The Revolving Retired life stage—households with a head age 55 or older with no children younger than age 18 present—falls between the Preretired and the Retired life stages. Traditionally, households moved from the Preretired life stage (households headed by adults between the ages of 55 and 65) to full retirement. Increased longevity, dual-earner households with different timing, and economic necessity are among factors forcing millions of not-wealthy households to chart a new course. Strategic Business Insights' Consumer Financial Decisions first reported this new life stage—Revolving Retired—in 2001. In less than a decade, the Revolving Retired have increased by roughly 2 million households.

Demographics

• The average age of Revolving Retired household heads is 67 years. The majority are members of the Silent Generation (56%) and Older Boomers (31%).
• Their average annual household income is $67,000.
• Revolving Retired household heads are more likely than heads of all US households to have a postgraduate degree (23%).
• The majority (57%) of Revolving Retired are married households.
• Only 9% of Revolving Retired households have "boomerang" kids.
• The Revolving Retired are more likely to live in a suburb of a large city (27%) than in a rural area (15%).
• Two-thirds have a last will and testament.
• One in four Revolving Retired household heads are owners or part owners of a business (25%)—a higher incidence than for Preretired (13%) or Retired (5%) households.

Products and Services

• Revolving Retired households average less in savings, liquid assets, investable assets, retirement accounts, and financial assets and have more debt than do either Preretired or Retired households.
• Two in ten Revolving Retired households have a first mortgage, and 14% have a HELOC on their primary home; 55% have outstanding credit-card balances.
• Preretired households have a higher incidence for group health insurance than do Revolving Retired households—the pattern reverses for individual health insurance; roughly two in five have whole life insurance.
• Half of Revolving Retired households are likely, or somewhat likely, to seek financial advice before making a major investment decision.

Financial Attitudes That Differentiate the Revolving Retired

Revolving Retired households differ from Preretired and Retired households in several attitudes. They are significantly more likely to agree that:

• Our household plans to make a special effort to spend less money in the coming year (78%).
• It is important to me that any financial institution I use be locally owned (73%).
• I would rather pay a single monthly fee for my banking services than pay a fee for each product or service I use (72%).
• I don't have as much life insurance protection as I should (56%).
• I shop around for financial products and services (55%).

Interesting Tidbits

• The unique nature of the Revolving Retired is a result of uncertainties about life expectancy, resource adequacy, plans for the future and contingencies, and debt consolidation.
• These concerns are exacerbated by a high degree of mistrust in intermediaries. Because the Revolving Retired are charting a new course, they need sources for information and advice that understand the breadth of their financial needs and can speak to them knowledgeably and responsibly.

Implications

Retirement is a twentieth-century anachronism. For the vast majority of people, retirement as we know it today did not exist before the Social Security Act of 1933, and it will not exist for the majority of people in the future. As we begin the process to determine what will replace retirement, one of the first steps is Revolving Retirement. Revolving Retired households occupy a unique netherworld between Preretired and Retired. Sometimes they seem more like the Preretired; other times they resemble the Retired. The truth is that they are a bit of both and some of neither. The key facts about the Revolving Retired are:

• Revolving Retirement is growing.
• The financial needs of Revolving Retired households differ from needs of Preretired and Retired households.
• As more households become Revolving Retired—whether by choice or necessity—a strong desire exists to simplify, concentrate, and consolidate.
• Opportunities exist for financial institutions and intermediaries to meet the broad and diverse financial needs of the Revolving Retired.

Additional information about Revolving Retired households—such as their complete demographics; financial balance sheets; goals for saving, investing, and borrowing; financial topics of interest; delivery channels and intermediaries; and products and services they are likely to obtain in the next 12 months—are easy to find in the MacroMonitor. Trends of how the Revolving Retired are evolving, how they have reacted to the current economic malaise, and how their financial beliefs have changed can provide financial institutions with insights and direction for meeting the burgeoning financial needs of Revolving Retired households.

For more information, contact CFD.