The retirement knot

September 17, 2014 admin

So much of what we do in the real estate investment world is ultimately about eventual retirees, some of whom are postponing retirement because they cannot afford to retire. And as more pension funds struggle beneath the burden of underfunded liabilities and move from defined benefit to defined contribution plans, even more of the onus of saving for retirement is placed on those eventual retirees.

There’s some good news to be had, though. The March 2014 Retirement Confidence Survey by the Employee Benefit Research Institute found that workers who have retirement plans through their employers (and even through IRAs) are more confident now about their ability to afford retirement than they were during 2009–2013, when confidence was at an all-time low.

And then there’s the Federal Reserve Board’s just released triennial Survey of Consumer Finances, which looks at changes in U.S. family finances between 2010 to 2013. Reduced interest rates on most types of consumer debt during this time period helped debt obligations for families with debt fall a median of 20 percent, or a mean of 13 percent. In addition, more Americans are paying down debt than during the 2007–2010 period covered by the previous survey. (But student loan debt is on the rise, now surpassing credit card and auto loan debt in America for these distant-future retirees.)

And once we’re all lucky enough to make it to retirement, where to live?

WalletHub studied 150 of the largest U.S. cities to determine the best and worst places to retire in 2014. Rankings were determined from a series of 25 metrics across five categories: affordability, activities, quality of life, healthcare and jobs, with the “jobs” category given a lower weighting given that most, but not all, retirees stop working during retirement. Three out of the top five best places to live were in Florida — no real surprise there — with Grand Prairie, Texas, and Scottsdale, Ariz., rounding out the list. Chicago and New York City, major cities for real estate investment professionals to work and live, are among the five worst places to retire, ranking 146 and 147, respectively.

But the fact of the matter is that populations globally are getting older — much older, and that’s reason to keep those of us in the real estate industry thinking about it well past our bedtimes.

This past August, Moody’s Investors Service published a sobering report on population and aging that is enough to turn just about anyone’s hair white. As more and more people age, the working-age population declines, and that will put tremendous stress on labor supply in the coming years. The report’s title says it all: Population Aging Will Dampen Economic Growth over the Next Two Decades. According to the report, by 2015 more than 60 percent of countries rated by Moody’s will officially be “aging,” meaning more than 7 percent of a population is age 65 or more. By 2020, “super-aged” nations, those with elderly populations above 20 percent, will increase from three today to 13 globally, and by 2030 there will be 34 super-aged countries. And aging isn’t just a problem of developed nations; many emerging economies around the world are aging rapidly as well. All of this will continue to wreak havoc on the age dependency ratio, which the World Bank tracks over time.

What do these global demographic shifts in aging indicate to you about future property market trends?

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Jennifer-Molloy91x119Jennifer Molloy is editor of The Institutional Real Estate Letter – Asia Pacific.

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