Document Sample
THE LaTEST WOrd Powered By Docstoc
					THE LaTEST WOrd:


Erik R. Pages
President, EntreWorks Consulting

      Executive Summary. What is the coming “age wave,” and what is the state of
      the field of retiree attraction strategies? This paper begins with a brief look at the
      numbers: the size of the coming retirement boom and what is the financial situation
      facing the baby boom generation. We next look at recent retiree migration trends. We
      then turn to a review of how states and localities are responding to these patterns .
      We conclude by assessing the effectiveness of these programs and by providing some
      recommendations for how communities can best attract, retain and engage these new
      retirees .

It seems like every day we get bombarded            marketing themselves to current and prospec-
with new data about the profound economic           tive retirees . Rural communities, especially
effects of the aging baby boom generation .         those with desirable scenic amenities, have
Beginning in 2006, the first baby boomers           been especially active. The field has become
turned 60 and we can expect the economic,           so established that it even operates its own
demographic and social effects of their retire-     trade association: the American Association
ment, work, and life decisions will reverber-       of Retirement Communities (AARC) . As
ate among all of us . Economic developers can       the retiree population grows, we can expect
be expected to bear a large part of this burden     retiree attraction strategies to become a more
as they struggle to respond to expected labor       common component of the economic devel-
shortages and provide amenities for a rapidly       opment tool kit .
aging population .
                                                    This essay assesses the state of the field of
Yet, the effects of the coming “age wave” are       retiree attraction strategies . It begins with a
not simply a burden . This looming demo-            brief look at the numbers: what is the size
graphic shift creates lots of new and interest-     of the coming retirement boom and what is
ing economic development opportunities .            the financial situation facing the baby boom
Baby boom retirees will be the wealthiest           generation . We next look at recent retiree
retiree cohort ever . They have money, and are      migration trends . Why retirees are moving
willing to spend it . Boomers are also more         and what kind of communities and amenities
mobile with greater willingness to move to          are they seeking? We then turn to a review
a new area after retirement or purchase a           of how states and localities are responding to
second home .                                       these patterns? What kinds of programs and
                                                    initiatives are being deployed to attract the
States and localities across the U .S . have        migrating retiree? We conclude by assess-
followed these trends, and are aggressively         ing the effectiveness of these programs and

48               Applied Research in Economic Development, vol. 5, issue 3, December 2008
by providing some recommendations for                cate during their retirement . The reasons for
how communities can best attract, retain and         migration fall into three categories . Amenity-
engage these new retirees .                          seeking retirees move to be near scenic
                                                     locations or warmer climates . This cohort is
Demographics—what is the coming “age                 the primary target for most retiree attraction
wave” and why does it matter?                        programs . Return migrants move back to
The economic impact of the retiring baby             their home communities, often to live near
boom generation will have a huge impact on           relatives . Finally, dependency migrants move
all parts of our economy . The numbers are           to be near family members who can take care
fairly staggering . By 2015, the U .S . will be      of them .
home to more than 45 million households
with people between the ages of 51 and 70            The locational choices of migrating retirees
years old . This compares to about 25 mil-           used to be fairly limited, with Florida and
lion for the previous generation . By 2015,          Arizona among the top destinations . Today,
Boomers will control nearly 60 percent of net        a much more diverse group of locations has
wealth (up from 51 percent in 2006) and ac-          entered into the mix . Table 1 lists the top
count for 40 percent of U .S . consumption and       states for migrating retirees .
income (Court, Farrell, and Forsyth 2007) .
                                                             Florida             37,140
As a cohort, the boomers are a major eco-                    arizona             24,610
nomic force . At the same time, individual                   Texas               18,290
retirees will be among the wealthiest in world
history . While many retirees will struggle to               Tennessee           10,663
make ends meet, a surprisingly large por-                    georgia              9,610
tion of boomers have accumulated extensive           Table 1. Net In-Migration 2000-2005 of
wealth. The affluent segment of boomer               60+ individuals . Census Bureau Data .
retirees, those with an average net worth over
$1 .2 million, will include ten million house-       Surveys of retirees offer a very clear picture
holds (Court, Farrell, and Forsyth 2007) .           of what motivates and interests affluent
                                                     retirees . They respond to a variety of push
Analysts expect that boomer retirees will            and pull factors (Fagan 2002) . The search for
act differently than their predecessors . They       a warmer climate is a primary factor, with
are more interested in remaining in the              many retirees moving the Northeast and the
workforce, and, faced with looming worker            Midwest to the Sunbelt . Other important
shortages, they are more likely to be in high        decision factors are the presence of scenic
demand by employers . At the same time,              amenities, especially in coastal locations .
boomers are showing greater interest in con-         Many migrating retirees place great emphasis
sidering entrepreneurship in later life . In fact,   on access to parks and recreation facilities .
recent research shows that self-employments          Proximity to medical care and educational
are rising with age . For example, one-third         opportunities rank high among retirees, and
of male workers between the ages of 51 and           help explain the popularity of college towns
61 are self-employed (Giandria, Cahill, and          as a retirement destination . Finally, retirees
Quinn 2008).                                         do place emphasis on some financial factors,
                                                     especially property and income tax rates and
Retiree migration trends
                                                     overall cost of living .
In addition to being richer and more engaged
in the workforce, boomer retirees, especially        How are communities responding?
those with higher net worth, are also more           Many communities have been targeting this
mobile . Projections show that as many as            market for years (Reeder 1998) . In fact, many
twenty million Baby Boomers might relo-              states and regions have programs devoted to

         Applied Research in Economic Development, vol. 5, issue 3, December 2008                49
the attraction of retirees . Southern states—      through the state’s tourism programs . Among
such as Alabama, Mississippi, and Tennes-          other states, Kentucky, Louisiana, and Texas
see—are particularly aggressive on this front .    also operate similar certification programs.
The programs take many forms, ranging from
basic tourism promotion to use of tax incen-       Financial incentives
tives . Most states do some sort of promotion      Many states and localities also provide a host
via their tourism boards, and tout their quality   of incentives to retirees . In most cases, these
of life, scenic beauty, health care quality, and   benefits, such as property tax abatements,
other amenities . When its comes to taxes,         are available to all senior citizens . However,
more than half of states with broad-based          they are aggressively marketed to potential
income taxes offer some sort of exemption          incoming retirees . South Carolina has a par-
for seniors (Murphy 2005) . Below, we review       ticularly strong set of financial incentives for
some typical retiree attraction strategies .       senior citizens . In recent years, the state has
                                                   undertaken a variety of efforts to reduce the
Tourism promotion                                  tax burden on retirees . These include elimina-
Targeted tourism promotion is the most com-        tion of state taxes on social security and other
monly used tool to attract migratory retirees .    retirement income, reduced property taxes for
This approach makes sense as research shows        retirement housing located in state enterprise
that migrating retirees generally visit an area    zones, and a homestead tax exemption for
as a tourist before considering relocation         senior citizens who have lived in the state for
(Chesnutt, Lee, and Fagan 1993) . These pro-       at least one year . In addition, South Carolina
grams generally include investing in major         residents aged 60 or older enjoy free tuition
marketing campaigns, production of market-         at state colleges and universities .
ing materials, and the provision of technical
assistance to local tourism promotion efforts .    Infrastructure development
The Alabama Advantage program (http://             A final category of potential support pro-
www .Alabamaadvantage .org/) is one of the         grams involves the development of special-
more long-running, dating back to the 1980s .      ized infrastructure for retirees . At present,
It operates a website that serves as a gateway     no states are operating programs of this
to Alabama communities that are seeking to         sort. However, a recent Georgia Tech study
attract retirees . It also publishes the Alabama   recommends that Georgia consider new
Advantage magazine and provides informa-           initiatives to help ease the construction of
tion packets and other resources to prospec-       retirement facilities across the state (Georgia
tive new residents .                               Tech Enterprise Innovation Institute 2007) .
                                                   In particular, the report recommends that
Community certification                            Georgia make ease regulations related to the
Beyond basic tourism promotion, the most           construction and management of Continuing
commonly used program type appears to be           Care Retirement Communities (CCRCs) .
community certification. Under these pro-          CCRCs are residential facilities that combine
grams, a state government agency, normally         living space with the provision of extensive
the Department of Economic Development,            health care services. In Georgia, like many
provides technical assistance to communities       states, CCRCs are heavily regulated and have
that are then certified as “retiree-ready” com-    proved quite difficult to build and manage.
munity . The Hometown Mississippi Retire-          The Georgia Tech study recommends that
ment Program (http://www .visitMissis              Georgia work to increase construction of
sippi .org/retire/) offers a typical example .     CCRCs as a tool to attract new retirees and
At present, Mississippi is home to 21 Certi-       to encourage healthy aging in place for the
fied Retirement Cities that have undergone         existing population of senior citizens .
a state-sponsored screening process, and
that are now marketed as retiree destinations

50               Applied Research in Economic Development, vol. 5, issue 3, December 2008
                                                    also indicate extremely positive economic
  Retiree readings                                  effects from migrating seniors . For example,
                                                    a recent case study of the impact of new retir-
  aging in Place Initiative: a joint                ees in Cumberland County, Tennessee, found
  program of the National association               that new migrants helped contribute to new
  of area agencies on aging and                     job opportunities, higher income levels and a
  Partners for livable Communities. It              large fiscal surplus (University of Tennessee
  is designed to build communities that             Institute of Public Research 2007) .
  are good places to grow old.
  (                            These positive results have been generated
                                                    prior to the coming age wave . If similar (or
  american association of                           better) outcomes are generated by retiring
  Retirement Communities                            boomers, the economic effects will be pro-
  ( a trade                found . At a minimum, we can expect a boom
  association focused on “promoting                 in new retiree attraction programs .
  economic development through
  retiree attraction.”                              To date, however, retiree attraction advocates
                                                    have viewed the process as something of
  Experience Corps (http://www.                     an E .D . “free lunch .” The message seems Program was                 to be: attract wealthy retirees, and count the
  started by leadership guru, John                  proceeds . Migrating retirees spend money,
  gardner, and seeks to encourage                   pay taxes, but don’t ask for much in return
  community service by those over the               (especially in terms of spending on new
  age of 55.                                        schools and other amenities) . As one recent
                                                    newspaper article put it, there’s “gold in
  georgia Retire: To view an impressive
                                                    silver hair .”
  and comprehensive program to
  attract retirees,                                 This rosy picture may suffer from several
  check out                                         shortcomings . At a minimum, it ignores po-                     tential negative economic effects, particularly
  This website and program were                     the effect of in-migration on rising housing
  developed by Triple Crown                         costs . For example, a study of Tennessee’s
  hometowns, a partnership of three                 Cumberland County found that the many
  south georgia counties (lowndes,                  benefits of in-migrating retirees also generate
  Brooks, and lanier).                              some negative impacts such as increased traf-
                                                    fic congestion and increased land and housing
  mississippi: To learn more about mis-
                                                    costs (University of Tennessee Institute of
  sissippi hometown Retirement, visit
                                                    Public Research 2007) .
                                                    The impact of retirees on housing costs pres-
The pros and cons of retiree attraction             ents something of a mixed picture for com-
                                                    munities . It can help generate wealth for resi-
While rigorous evaluation studies are fairly        dent and businesses that are selling property .
limited, early research indicates that these        On the flip side, it creates cost challenges for
state and local retiree attraction efforts seem     younger workers and low-income families .
to generating positive outcomes . For ex-           A more worrying set of issues concerns the
ample, a study of Mississippi’s Mississippi         overall costs of supporting a rapidly aging
Hometown Retirement program found that              population of retirees . Most retiree attraction
it generates a statewide annual economic            efforts rightly focus on what we might call
impact of $194 million and 2,320 new jobs           the “young elderly .” This group has access to
(Campbell 2005) . Community level studies           financial resources, is new to retirement, and

         Applied Research in Economic Development, vol. 5, issue 3, December 2008                51
is anxious for new experiences . This cohort       involves a major shift in how many regions
represents the “holy grail” for economic           view economic development .
developers and developers of golf courses,
resort communities and the like .                  This demographic evolution is natural . Our
                                                   challenge is not to stop it, but to prepare for it
Recent research offers many indications of         in advance . Communities must take a long-
the positive economic impacts of relocat-          term look at future infrastructure and amenity
ing retirees . USDA researchers found that         needs, as well as the economic implications
non-metro retirement destination counties          of an aging population . Success requires
grew much more rapidly and enjoyed higher          careful planning and anticipation of the costs
per capita incomes than comparable rural           generated by a population that will “age in
counties (Reeder 1998) . Retirees also help        place .” Investments in new medical facili-
stimulate sectors such as real estate, health      ties and other specialized amenities, such as
care, financial services, restaurants and          transportation services, may be required .
entertainment .
                                                   Preparing for this potential economic down-
While the initial impact of retiree migration      side makes sense . It makes even better sense
appears quite positive, the long-term impacts      for regions to think more deeply about how
are not well understood . The “young elderly”      to get “the most bang for the buck” from
don’t stay young forever . As they gradually       migrating retirees . Too many communities
become the “old elderly,” their health may         attract retirees who remain isolated in a
decline along with their positive economic         newcomer’s enclave, and often fail to become
impact on the community . At this point, many      fully integrated in the community’s civic and
retirees may depart a community to live            economic life .
closer to relatives . Or, they may remain in
place but generate increased demand on local       By failing to engage these newcomers in
services . In effect, the economic “free lunch”    local economic activities, we do not fully
generated by migrating retirees may only           capture the real benefits that could be gener-
provide a short-term economic stimulus while       ated by migrating retirees . The real strength
they remain in good health .                       that these retirees bring comes from their
                                                   knowledge, career experiences, connections,
Unfortunately, there are few rigorous analy-       and networks . Yet, economic developers
ses of the long-term economic consequences         often fail to tap into this important resource .
of retiree concentrations . One recent study       We must stop simply viewing as migrating
noted “the paucity of knowledge regarding          retirees as a cash machine that spends money
the longer term effects of such (retiree) popu-    and pays taxes. We must instead find a way
lation movement” (Serow 2003, 897-1003) .          to integrate new residents into the center of a
However, some recent studies indicate that         community’s economic life .
community costs for emergency medical care
run slightly higher than average . However,        How can this happen? Such integration could
these higher costs may be are offset by lower      take many forms. Groups like the Service
demand for other services such local schools       Corps of Retired Executives (SCORE) have
(Georgia Tech Enterprise Innovation Institute      long sought to tap retirees as mentors for new
2007) .                                            businesses . Local mentoring networks could
                                                   be expanded as one means to encourage retir-
Retiree migration for the long haul                ees to nurture local firms. In addition, retirees
Communities considering retiree attraction         could be organized into mini-angel networks .
policies need to be fully informed about the       By pooling resources, a new local source of
potential long-term consequences of these          start-up capital could be generated . Finally,
initiatives . Intentionally aging a community      retirees may opt to start their own businesses .
                                                   This growing boomer entrepreneur market

52               Applied Research in Economic Development, vol. 5, issue 3, December 2008
can help strengthen local economies in retire-      Court, David, Diana Farrell, and John E . For-
ment havens .                                         syth . "Serving aging baby-boomers ." The
                                                      McKinsey Quarterly 4 (2007): 104,106.
While few communities are now focused
on this challenge of integrating retirees into      Fagan, Mark . 2002 . Retirement Develop-
local civic life, some places are trying to get       ment: A How-To Guide Book. Center for
ahead of the game . For example, Wyoming’s            Economic Development, Jacksonville State
Governor Dave Freudenthal has recently                University .
led an initiative that examines not only how        Georgia Tech Enterprise Innovation Institute.
Wyoming can attract retirees, but also on             2007 . Retirement Communities: An In-
how the state can assist those who want to            novative Retiree Attraction and Eldercare
start their own companies (http://Wyoming .           Living Strategy for Rural Georgia: 58.
ecurveFINAL 000 .pdf) . At the national level,      The University of Tennessee Institute of
groups like the Experience Corps are devel-           Public Research . 2007 . The long-term
oping best practices for engaging Americans           impacts of retiree in-migration on rural
over 55 in community service . These are all          areas: A case study of Cumberland County,
nascent programs that should offer some use-          Tennessee . http://www .ips .tennessee .edu/
ful lessons in the future .                           userfiles/file/Impact of Retiree In-migration
                                                      on Rural Areas .pdf .pdf
As our population ages, the real community
challenge is not to simply to attract retirees .    Murphy, Kathleen  . "Send us your baby
Instead, it is to find the tools that create         boomers, states plead ." Stateline .org .
a win-win situation where both sides are             http://www .stateline .org/live/ViewPage .ac
enriched. Retirees enjoy a fulfilling period of      tion?siteNodeId=136&languageId=1&co
life, with access to desired services and ame-       ntentId=45531 Reeder, R . J . 1998 . Retiree
nities . Meanwhile, communities are enriched         Attraction Policies for Rural Development .
by the investment, knowledge and connec-             U .S . Department of Agriculture Economic
tions that retirees bring to the community .         Research Service . Agriculture Information
                                                     Bulletin No . 741: 5 .
Sources and further reading                         Serow, William J . 2003 . “Economic conse-
Cahill, Kevin E., Michael D. Giandria, and            quences of retiree concentrations: A review
  Joseph F. Quinn. April 2008. “Self-em-              of North American studies.” The Geron-
  ployment transitions among older workers            tologist . Vol . 43: 897-903 .
  with career jobs .” Boston College Depart-
  ment of Economics working paper: http://          Wyoming AARP and Gov. Dave Freudenthal.                        2005 . http://wyoming .gov/governor/poli-
                                                     cies/documents/ WyomingSelf-Sufficiency-
Campbell, Charles A . 2005 . “The impacts            Standard2005_000 .PDF
  of the hometown community retirement
  program in Mississippi .” Mississippi State
  Universit, John C . Stennis Institute of
  hometownretirementreport .pdf
Chesnutt, J . Thomas, V . Wilson Lee, and
  Mark Fagan . June 1993 . Attracting the
  Migratory Retiree . Alabama Cooperative
  Extension Service Issue Brief CRD-56 .

         Applied Research in Economic Development, vol. 5, issue 3, December 2008               53
The author

Erik R. Pages is President of EntreWorks
Consulting, an E.D. consulting firm based
in Arlington, VA . He previously served as
Policy Director for the National Commission
on Entrepreneurship (NCOE) . Dr . Pages
has also held senior positions at the U .S .
Department of Commerce's Economic
Development Administration (EDA), where
he helped lead efforts to assist communities
affected by military base closings and defense
plant shutdowns . He received his Ph .D . from
Georgetown University.
  • 703 237 2506
  • epages@entreworks .net

54              Applied Research in Economic Development, vol. 5, issue 3, December 2008