'Boomer' No Longer Synonymous with 'Consumer?'

After 40 years of dominating this country’s economy, baby boomers are starting to throttle back on spending. 

Baby boomers used to be dubbed “conspicuous consumers,” but are now turning into “temperate pragmatists,” a term coined by Pam Danzinger, president of Unity Marketing. She first noted “the emergence of this new personality in the luxury market” back in 2007 when, she says, the numbers reached a critical mass. 

It shouldn’t come as surprise. Danzinger, who specializes in market research into the affluent consumer market, says the shift has been building for several years. “Affluence comes with middle age. About half the people I survey are baby boomers.” 

Having spent liberally on “stuff”  for themselves, their homes, cars and their [often pampered] children, more and more baby boomers are reaching the stage in life when status symbols and collecting “things” are not as important as they used to be. “They’re more interested in experiences,” according to Danzinger. “Things to do as opposed to have. It’s a natural part of the aging process.”

Matt Thornhill is president and founder of The Boomer Project, a marketing and consulting firm  published a book three years ago claiming “the Baby Boom drives U.S. consumer confidence more dramatically than any other generation [and] remains the most affluent spending group.”

And Thornhill is not backing down from that, although he agrees that this generation is going to spend differently.

“Relative to their early 40s, boomers now know they’re at the peak or headed to the downside of their income.” Simply due their sheer numbers, he expects total boomer spending will continue to exceed that of other generations. Echoing Danzinger, he says, “It’s not about more stuff, it’s about more experiences.”

Both Danzinger and Thornhill say the stock market selloff and prolonged economic downturn accelerated the emergence of this move toward more discriminate--and discrete--spending on the part of boomers. “For the last 25 years it was all about indulgence, living beyond your means,” claims Thornhill.  

Thanks to the second bear market in a decade, retirement plan balances have not grown as expected.  In addition, layoffs in this recession have hit the 55-and-older crowd hard. The end result is that many boomers have grown anxious about money at a point in life when they realize it’s going to be tough, if not impossible, to recover. 

In terms certain to rattle retailers, Thornhill predicts these tough economic times will change boomers in a way no one would have dreamed possible 10 years ago: “They’re going to come out of this recession and be more responsible about spending.  They realize there are economic consequences with taking all of the equity out of your house and using it like an ATM machine.” He says we’re entering the “Age of Responsible Consumerism.”

He also claims the “green” or “sustainability” movement is having an impact on this generation. “It’s the idea our parents and grandparents had due to the [Great] Depression: use it up, wear it out, before you buy a new one.”

Danzinger says baby boomers are feeling the pressure of time as they reach their 50s and 60s and asking themselves, “What do I want in the next 20 years?”  The answer, she says, “isn’t another Mercedes or diamond ring.  I want to leave the world a better place.”

Coincidentally, she and Thornhill - both baby boomers themselves- have each traded in a Mercedes for a non-status symbol vehicle.  “In my 30s it mattered what I drove,” says Thornhill. “I was buying things to be seen as successful. Boomers are way past that. They’re more pragmatic.”

There is at least anecdotal evidence of a real trend here: According to www.LeaseTrader.com, individuals age 55 and older have been “flooding” the Web site with listings of high-end vehicles in the hope of finding someone to take over their leases.

According to John Sternal, vice president of marketing, most of these listings are financially driven. “They’re looking to downsize to a more affordable vehicle or get rid of a car entirely.” 

It’s going to be more painful for baby boomers to rid themselves of another big expense:  “boomerang” kids.  As Thornhill points out, “Kids [of baby boomers] can’t get jobs. So they moved back home. They’re 25, 26 years old and still hanging around.” That, too, crimps the amount of spending boomer parents can afford. 

The question is, if the trends in baby boomer spending are correct, what is the long-term effect on our economy and the financial markets? 

Ms. Buckner is a Retirement and Financial Planning Specialist at Franklin Templeton Investments. The views expressed in this article are only those of Ms. Buckner or the individual commentator identified therein, and are not necessarily the views of Franklin Templeton Investments, which has not reviewed, and is not responsible for, the content. 

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