Ceilidh

Michael Zey
futurist3000@aol.com

His bottom line: Unlike previous generations, boomers will ease into retirement rather than stopping work abruptly at age 65. He expects the stock market to benefit from boomers' longer-than-anticipated-ownership of equities, and he predicts a global collision between the tsunami of upcoming retirees who want to live near the water and the fixed supply of coastal land.  

  In his report titled "Retiring the Current Model of Retirement," Mr. Hokenson explains that the notion of mandatory retirement at 65 dates to 1874, when the first private industrial pension plan was established by a railroad company. At that time, 65 was believed to be the maximum age at which one could safely operate a train.

  The retirement age of 65 was formally institutionalized for all U.S. railroad workers by the Railroad Retirement Act of 1934, legislation that played a key role in determining a retirement age in the Social Security Act of 1935. As a result, for nearly three-quarters of a century the retirement age of 65 has been a fundamental assumption in most economic models and financial forecasts.

  Mr. Hokenson, however, sees otherwise. Whether driven by lifestyle choices or by the need to accumulate enough assets to retire, boomers, he believes, will transition into retirement, cutting back on hours per day, days per week, then weeks per year.

  This tendency to continue working, albeit it on less than a full-time basis may be spurred, in part, by the results of preliminary research on Alzheimer's disease. "The likelihood of developing Alzheimer's disease has recently been shown to be inversely correlated to the level of one's physical and mental activity. Although the evidence for 'use it or lose it' is limited and preliminary, it may be enough to influence a culture that, as a whole, is very gerontophobic," Mr. Hokenson notes.

  "The ramifications of this change in retirement behavior will be global and profound. The increased life expectancy of the world's single largest generation and its propensity to remain employed will affect almost every industry," he notes.

  "Boomers," he writes, "are not going quietly into their golden years," explaining the popularity of such lifestyle drugs as Viagra and Levitra, and the rising demand for Botox, cosmetic surgery and visits to spas.

  Mr. Hokenson expects to see an increase in mini-vacations as Americans begin to cut back work schedules and take longer weekends. He anticipates that demand for automobiles should remain robust, however, because of the need for that extra car in order to get to work.

  As to retirement properties, Mr. Hokenson describes the universal appeal of living near the water. "Today, nearly two-thirds of the U.S. population lives within 100 miles of a coastline. Worldwide, half the population lives within 200 kilometers of a coastline, and that percentage is rising."

  He predicts that this preference will translate into increased demand for retirement homes located near a body of water. "If you have the assets, now would be a very good time to buy that retirement property. There is a collision between a fixed supply of coastal land and the tsunami of upcoming retirees who want to live there."

  Mr. Hokenson expects this migration to the coastline to be even more popular in Europe. "In the past, the vast majority of Northern Europeans aged in place. Now, there is a large influx of Northern Europeans into Spain, Italy and even Cape Town. The desire to be where it is warmer is increasingly universal in nature. It is a global tsunami, not just an American one."

  The shift to gradual retirement will also enhance the long-term outlook for the stock market because the current model (retiring at 65) assumes that people approaching retirement begin shifting their investment priorities from capital accumulation to capital preservation. They sell risky stocks and use the proceeds to buy fixed-income instruments and/or less risky equities, for example, those that pay dividends.

  Under Mr. Hokenson's new model, however, and his outlook for continuing low interest rates, he expects that financial assets held by future retirees will have higher risk and higher volatility. "It is highly unlikely that more than a handful of future retirees will be able to shift assets towards such predictable income streams as bonds."

  Further complicating this new retirement pattern is the longevity of the boomers' parents' generation. "For the first time in history," Mr. Hokenson writes, "there will be multiple generations of retired households. This is very likely to have a profound impact on inheritance."

  Referring to a bumper sticker commonly seen in retirement communities -- "We're spending our children's inheritance" -- he raises several questions about the long-awaited transfer of wealth to the baby boomers. Will the parents of the baby boomers bequeath their remaining assets to the boomers, who are themselves retired, or to their grandchildren or great grandchildren? Or will they do something else with these assets?

  Mr. Hokenson's forecast sounds several alarming notes. He describes Social Security as "a pure demographic Ponzi scheme," an argument he first raised many years ago in a report entitled "Social Insecurity." In this current report, he reiterates his opinion: "There are simply not enough potential contributors to Social Security to allow baby boomers to retire at the same ages and similar standard of living enjoyed by their parents."

  For nearly 30 years, Richard Hokenson has been recognized as a pioneer in the application of demographics to economics and the financial markets. In 1978, he joined Donaldson, Lufkin & Jenrette (DLJ) and served as DLJ's Chief Economist from 1995 until its acquisition by Credit Suisse First Boston (CSFB), when he was named Director of Demographic Research. He is a well-known and popular speaker at investment and consumer conferences around the world. In May 2002, he founded Hokenson & Company as an independent consulting firm.

  Hokenson & Company's macro forecasting services, analysis of global demographic trends, research reports and comparative demographic data about every country in the world are available to institutional investors, corporations, trade associations and other clients. Mr. Hokenson's written reports are distributed to institutional investors by the New York-based broker/dealer Soleil Securities Corp. Access to Mr. Hokenson's interactive website, www.hokenson.biz, which includes a comparative database of demographic information and analysis about every country in the world, as well as his written reports, is available to subscribers through Hedge Fund Solutions, which provides money mangers with business services and research products.

  For more information, please visit Mr. Hokenson's web site at www.hokenson.biz or contact either Soleil Securities www.soleilgroup.com at 800-557-0226, or Hedge Fund Solutions www.hfs-llc.com at 212-293-3476.

CONTACT:Conroy Communications, LLC Catherine M. Conroy, 718-376-5284 conroy99@optonline.net