Baby Boomers Envision Their Retirement: An AARP Segmentation Analysis

Back in 2004 as the early boomers were reaching their late 50’s the American Association of Retired Persons (AARP) commissioned a report to see what boomers saw for themselves in retirement. As a result of that report, five well-defined groups of Baby Boomers emerged based on how they did the report. Because the sample was randomly selected and represents the population of Baby Boomers across the United States, the AARP decided they could reasonably assert that the five segments represent natural groups in the population as a whole.

A detailed portrait of each of the five segments is in the report (If interested do as search for Baby Boomers Envision Their Retirement: An AARP Segmentation Analysis). I thought it would be interesting to see what these segments were, and I am trying to find out if there is any research on what actually happened when by 2014 all of the early boomers retired. The following is a brief description of the five segments that comprise the Baby Boomer generation includes:

The Strugglers (9%) — Of the five Baby Boomer segments, the Strugglers are the lowest income group, with a median household income of nearly $30,000 below that of the average Baby Boomer. This group is disproportionately comprised of females (64%) rather than males (36%). The Strugglers are saving virtually no money for retirement because they simply have no money to save. The Strugglers, it seems, are not even in a position to prepare for retirement. Compared to other groups, they report having given relatively little thought to retirement (where they will live, what they will live on). A majority say they look ahead to their later years with very little sense of optimism.

The Anxious (23%) — The Anxious are best characterized by their sense of apprehension when they look ahead to their later years. Although they fall below the average Baby Boomer’s household income level (by approximately $10,000), with their limited means, they currently strive to put some money aside for retirement. But the Anxious do not expect to be rewarded with financial well-being when they retire. Indeed, many do not expect to be able to stop working. In addition to their anxieties about their retirement finances, the Anxious also express great concern about their health care coverage during their retirement years.

The Enthusiasts (13%) — Unlike the Strugglers and the Anxious, who fear not having enough money in retirement and look toward their later years with very little optimism, the Enthusiasts could hardly be more eager to reach their retirement years. A defining characteristic of this group is that Enthusiasts—without exception—do not plan to work at all during retirement. Indeed, they envision having plenty of money and plenty of time for recreation. For them, retirement promises to be a time free of the rigors of working.

The Self Reliant (30%) — The Self Reliant segment—which boasts the highest income and educational level of any group in the segmentation—has the resources to save and is aggressively putting money into retirement-oriented investments. However, in contrast to the Enthusiasts, the Self Reliants want to continue working at least part-time after they retire. Indeed, the contrast with the Enthusiasts could not be more striking: whereas all of the Enthusiasts expect to stop working, only 1% of the Self Reliant expect to not work at all. But what motivates the Self Reliant to continue working is not the pay, but rather the interest and enjoyment that work provides.

Today’s Traditionalists (25%) — In describing this group, who make up one-quarter of the Boomer population, the word traditional comes to mind. This segment, in many of their attitudes toward Social Security and Medicare, seems to have a stronger sense of confidence and less of an attitude of uncertainty than the other segments displayed toward these programs. But this group is not totally traditional: Today’s Traditionalists plan both to work and to rely on Social Security and Medicare during retirement.

Figure 2. Selected Top Characteristics Of The Five Baby Boomer Segments

The Strugglers

·        Not putting money into any of the savings vehicles asked about in the survey.

·        Not satisfied with the amount putting away for retirement.

·        Find it hard to save for retirement with so many other needs right now.

The Anxious

·        Not optimistic about retirement.

·        Not satisfied with amount putting aside for retirement.

·        Greatly concerned about health care coverage during retirement.

The Enthusiasts

·        Plan to not work at all when retired.

·        Optimistic about retirement years.

·        Can’t wait to retire.

The Self Reliant

·        Currently putting money into a wide array of savings vehicles, and fairly sure they can count on these as sources of retirement income.

·        Satisfied with amount currently putting away for retirement.

·        Plan to work part-time mainly for interest or enjoyment sake.

Today’s Traditionalists

·        Confident Social Security will still be available when they retire.

·        Confident Medicare will still be available when they retire.

·        Plan to work during retirement.