Retirement is a complicated topic these days. In the past it was quite straightforward: people in employment retired at a set age, and that was that. Only business owners might work for longer. In many cases, even if you were capable of working longer, you weren’t allowed to.
Now we are in very different territory, simply because people in the West are living longer. As Bessemer Venture Partners says in an article, “ nearly one-third of Baby Boomers have nothing saved in retirement plans; for those with positive balances, the median amount saved is approximately $200,000, in contrast to the estimated $1 million to $1.5 million nest egg needed to afford daily living and healthcare expenses throughout a thirty-year retirement.”
As it also humorously notes says at the beginning of the blog: “Warning: Some or all of this content is mildly depressing.”
However, fintech innovation in consumer financial services has the potential to be the solution to the Baby Boomer dilemma. Bessemer says, “we are starting to see this burgeoning problem motivate some of the brightest entrepreneurs and these product leaders are creating modern solutions for aging individuals facing life’s financial inevitabilities.”
It has been “mapping out and exploring the macro trends that are impacting the aging population’s financial well-being while also trying to identify potential solutions.”
The US demographics tell a dramatic story: “Retirees and Boomers yet to retire own 83 percent of all investable assets or nearly $35 trillion. Nevertheless, as one would expect these numbers are skewed to the wealthy; the majority of Boomers are headed for a desperate need for financial assistance.” This indicates there is a huge market opportunity for those who can get their heads around it.
Pensions are no longer guaranteed, because the social security income needed to support them is unsustainable. There aren’t enough workers paying in to it, for the government to pay out to all the retirees.
What is needed are entrepreneurs who are building promising companies that serve the aging population’s retirement and economic gap needs. This goes for Europe as well as the USA.
Bessemer suggests: “We expect to see companies help retirees monetize their hobbies or take on more part-time work.” It cites the example of income-building platform Steady, which connects flexible opportunities to underemployed groups.
There are other ways as well, such as tapping into home equity so that people can achieve more liquidity using fro example, home-sharing, home equity lines of credit (HELOC), reverse mortgages, and sales leasebacks options that allow retirees to leverage their home equity while staying in their homes.
This ageing market is one that might be overlooked in the fintech rush to please Millennials, but it is one where digital startups might find there is treasure to be had.