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Takeaway: An interview with Neil Howe on Boomer seniors, a growing population poised to redefine elderhood.

Last year, the first baby boomers turned 65. The last will reach that age in 2029. Over the next two decades, the senior population will be growing at over 3 percent per year. That's faster than total U.S. population growth—even faster than GDP growth. In 2010, seniors accounted for 13 percent of the population. By 2029, they'll account for 19 percent. One in five people you see walking down the street will be over 65 years old.

What is the impact of this growing elder population? And, as this large new generation of Boomers crosses the age-65 marker, how will they change how we think about the elderly? For answers, Hedgeye sat down with Demography Sector Head Neil Howe to get his take on how Boomer behaviors and attitudes will carry over into the elder population.

Hedgeye: Neil, before we start, who are the baby boomers? What does that term actually mean?

NH: Well, it's important to distinguish between baby boomers and Boomers. When we talk about baby boomers, we're using the U.S. Census Bureau definition, which refers to everyone born from 1946 to 1964. The baby boom started just after World War II, when married couples who had put off having kids in the 1930s and during the war were eager to start a family, and increasing productivity and rising wages kept the boom going for almost 20 years. However, when we talk about Boomers, we're not talking about the birth boom per se. We're talking about a social generation having its own location in history and defined by shared values and experiences. As a social generation, I define Boomers as born a bit earlier, from about 1943 to 1960. Even the oldest can’t recall World War II, and even the youngest can usually recall JFK’s assassination.

However you date them, they certainly have as a group a very distinctive life story. Their first wave began entering America’s college campuses in the mid-1960s. They helped ignite countercultural passions and pushed the nation into an era of political idealism, cultural awakening, and social upheaval. In the years that followed—from LBJ to Reagan, from hippie to yuppie—Boomers shook the windows and rattled the walls (let me paraphrase Bob Dylan here!) of everything their parents had built. Along the way, this generation began to manifest so many of the collective attitudes and behaviors for which they have since become famous: their individualism, their attraction to personal risk, their distrust of big institutions, their carelessness about material wealth, their cultivation of self, their die-hard moralism.

Hedgeye: OK, so what can we expect as such a large population group gets older?

NH: You mean, just looking at their number? Well, it’s an age wave, no doubt about it. And the impact of their number will be dramatic and sweeping. First and foremost, of course, health care consumption will skyrocket. Spending on federal entitlement programs like Social Security and Medicare will surge. And as retirement-age Boomers begin to move out of the workforce, there will be a depressing effect on employment, production, tax revenues, and GDP. (Maybe I should say “is” such an effect—since it’s already happening.) Consumption rates will increase, while savings rates will fall. Public capital investments in areas such as training, education, and work-related infrastructure will likely decline.

Hedgeye: OK, so much for numbers. What about the qualitative impact of this generation’s aging?

NH: Well, that's the real story—or at least, it’s the story that’s much less often discussed. There are huge forthcoming shifts in the attitudes and behaviors of seniors. The generation that’s just now starting to move past age 65 will have vastly different wants, needs, likes, and dislikes from the earlier waves of elders they are replacing.

Hedgeye: What will be the biggest difference between elders today and future, Boomer elders?

NH: The biggest difference will be in Boomer wealth—or lack thereof. Today’s elderly, especially “Silent Generation” retirees currently in their 70s, are fairly well-off. Indeed, relative to younger households, retirees are more financially comfortable today than at any time in our history. This is a generation that, for the most part, played by the rules and saved scrupulously. They were able to retire on generous defined-benefit pension plans and got to cash out their home and retirement assets before the 2008 crash. Federal data released earlier this year show that, for the first time ever, households headed by people age 75 and over have a higher median net worth than any younger age bracket.

But this elder affluence is destined to fade fast as successive waves of Boomers turn 65. There will be a pronounced, predictable shift in retirees’ overall socioeconomic situation, including a decline in educational attainment and the share with college degrees, a decline in the professional share, a decline in household net worth and pension assets, and a relative decline in pre-retirement income. It’s a trend that will get progressively worse as we move from today’s first-wave Boomers born in the mid-1940s—who married earlier, took fewer personal risks, and have done better in the economy—and last-wave Boomers born in the late 1950s. Household net worth at age 65 will steadily decline, and poverty rates at age 65 will steadily rise. And this shift will accelerate even faster if and when Congress decides it has to cut back on entitlement benefits to new retirees or the “young old” over the next few years.

Hedgeye: Doesn’t everyone think most retiring Boomers are yuppies with plenty of money?

NH: There’s a persistent myth that Boomers have a lot of wealth for retirement. They don’t. Even before the Great Recession, Boomers weren’t very well positioned for retirement. In 2007, just before the housing bubble burst, households age 55 to 64 had a median net worth of just a bit over $250,000, according to data from the Federal Reserve, and that included everything from savings to home equity. By 2010, that number had dropped by a third, to just a bit over $150,000.

Hedgeye: Why do Boomers have so little?

NH: It's because of a host of factors. They’ve had to shell out a lot for their kids’ college tuitions and for their own aging parents’ care. Or they didn’t save as much. Or they opted for a “defined contribution” plan andguess what?they never contributed. Or they never rolled it over when changing jobs. Or they kept borrowing against their homes as they grew older. It seems almost quaint to recall a time when the Boomers’ parents would hit their late fifties and pay off the last penny of their 30-year mortgage and thereafter own their home “free and clear.” Wow, what happened to that habit? Combine all of these factors, and then add in a sudden downward shock both to the stock market and housing prices, and you have a large portion of Boomers whose savings have been wiped out. A Harris Interactive poll last year found 25 percent of Boomers don’t have any money saved for retirement, and 26 percent have no personal savings at all.

Hedgeye: What do their financial troubles mean in the long run?

NH: As the living standards for the median elder declines, the inequality in elder living standards will rise. This rising inequality will reshape the material look and feel of the new elder lifestyle. High-end vacations and luxe retirement goods may still find a niche market. But staunchly middle-class retirement options are likely to disappear. Boomers invented “the hourglass economy,” according to business writer Michael Silverstein, which is characterized by “death in the middle” for the merely average, as opposed to the premium or discount. What’s more, even if they can afford it, most Boomers are repelled by the idea of a middle-class brand. In the homes of tomorrow’s Old Aquarians, you’ll find more things from Restoration Hardware or the Dollar Store, and fewer items from anywhere in between.

Hedgeye: Why is there such a growing spread in Boomers’ financial situations?

NH: There are two schools of thought here. One points mainly to fundamental demographic and economic forces that hit this generation (especially the late-wavers) hard in the 1960s, ‘70s, and ’80s. These were forces like rising parental divorce rates, surging immigration, globalization, and a widening gap between college and non-college wages. The combined effect was to increase the distance between the haves and have-nots. Another school, represented by writers such as Myron Magnet or Charles Murray (in his recent book, Coming Apart), points to the greater lifestyle freedoms young Boomers enjoyed, including the freedom to not go to school, not to get a job, not to get married, or plan for the future. They argue this freedom has adversely impacted America’s working class more than its elite. Whatever the cause, we’ve got to deal with the outcome.

Hedgeye: What other changes will we see in the elder population?

NH: Ethnic and racial diversity will be on the rise. If today’s Silent Generation elders seem culturally homogeneous, there’s a good reason: Due to their location in history as children of the Great Depression and the young adults of the 1950s, the Silent Generation has turned out to be the least-immigrant generation per capita in American history. Boomers are going to change that. The Hart- Celler Act of 1965 greatly widened the legal window for newcomers, and many other Boomers climbed through windows that weren’t exactly in the law—making Boomers a generation of rising immigration from first to last cohort. Between now and 2030, the Hispanic and Asian shares of elder Americans will double.

Sure, Boomers aren’t as diverse as today’s younger generations—the Gen Xers and Millennials who follow them. But in languages, cuisines, religions, and customs, Boomers will be a markedly more diverse generation of retirees than the last.

Hedgeye: What about retirement? How can we expect generational differences to affect that?

NH: For starters, Boomers will redefine the whole idea. The number of Americans in their late 60s who are still working has skyrocketed. In fact, the Great Recession has hardly touched the employment of seniors. Since 2007, the total number of U.S. jobs has fallen by half a million. But that nets into an increase of 3 million jobs held by Americans over age 60—and a decrease of 3.5 million jobs for everyone 60 or younger!

Hedgeye: A lot of Boomers must still be working because they don't have adequate savings.

NH: That's the main reason. According to AARP, “current financial need” is by far the single biggest reason older workers cite for working past the normal retirement age. What’s more, this is no surprise to most Boomers, who have known for a long time that they would have to retire later.

Hedgeye: But that's not the only reason?

NH: No, money isn’t the whole story. Even among aging Americans who can afford to retire, many are choosing to keep working. For a lot of successful Boomers, retirement sounds like death. They’ll choose to stay engaged in productive activity even if they don’t need the money. One out of five Boomers, according to AARP, insists that they work mainly for “psychological or social fulfillment.” Millions of Boomers are following the model of Bill Clinton or Bill Gates and starting a post- retirement “encore career,” using their skills in the service of some higher cause—education, health, the environment, social welfare—for little or no pay.

Hedgeye: What other changes will we see as Boomers age?

NH: The generation gap is going to shrink. Thirty or forty years ago, there were stark differences between the old and the young in their tastes and values. Youthful Boomers invented the notion that you shouldn’t trust anyone over age 30. They actively, purposefully chose to adopt a “counterculture” having nothing in common with their parents. Not so today. Pop culture now sweeps across age brackets. Boomers and their kids swap book recommendations and trade emails about last night’s American Idol. They post Facebook updates about the same celebrity breakups, listen to the same songs, see the same movies, and wear the same brands.

Hedgeye: What does this mean for the future of families?

NH: Beyond pop culture, this growing closeness between Boomers and their young-adult children reflects a major shift in family dynamics. One example: Millennials are much more comfortable gravitating back home. In 2010, almost a fifth of young adults lived with their parents. That's twice the share as thirty years ago. Part of that certainly has to do with the weak job market, but it also reflects the complete closure of the values gap.

Boomers and their children also maintain much closer financial relationships than Boomers did with their own parents. Boomers are helping their kids find jobs, co-sign mortgages or car loans, pay for family vacations, and care for grandchildren. Grown kids, meanwhile, are helping their Boomer parents with chores, shopping, and other errands.

Hedgeye: Are these stronger family connections going to affect Boomers’ housing choices? It seems like Boomers would want to stay close to their children as they age.

NH: Yes, we’re definitely seeing that mentality, and it’s a big change from past generations. When the G.I. Generation retired, many of them packed up their bags, sold their homes, and moved to retirement communities in sunny climes far away from their adult children. Most Boomers won’t want that—partly because of the desire to be near their kids, and partly because, again, many Boomers will continue working well past retirement age. The new elders are much more likely to choose to age in place, in the house where they already live than to decamp to a far-off retirement village. The Boomer buzzword for this phenomenon will be NORC, or “naturally occurring retirement community.”

Hedgeye: What about the Boomers who do want to move?

NH: They’ll be much less interested in exclusive elder communities. Many will prefer mixed-use urban quarters where they can be around young people. And of course many will be attracted to locales— university towns, art centers—where they can reaffirm their connection to the world of the mind and culture. Even when they do opt to move to active adult communities, they’ll choose to stay closer to home. Already, retirement-home developers have begun building fewer massive seniors-only projects in Arizona and Florida, and more smaller developments around various cities in the Northeast and Midwest. Wherever it’s located, though, the elder community of the next couple of decades is likely to have fewer rules and more opt-out provisions. Forget those restrictions against kids living in the communities.

Hedgeye: What would you say is a reason that some Boomers plan to stay put and some Boomers are willing to leave?

NH: With Boomers, as always, one must keep in mind the widening spread in outcomes—not just between rich and poor, but between familied and unfamilied. Coming of age amid feminism and watershed changes in gender roles, lots of Boomer women have chosen not to have kids. To be specific, the share of women who are childless at or near the end of their childbearing years has risen from 10 percent for those born around 1940 to 20 percent for those born around 1965. So even with all the reconnecting within extended families, a growing number of Boomer elders will have new ways of defining family. They will be adoptive parents, connecting into blended families through remarriage, or doting on their nieces and nephews. Many will gather in intentional communities, cooperatives, or just close groups of friends and neighbors and consider these their “family.” Today, we habitually think of elders as defined by their lifetime marriages and nuclear families. Twenty years from now, we no longer will.

Hedgeye: How is the Boomers' past going to affect them as they age?

NH: Compared to their parents’ generation, Boomers have always lived on the edge. In their youth, they launched a behavioral trend toward personal risk-taking. They had higher rates of drug use, teen pregnancy, suicide, and self-inflicted accidents, along with lower test scores, later marriages, and later career choices. They took that “born to be wild” streak—“If I have to break the rules to do it my way, I will”—and they’ve stuck with it. Americans in their 50s and early 60s have recently been experiencing sharply rising rates of drug overdoses, sexually transmitted diseases, motorcycle fatalities, and suicides. This will continue as they move past age 65.

Let me give you one recent example of what I’m talking about. The CDC recently issued a “generational alert” to everyone born between 1945 and 1965 (that is, Boomers) to get checked for Hepatitis C, because Boomers account for roughly 4 out of 5 Hep-C cases today. Why? Because of all the wild stuff, including non-sterile injections and tattoos, that Boomers did back in the day. It reminds me of the old Robin Williams line: “If you remember the ‘60s, you weren’t there.”

Hedgeye: What about long-term effects?

NH: Some of these personal-risk habits have translated into chronic conditions. As Boomers have reached midlife, for example, rates of chronic disease for people in their 50s and 60s have risen sharply, especially diseases driven by obesity, like type-2 diabetes. Disabilities that limit activities of daily living (ADLs) are also more common. For the last 30 or 40 years, as the G.I. and Silent generations retired, ADL disabilities among those 65 and older have been on the decline. Some health experts and demographers believe that as Boomers move past age 65, that trend may reverse.

Hedgeye: A high-risk lifestyle in an aging population sounds like we can expect health care spending to skyrocket. Is there anything else you expect to change with regards to health care?

NH: Well, it’s not all bad news. Boomer attitudes toward health care may come with a bright side. This is a generation that came of age with a new “natural” and “holistic” attitude toward diet, exercise, and healthy living. While that hasn’t proven very effective in improving lifestyle habits, it has certainly changed Boomers’ approach to health-care treatment. More than their parents or grandparents, Boomers look energetically for alternatives to high-tech industrial medicine and want to be fully informed and personally involved in their own healing. Most physicians believe these attitudes tend to improve compliance and keep costs down. Hospitals are now starting to offer natural foods, allowing complementary and alternative medicines, building rock gardens, and hiring spiritual and lifestyle counselors. Many of these New Age tools may help. They can’t hurt. And they’re much cheaper than installing another million-dollar MRI scanner.

Hedgeye: Have we seen any effects from this “natural” attitude towards health?

NH: Absolutely. Boomers’ aversion to long-term institutional care—combined with the greater willingness of family to pitch in and the reluctance of government to spend—has already led to a dramatic reduction in the new nursing home units that state and local governments are expected to build. In fact, several states have flatly declared that they will build no new units. Boomers will be much more interested in home-health options or more flexible modes of assisted living. When Boomers do enter long-term care, a growing share will insist on small, informal, decentralized units that have live-in staff and allow plenty of plants and pets. One prototype for this new approach is the Green House Project, whose motto“Caring homes for meaningful lives”is pitch-perfect for Boomers.

Hedgeye: How will the Boomers’ independent streak affect civic engagement?

NH: Some people assume that old people have always been active, engaged citizens and one of the biggest, most organized political blocs. Not so. That was largely true for G.I. and Silent Generation retirees. But it wasn’t true before them. And it won’t be true after them. Boomers in old age will be less “gray panthers” and more “bowling alone.” The generation that invented McMansions and the exurbs has never been big on group cooperation, and that isn’t going to change now. With every age bracket they’ve entered so far, Boomers have marked a decline in civic participation, including voting, municipal meetings, petition campaigns, letter-writing, and responding to pollsters. That attitude will start to transform the reputation of seniors from highly engaged civic participators to something very different. The media keeps reiterating the idea that Boomers will, with their vast numbers, make senior associations even more powerful than they are today. But me-first Boomers don’t join associations.

Boomers will engage on issues, but they’ll tend to be single-cause issues. Unlike their parents, Boomers have never organized successfully around their own collective self-interest. In other words, a Boomer won’t respond at all until you push his or her particular button and elicit passionate and perhaps “uncivic” engagement. Distrust and cynicism will rise. Today’s retirees tend to be civil and respect expertise even when they may disagree with it. Tomorrow’s Boomers will find it much easier to be uncivil, to regard passion as a sign of commitment, and to disrespect expertise freely. Prepare for a plethora of angry bloggers and retired professionals who know how to file an obstructive lawsuit in a heartbeat.

Hedgeye: How will this change the ways that leaders and governments connect with citizens?

NH: Currently, government communications often start with older generationsincluding seniorsas the best way to get everyone on board: Elected officials phone civic leaders, visit corporate boards, and place editorials in newspapers. By engaging older people and getting their attention and compliance, the assumption is that tuned-out young people will simply go along. As time passes, governments may want to rethink that strategy. A better way may be to try harder to connect with a more trusting, networked, and plugged-in generation of young adults while actually doing less with an increasingly unplugged generation of elders. This means communicating more through K-12 schools, colleges, youth groups, and on Facebook  and leveraging the power of young parents and volunteers to spread the message and sway opinion through their own networks.

Hedgeye: So are aging Boomers going to become socially irrelevant?

NH: Not at all. Boomers can still be helpful, but in a new way. The Boomers’ parentsthose whom we still call “senior citizens”were (and in their 80s and 90s, still are) happy to serve as ground troops, licking 100 envelopes, phoning 10 friends, and following any directions they are given. With Boomers, though, that won’t be any more effective after age 65 than it was before. What works much better is to bring in Boomers early in the process, listen to their insights, help them “discover” for themselves the need for a new government initiative, and then let them communicate that “vision thing” to the community in any way they want. Again, Boomers have always been better talkers than doers. Don’t even try to give them orders. Instead, inspire them to become passionate advocates of your cause.

Even while Boomers fall in civic engagement and dissociate themselves ever further from the “senior citizen” self-image, they will continue to rise in terms of visionary cachet and cultural creativity. They’ll continue to drive popular culture: Expect to keep seeing the likes of Mick Jagger, Tom Petty, Madonna, and Brian Wilson to be celebrated during Super Bowl halftimes even as they age into their 70s. For Boomers, the most sought-after local communities will be renowned for their culture, their soul, their unique story, their authenticitynot, as it might have been for G.I. Generation retirees, for their wide roads, gleaming tiles, and endless golf courses. Many Boomers will be congregating around universities and colleges, art and music hubs, and natural and historic landmarks. In so doing, the Boomers will have entirely reversed the reputation of their G.I. Generation predecessors in old age as civically powerful and culturally weak. Elder Boomers will be civically weak and culturally powerful.