As Baby Boomers Retire, How are You Protecting Your Business by Building Products & Experiences for Younger Generations?
Since 2020, more than 3 million people have retired. Many of these were Baby Boomers who were expected to retire earlier, but, due to the 2008 economic crash, they lost so much home equity that they delayed retirement until housing prices regained pre-2008 levels—which happened in 2019. With the rise of COVID-19, many Baby Boomers saw that as the time to retire. What we experienced as 3+ million people left the workforce were the first pains of a tightening labor economy, but that is nothing compared to what’s coming with 75 more million people expected to retire over the next 6 years.
And, it’s not just Baby Boomers. With the average retirement age being 61, the first of the Gen X generation could potentially leave our workforce as early as 2030. Now, with so many people leaving the workforce, that could be good news for Millennials and Gen Z, opening up new leadership roles and increasing wages due to limited supply. But, there’s just one catch: 40% of small businesses are owned by Baby Boomers, and 1/3 of American jobs are created by small business, threatening a significant number of jobs.
The news doesn’t get better. 59% of Baby Boomer business owners have no succession plans, and 45% have no retirement savings. What that means is that Baby Boomers are relying on their businesses to fund their retirement, but with a significant number of those businesses being retail and restaurants, they’re not the types of businesses that attract private equity firms. Worse, Millennial children are less interested in taking over the family business than previous generations, leaving Baby Boomers with limited options. And, as they look to an uncertain future which can include health or other personal issues, they may just decide to close their doors.
Now, as a credit union or regional bank, have you thought about what it means for your deposits as Baby Boomer business owners look to retire? Have you thought about how to talk to them about succession planning?
And, have you thought about how to grow your customers by attracting and retaining Millennials and Gen Z customers? Here are some things for you to think about:
Millennials and Gen Z are in debt and want to understand more about what they can be doing to have a healthier financial outlook and secure their financial futures.
As of early 2023, the U.S. credit card debt of $930 billion far surpassed even the debt incurred as of the 2008 financial crisis.
15 Million Millennials have student loan debt which is more than any other generation.
Compared to other generations, Gen Z has a 76% higher rate of credit card delinquency.
Being digitally-savvy consumers, these younger generations may not be aware of the benefits of banking with a credit union or a regional bank. They may not know the programs available to them that can help them save money, reduce debt, build wealth, and potentially, even buy a Boomer-owned business with little to no cash upfront (which we’ll get to in a subsequent post).
But, because they’re digitally savvy, they have strong opinions about the technology they use and what they expect an online experience to deliver. They expect mobile-first, seamless experiences which allows them to transact quickly, find support independent of an agent, and easily transition from self-service to agent-assisted service with all their information delivered upfront. Gen Z, in particular, has such limited tolerance for bad technology that they will even choose their jobs based on what type of technology they’ll be using.
But, beyond seamless, personalized, 24x7 digital experiences, Millennials and Gen Z are also going to need services and programs catered to their financial situations which could include:
Providing online financial literacy classes or short educational videos
Loans with deferred payment options in case of unemployment
Insurance products specifically designed to cover periods of job transition
Tailoring low-interest loan programs to Millennials and Gen Z to help them pay off credit card debt
Fostering entrepreneurship in your communities to help younger generations understand how they can buy new businesses
In subsequent posts, we’ll highlight how to reach your Baby Boomer business owners, supporting them and their communities through the upcoming economic transition, and we’ll get more granular on what Millennials, and particularly, Gen Z wants and needs from digital experiences. But, for now, if you’d like to learn more about what you could be doing differently to build your customer base with more of the customers who’ll be the majority of the labor force in just 6 years, contact us.