Why Retirement Still Looks Bright for Boomers

On the surface, the future looks bleak for baby boomers. The Center for Economic and Policy Research projects that the median baby boomer household lost 45 percent of its net worth between 2004 and 2009. So why does retirement expert Ken Dychtwald think boomers will enjoy a more comfortable retirement than their parents did? Dychtwald, a psychologist and author of 16 books on aging, including his latest, With Purpose: Going From Success to Significance in Work and Life, recently spoke to U.S. News about what's in store for boomers.

How will retirement for baby boomers be different from the generation before?

Boomers are going to retire later than previous generations. They're [also] going to be more challenged financially than the last couple of retiree cohorts. There are a couple of reasons: First, it's a generation that grew up with such abundance that unfortunately, they have not been saving for a rainy day. Unlike their parents, boomers grew up in a time of prosperity, and they have been too quick with their credit cards, too slow with their retirement plans. There will still be lots of fun to be had, but they will be a more strained generation than previous cohorts.

So if boomers are under such financial stress, why do you write that their retirement years will be spent driving the consumer economy?

When the dust settles and you look around for who has the money to spend, you still come to the realization that 70 percent of all the wealth in America is owned by people over 50. They spend about 2½ times more than the younger generations on just about everything. You can't look at them as a nonmarket: They might be where the boom markets are for the next 20 years. What's going to be different is that as the boomers retire, because of their awesome numbers and their marketplace gravitas, there is going to be a multiplication of many of the goods and services one might imagine to make retirement more comfortable.

What are some examples of these goods and services?

There are a few areas of technology that could really make a difference in boomers' lives as they grow older. They also represent extremely viable marketplace opportunities. First, life sciences. The boomer generation want to feel and act young until they're 100, whether these are organ-cloning technologies or a Salk-like vaccine for Alzheimer's or cosmeceuticals--most cosmetics affect the look of your skin, but others might cause it to grow young again.

Second, social technology. We largely think about it with young people, but I think it has enormous value for people as they age. Technology allowing people to stay connected and interact is a fantastic resource for a population as it ages. In terms of ability to continue learning, to share information about how to care for a parent, to connect with old friends--it has enormous potential. Somebody could come up with the idea of an Internet cemetery and make a fortune.

The third area is information technology putting intelligence into the dumb parts of our lives. [There could be] smart clothes--circulation shifts as you age, and clothes could adjust for your comfort. Why heat up a whole house if your clothes could do it for you? Then there's nanotechnology. Nanotransmitters will exist that will monitor body functions and perhaps even communicate to a family from a local hospital.

It's possible that many older Americans won't be able to afford these new products. What about them?

The initial product usually costs a lot in the beginning. Once something catches on, the prices come down, and the affordability becomes more reasonable due to competition.

As the population ages and the epicenter of the consumer marketplace moves into maturity, the middle- and lower-class older Americans will benefit the most. The boomers have such enormous demographic heft that as they migrate into maturity, nearly every provider of products and services--whether it's software, vitamins, shoes, cars--is going to realize that [boomers] are where the numbers are, and that's where the money is. There will [also] be the growing realization that this, like every other age group, is made up of a full spectrum of financial possibilities. The way to make money in America is to tap the mass market. I do think the greatest growth will be in the middle class because their numbers are so large.