Partners (Number 2, 2006)

Vol. 16, No. 2, 2006


Can Housing Be Green and Affordable?

Technical Education: A Remedy for Poverty?

Soaring Insurance Costs Make Housing Less Affordable

CRA Revisions: Flexibility and New Choices

Reverse Mortgages Provide Answers for Some (but Not All) Seniors

Recruiting Retirees Calls for Careful Planning

Atlanta Fed Hosts Last in Series of Asset-Building Forums

Spotlight on the District—Georgia and Eastern Tennessee



  Recruiting Retirees Calls for Careful Planning

Retirees are on the move, and they are taking their spending power with them. Many rural communities intend to benefit from this migration by appealing to seniors with active adult communities and other amenities.

According to the Pew Research Center, the graying of the baby boomer generation will create an 18-year surge of retirees. Beginning in 2006, economists anticipate about 4 million people will retire each year. They project at least 400,000 a year will move to another state, bringing on average $320,000 to purchase a retirement home.

More than half of total U.S. consumption can be attributed to this diverse crowd of highly educated retirees, who part with about $2.3 trillion annually. According to USA Today, baby boomers’ large disposable incomes have been fueled by increasing home equities resulting from ballooning property values, fat 401k funds and inheritances.


Projections indicate that as many as 20 percent of the 70 million retiring baby boomers will migrate. To capture some of this mobile wealth, many rural communities are including plans to recruit retirees in their economic development policies in hope of boosting local economies. Disadvantaged rural areas characterized by a low-skilled labor force and significant unemployment stand to benefit from the service and retail jobs that retirement communities generate.

Three types of retirees tend to migrate. The first are seeking amenities such as warmer climates, lakes, beaches or mountains. The second type, return migrants, move back to their home states to be closer to relatives. Dependency migrants, the third type, move to be closer to families or others who can help care for them. Communities seeking to attract retirees typically target couples in good health who possess above-average disposable incomes.

What communities stand to gain
Immigrating retirees can spark growth in multiple markets. Industries as varied as housing, entertainment, banking, financial services, transportation, health services, insurance, utilities, household goods, and food all stand to gain from an influx of well-heeled seniors.

Since most retiree income is from transfer payments, pensions and other non-wage revenue, it is not affected by economic downturns. An expanding tax base provides municipalities with more funding for state and local services, with little or no strain on social services, criminal justice services or schools. Finally, retirees exponentially boost a community’s tourism industry.

A 1986 study by the Federal Reserve Bank of KansasCity found that retirement-based rural communities have out-paced all others in per capita income growth. Non-metro counties identified as retirement sites have also witnessed the largest increases in personal income and employment. The study found that retirees’ incomes have a high multiplier effect on employment in local economies since their disposable wealth is largely used for goods and services. The economic impact of one new retiree household is equal to 3.7 new manufacturing jobs, according to economists Green and Schneider in a 1989 study. They attribute the disparity to “leakages” in wage employment such as federal and state income taxes and income exported to commuters.

In addition to projecting increases in local wealth, planners must be mindful of meeting the needs of an older population that will most likely “age in place.”

Retiree recruitment efforts in the Sixth District support the notion that migrating seniors can benefit local economies. Mississippi has led the way with its official retiree attraction program, Hometown Mississippi Retirement. The major component of the program is the “certified retirement city” where the state screens cities on certain criteria such as affordability, low taxes and quality medical care.

According to a 2005 study by Mississippi State University, the program has cost the state $200,000 per year, but has netted nearly 7,500 additional retirees. In addition, it adds some $194 million per year to the state’s tax coffers and generates 2,320 jobs annually. This project also helps local officials in the 19 certified communities to showcase their areas to retirees.

In Alabama the state pension fund sponsored the Robert Trent Jones Golf Trail, including 18 public courses and numerous hotels. The project catapulted tourism income there—from $2.5 billion in 1990 to more than $7 billion last year.

Success depends on careful planning
Thoughtful planning is key in implementing a successful retiree recruitment strategy. Local governments must enlist a skilled staff and collect sufficient data to develop a plan that will benefit the community. Strategizing for retirees is more specialized than traditional economic development, so local governments in areas that lack expertise may face planning challenges.

In addition to projecting increases in local wealth, planners must be mindful of meeting the needs of an older population that will most likely “age in place.” Building nursing homes will be important in these communities. Additionally, the economic status of the retirees will eventually decline due to failing health, the loss of a spouse or both. As retirees age, the need for governmental services such as health care and elderly assistance will increase. Strategies to recruit retirees must consider these changes and the demands they will impose on the community and local government.

Representing approximately 30 percent of the U.S. population, persons aged 50 and above have. . .
  • 77 percent of the nation’s personal financial assets;
  • 80 percent of the money in savings accounts;
  • 68 percent of all money market accounts;
  • Nearly 50 percent of all corporate stocks;
are significant economic players who. . .
  • Earn 42 percent of total after-tax income;
  • Buy 48 percent of all domestic new cars;
  • In 80 percent of the cases own their own homes, 80 percent of which are mortgage free;
  • In 27 percent of the cases have accounts with brokerage firms;
maintain major assets including. . .
  • Financial assets 80 percent larger than average;
  • Savings accounts 90 percent larger than average;
  • Checking accounts 50 percent larger than average;
  • U.S. Savings Bonds 50 percent larger than average;
  • Other securities 50 percent more than average;
  • Houses worth 20 percent more than the U.S. average.

Auburn University Community Resource Development and Jackson State University Center of Economic Development.

Local governments should also be aware that intentionally aging a community can result in the dominance of the retirement population, and indigenous locals may be adversely affected. For example, expanding a housing market to accommodate retirees will raise the cost of public services for old and new residents as demands on the community’s infrastructure increase.

Many will stay put
Despite the projections for retiree migrations, the majority of the elderly decide to age in place. In any given five-year period, only about 5 percent of those over 60 make a long- distance move, according to a study conducted by Sheilds, Stallman and Deller. Likewise, The Pew Research Center finds that roughly the same percentage of families live close to one another now as in the late 1980s, when Gallup conducted a similar survey. These studies suggest that U.S. society may not be as mobile as it imagines itself to be.

Many retirees who relocate will probably choose to move to an active adult community not far from where they currently live. In Henry County, Ga., for example, developer Steve Romeyn of Windsong Properties found that 60 percent of his new homes for active adults sold to individuals who lived in the greater Henry County area. Local governments would thus do well to consider appealing to retirees already in their midst.

Not too early to start marketing strategy
A growing number of rural municipalities have made attracting migrating retirees a key component of their overall economic development strategy. The expected growth in the number of older migrants in the next decade bodes well for those seeking to boost their tax base without overly straining the existing infrastructure. Consequently, many communities are seizing the opportunity early to market themselves as a retirement destination for the first wave of baby boomers who will be looking to relocate their roots and wealth.

This article was written by Sibyl Howell, regional community development manager at the Atlanta Fed.