Perils and promise for retirees

By Tokiko Oba / Daily Yomiuri Staff Writer

Baby boomers are said to be conscious about what they like and have stronger consumer confidence than the generation before them because they grew up in a period of high economic growth. And because the baby boomer population is large, the total amount of retirement bonuses to be paid out to them as they leave the workforce is estimated to be as much as \45 trillion.

Their retirement is a golden opportunity for businesses. Companies are developing goods and services that will meet their tastes, waiting for the retired-but-active baby boomers to start exploring their fields of interest. "Their money is the envy of all businesses," says Hideo Kumano, chief economist at Dai-ichi Life Research Institute. "Businesses cannot afford to miss this opportunity."

For example, Yamaha Corp. offers music lessons for beginners aged 50 and older who have longed to play a musical instrument.

On a recent weekday afternoon at a lesson room near Shinjuku Station in Tokyo, a young woman was teaching violin to two women who could have been her mother's age.

One of the students, Hideko Kanno, a piano instructor in Nerima Ward, started to study the violin when her daughter got her own instrument and began to practice. "I've always been fascinated with the violin," she said. "It's not so intimidating to join the class" partly because her classmates are about the same age.

The program for baby boomers and their elders has gained ground since its launch in May 2004. About 3,000 people have taken part in the program.

According to Masaru Sumi, a Yamaha employee in charge of music lessons for adults, the company needs to expand its target market because the number of children taking music lessons--a traditional mainstay for the company--has leveled off because of the declining birthrate.

Yamaha offers 12 three-month courses for people aged 50 and older, including piano, drums and ukulele. The company claims the courses are designed so students will feel comfortable starting out. The students are allowed to use instruments that belong to the company, the lessons are held twice a month, and the tuition less than that of regular adult lessons.

That does not bother Yamaha, as the real intention of this program is to lead the students to continue regular lessons in adult courses for a longer term. If they feel they are getting better, there is more chance they would buy an instrument of their own.

"Unlike young students, people in this generation tend to stay involved with the same instrument for the rest of their lives," Sumi says.

Retirees likely to travel widely

Dai-ichi Life's Kumano estimates baby boomers' individual assets totaled \130 trillion as of fiscal 2004. He also estimates the assets will balloon to \175 trillion in five years, with retirement bonuses taken into account.

According to Hakuhodo Inc.'s Elder Business Development Division, baby boomers think their ideal retirement life would involve doing things that are fun, healthy and intellectually stimulating.

A survey conducted by the division and released in October shows travel is the dominant leisure activity they are willing to spend money on. Of 360 baby boomers surveyed, 56.9 percent said they would spend money on domestic trips after they retire, and 47.7 percent mentioned overseas trips. The list also includes personal computers and other Internet-related equipment, dining out and enjoying artistic interests, such as music and movies.

But the travel industry is still concerned because many baby boomers have already visited foreign tourist destinations and may want something different.

Katsumi Nemoto, an official at JTB Corp. who oversees programs targeting customers aged 50 and older, says, "We doubt conventional package tours will appeal [to the baby boomers]."

So the company is focusing on tours featuring special activities or educational content. Such programs include a 13-day trip to Turkey planned and guided by a local expert on ancient ruins, a nine-day trip to Florence accompanied by a Japanese artist who lives in the city and an eight-day farm stay in New Zealand.

Moreover, because customers who are interested in such tours usually wish to gain some background knowledge before they go on a trip, JTB offers a seminar on the history and culture of the country before each trip.

The JTB venue, Royal Road Ginza, is located in the upscale neighborhood in its name. It is spacious and has a luxury atmosphere. There is no hustle: no counter or customers waiting in line. The pre-trip seminars are held in a salonlike conference room. "Other travel agencies hold preparation seminars, too," Nemoto says, "but we offer this atmosphere at the same time."

The company aims to boost the number of tourists in the senior programs by 40 percent in the latter half of fiscal 2005 from the previous year.

Investment remains important

To enjoy such a fun and intellectual life, baby boomers will need a financial plan that will enable them to afford such activities in addition to basic living expenses.

According to Tomoo Sumida, a senior economist at Nomura Asset Management Co., an average baby boomer and his wife will need nearly \400,000 a month, or \4.7 million a year, to live a comfortable life in retirement in a large city.

Apparently, pension payouts are not enough. Savings are not so hopeful, either, under the current low interest rates. Even if the Bank of Japan does raise the rates, the increase will not be as dramatic as retirees want. "Then they may become impatient and start moving their money," Sumida says.

Nomura Asset established a cross-section team in summer 2004 to tailor products for baby boomers. The team started out with a survey of baby boomers' financial activities.

Contrary to the team's expectations, it found out baby boomers do not have much investment expertise or even specific ideas about what they want to do with their assets. They have not had a lot of experience in investment because the corporate warriors had been too busy in their companies' trenches to play the money game on a private, individual basis.

The team concluded it should offer a basic item for beginners. Now it offers a fund of medium-risk investment trust products with investment lessons. "They won't listen to us if we offer just the products. We must offer investment education, too," Sumida says.

Dai-ichi Life's Kumano agrees that baby boomers should study. He is skeptical about the usual sales pitch targeting baby boomers, showing retirees taking round-the-world cruise trips, making easy profits as day traders and building new homes.

"How many baby boomers could really do that?" he wonders, saying the image of the leisurely retirement life created by companies is far from real life for the average 60-year-old. "Companies are appealing to baby boomers' dream of living a fun life and promoting a lifestyle that doesn't match their reality," he says.

According to Kumano, the corporate messages target rich seniors. Even though they account for only about 20 percent of total baby boomers, such tactics would pay off. But he warns the remaining 80 percent to become active in studying and investing so they won't get fooled into complacency.

"Retirement is an opportunity for them to study how to increase assets," he says. "We can't help it that there's a difference in assets among individuals, but [baby boomers with fewer assets] can improve their financial skills by becoming active. That would be a meaningful retirement life."