatically. Unlike their parents and the generations before them, Boomers are increasingly willing to relocate upon retirement, and their choices of locations are becoming more active, youthful and far-removed from the stereotypical retirement spots.
The increased willingness of Boomers to move greater distances than previous generations during their retirement years is summarized by a 2009 research project by AARP, which studied information on how the recession has affected housing situations and decisions of Baby Boomers. The report came at a time when the first wave of Boomers was set to begin retirement, although in many situations the decision to retire may have been delayed because of the economic downturn.
The study found that only 79 percent of Baby Boomers want to stay in their current homes as they age, with older Boomers (83 percent) more likely to say they want to remain in their homes than younger Boomers (76 percent). Compared to the 1990 and 2000 census data, these numbers demonstrate a shifting trend: The later in the 20th century that a member of the population is born, the more likely they are to move (or want to move) their primary residence in retirement.
In terms of the recession's impact, a large majority of boomers (85 percent) reported that they will be financially able to remain in their homes, with the trend differing between older Boomers (88%) and younger Boomers (83%), demonstrating acceleration for the trend for the younger individuals. Respondents in the survey shared the opinion that the downturn resulted in them "holding back" from making housing changes as they put off buying or selling a home, or even making modifications or improvements. The study suggests that senior citizens have chosen to "sit tight" until the economy presents a better time to move elsewhere.
The report includes several telling examples of how pending retirees are dealing with the current state of the economy. One person described their experience in the wake of the housing crisis: "We sold one house at a loss, a significant loss. That combined with the fact that both my wife and I aren't working regular jobs right now, that's held us off from buying another house in a different community."
Despite the economy, and perhaps because of it, the relocation trend Baby Boomers are demonstrating is likely to continue and may even accelerate. "The trend is definitely true, especially in places where taxes are high," says Jerry Lynch, who is a certified financial planner and owner of JFL Consulting, which offers investment and retirement advisory services.
"People heading into retirement could pay for a portion of a new home just with the money they'd pay over that period in taxes, if they live in places like New York or New Jersey," he says. He estimates that among his clientele in the tri-state area, 25-30 percent of individuals near retirement age are "adamant" about relocating, while another 25-30 percent would like to move, but are waiting to see what happens in the economy and where their children are moving, a number well above the national average.
For individuals looking to retire in the next 5-10 years, Lynch suggests an interesting strategy: "Start looking at places where you'd go on vacation, preferably somewhere you can buy a home at a discount. Because 401(K) contributions, in reality, are only tax-deferred (not truly tax free, as you must pay taxes on them in the future), you can reduce your contributions to your retirement plan and use the money on to help pay the mortgage interest or taxes on a home you can buy today. These payments are tax deductible, and provided that you live in the home for at least 2 out of 5 years, any gains in property value are tax free up to $500,000."
Not only are Boomers more likely to relocate, but their choices of relocation destinations are changing as well, shifting the paradigm for aging in America.
A 2007 study from the Brookings Institution indicates that Boomers are expected to move to cities like Las Vegas, Denver, Dallas and Atlanta, which were previously considered to be attractive places for a younger demographic. This new wave of migration may lead to increased demand for new types of housing, activities and cultural amenities in these areas, spurring new opportunities for economic growth.
For younger Boomers who may still be part of the work force, the retirement migration also has the potential fuel economic growth in jobs and spending patterns, while areas with an older senior population could potentially suffer economically from individuals with poor health and financial situations.
Retirement is now seemingly becoming the 'cool' thing to do, as many Baby Boomers are embracing more active lifestyles, seeking more 'trendy' destinations and bucking the trend established by their predecessors. In short, Boomers are redefining the idea of how Americans spend their retirement years.
- Slideshow: Top Places for Boomers to Retire
- Homebuilders Target Active Boomers
- Quiz: Test Your Boomer Smarts
Watch "Tom Brokaw Reports: Boomer$!", Thursday, March 4 at 9pm ET on CNBC. The program will also air Saturday, March 6 at 7pm ET; Sunday, March 7th at 9pm ET; and Monday, March 8th at 8pm ET.