IRM and the Boomer generation

I have come to the point in this first phase of my research to consider the economics of retirement for the Boomer generation. This is important because Boomers have the potential to significantly influence international retirement migration (IRM) trends, dramatically shift the demographics in communities like San Miguel de Allende (SMA).

As boomers move toward retirement, financial analysts have begun to predict what influence they will have on the U.S. economy. A recent article in Market Watch (linked on the title above) summarized the Boomer retirement scenario like this:

The top 5% of all boomers hold 52% of the financial assets held by their generation. As a group, few Boomers have assets to rely upon for their retirement. The major exception here is housing (many in the Boomer generation made significant financial gains on their homes) If they want to maintain the lifestyle they’ve become accustomed to during their working years, however, they will have to become more financially savvy, save more money, and plan to work longer than retirees did in the 1980s and 90s.

What does this mean in terms of international retirement migration (IRM)? When you couple the fact that very large population of retirees is basically not financially ready to retire, with potential inflation (i.e., oil prices) and the rising cost of health care, the incentive to move to a location where they can live more comfortably on the assets they have will likely increase.

In this context, communities in Mexico like SMA, Lake Chapala, Ajijic, Marfil, Los Pozos and others might start to look more attractive to Boomers than they have to the retirees who preceeded them. In the aforementioned locations, SMA, Lake Chapala and Ajijic have long standing American populations who have changed the local market for goods and services, making the adjustment to living in Mexico much easier now that it was twenty years ago. The combination of econmic factors (that is, Boomers who do not have enough money to retire comfortably in the U.S.) with the established American and other expatriate populations could compel more retirees to consider Mexico (or other Central American countries) to move south in even greater numbers than we see today.

What would increaseing numbers of emigrating Boomers mean for Mexico? Well, for one, it will pose a huge strain on local resources. Americans in particular are big consumers of resources, most notably water, and ever-increasing development could strain regional water supplies (the City of Guanajuato is currently experiencing water shortages).

It would also be advisable for the Mexican government to rethink its national healthcare policies vis-a-vis foreign residents. At the moment, any foreign resident can purchase national health insurance in Mexico for about $300 per year. This gives one access to all of the public hospitals and doctors in the Republic. The major downside here is the doctors working in the public system as a rule do not speak English. Nevertheless, the spiraling cost of healthcare in the U.S. may make this obstacle seem superfluous given the alternative of unaffordable healthcare in the U.S.

As the U.S. retirement-age population grows, our government’s inability to address the healthcare issues of our nation will no doubt compell retiring Boomers to seek novel alternatives to retirement in the U.S. Couple this with the Boomers’ limited retirement savings and few assets, and it could mean that the next international immigration crisis might take place in Mexico.

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