Over the years, there have been tons of commentaries by armchair expat experts opining about living in Mexico, future trends in Real Estate, advice about what to invest in, and what to expect for the future for those of us who live in Mexico.
Could their conclusions of who is retiring be misguided… Are there other ever more-likely waves of very-different, new types of gringos headed to Mexico, starting heavily in 2014 and rolling out through 2030 or 2035?
Official Census Data seems to tell a different tale than what you may have heard:
Demographics of the Upcoming Wave of Baby Boomer Retirees
The Baby Boom generation represents the largest single group of American and Canadian citizens in both countries, with the highest birth rates seen in the past 75 years. There has been a recent spate of fearful comments made by some expats across Mexico about how the new INM rule changes will drive current expats out of Mexico, and chase away future snow-birds. Some folks claim that Baby Boomers have relatively low net worths and cannot meet the new INM monthly income standards, and that INM’s new annual average savings/retirement accounts balance standards are so excessively high that the NEW Boomers who will be retiring between 2014 – 2029 supposedly ~ do not ~ and supposedly ~ will not ~ have sufficient income to come to Mexico to visit (for months as snowbirds) or enough to live here. Are these things Believable? … Credible? …
Are they Fear-Based? … or Fact Based?
Since discussions of these things tend to be rich in details (aka long), please consider the following disclaimers to help us evaluate all the varying claims, using a series of apples-to-apples basis comparisons, presenting US Census Bureau median-Average based statistics, to accurately and reasonably to consider the official data on Boomers and their assets.
The facts and figures presented here are from 2009, when the Fiscal Crisis was in full swing, battering our retirement savings and home values to record lows. The values quoted are based on Median statistics, not arithmetic averages, which means that they are based on the most commonly occurring values.
Why are Median statistics important?
If there are 10 people in a room, Bill Gates and 9 McDonalds workers, then what is the average income of the group?
If you calculate an arithmetic mean Average annual income:
$5 billion (Bill) + (9 x $18,000) … divided by 10 = $500,000 per person in annual income…
Does the average person in the room make $500,000 ?
The Average person is a McDonalds worker. Does the typical McDonalds worker make $500,00?
Still, if you believe the results commonly reported by Fidelity, Bloomberg, Time Magazine, Money Magazine, et al, then you would likely believe that the Average Person in that room must make $500,000 a year.
Why make the example? Much of the data presented on Boomers is analyzed by throwing it all in a big pot, and then mistakenly reporting misrepresentative Arithmetic Mean Averages. How do we get around this problem? Saavy analysts use Median-based Averages to get useful Average Incomes for Groups of People, especially when the individuals in the group have a wide range of incomes. What is a Median-based Average? Create a list of the lowest incomes up to the highest incomes, and find the person in the middle of the list: #5 in our 10 person group is Sue the McDonald’s cashier. How much does Sue make? She makes $18,000 a year.
We can now a bit more accurately say that the AVERAGE person in the room makes $18,000 a year….
This is why our results and facts presented in this article are so very different from Fidelity’s, Time’s, Money’s (et al) reports of (mean) Average account balances for upcoming retirees, because they artificially add-in millions of people’s account balances who have saved almost nothing, which skews their supposed “Average Savings per Retiree” very very low… Just like having Bill Gates in the room skewed the arithmetic mean Average up to the ridiculous $500,000 average (mean), while the McDonalds workers clearly make $18,000, then Time and Money magazines et al similarly falsely skew their Average Savings numbers for Boomer Retirees way too low by including people who will likely never retire because they have very small savings. If the goal is to describe who will retire, and when they will retire, is it really useful to include millions of data points from people who will likely never retire ?
Median statistics are the best way to accurately evaluate and accurately present sets of data that include broad ranges and varying types of data, and median results are what we present.
Just Who will be Retiring?
Specifically, we want to know what types of people will be retiring between 2014 and 2030, … and spending money until 2050 … Plus, it is fun to identify the different groups that they fit into. To do this, we must further break the 2009 Census data on Boomers down into even smaller sub-groups, to accurately understand each group. The US Census Bureau does this by dividing big populations down into groups called “ventiles”. Ventiles are 20’th percentile groupings: the 1-20% group, the 21-40% group, the 41-60%’ers, the 61-80%, the 81-100%’ers.
Since the people who have plenty of savings and who own their own homes are the most likely ones to retire at the SSI driven age 66, then these are the folks who are most likely to consider visiting Mexico or consider coming to Mexico as snowbirds. We suspect that the super rich, very rich, and merely wealthy will not be escaping the cold, slush, and snow, by coming to Mexico…. ???
It turns out that the key groups considering Mexico are actually the 61%’ers – 95%’ers, since the top 5% are the wealthy, likely heading to France, Monaco, the Côte d’Azur, the Caymens, etc. We believe that the Canadians and Americans most likely to come to Mexico are ordinary Middle Class and Upper Middle Class folks who had good jobs, maybe ran small-medium sized businesses, … who saved their money … These are Folks who have little or no debt, own their own homes, and will be collecting both decent SSI benefits and various types of defined benefit pension regular payouts.
Please…. ENOUGH with the DISCLAIMERS, Professor steve….
OK: Here goes with the fun fun fun, meat and potatoes discussion of WHO will be coming to Mexico…. and WHY.
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First, consider: The US 2000 Census counted 79.6 million U.S. residents, still alive, born in the years 1946 to 1964, inclusive, with the birth rate spiking up to high levels in 1948. This year is really important to consider when evaluating who is retiring now, who will be retiring, and WHEN the big waves of retirees will actually start.
Readers with a sharp eye, will also notice that the data peak of birth rates actually span: 1939 – 1974 = a 35 year period vs. the much quoted Baby Boom 1946-1964 period. This means that the remaining Americans people born outside of the 1939-1974 window, represent relatively smaller slices of the 315 million US population, so please temporary blot these folks out if your mind.
This also means that as the group of Boomers+6 constitutes the major source of growth of Americans and Canadians visiting & coming to Mexico. Further, after these folks die-off, the numbers of NOB foreigners coming to Mexico will fall off precipitously.
Hint: Consider images of young recent college grads, … jobless, living in their parents basements, with $40,000 of Student Loan debt, are burned into our brains … but this guy’s Grandpa and Grandma likely have saved for retirement, own their own home, and have some nice nest eggs stashed-away. When thinking about who will be spending $$ in Mexico, should we think of Chad or Meagan, twittering and chatting & IM’ing from their basement lairs or at Starbucks, or … are Fred and Ethyl more likely to don Hawai’in shirts and shorts, and sip cold ones in Tropical locales?
Sharp readers will also note that these Government statistics about people born in the USA do not include immigrants, or Canadian, or British Boomers – large groups of people who actually increase the pool of upcoming retirees who may enjoy some time in Mexico from the US Census Bureau results…
If you include all years (2014 – 2030) of larger numbers of the upcoming retirees, then there are roughly 100 million US citizens becoming eligible to retire with Full Benefits during that 16 year long spike…
Now consider that those retiring folks will likely live to at least age 85 – which pushes their retirement spending out 20 additional years to … 2050…
Let’s also remember that these “Baby Boomers+6” represent an actual wave of upcoming retirees who will be traveling – because travel is something they reaallly enjoy: Escaping the cold, snow & slop… Heading South … and Spending $$ on enjoying life in pretty, warm places between now and … 2050…
Next, let’s consider the factors controlling retirement for the people who will likely come to Mexico:
US Social Security rules allow retirement with full benefits (the most common type of retiree) at age 66 – 66.5 for people born before 1958, and retire at ages 66.5 – 67 for people born after 1957. Since the largest number of Boomer births started in 1948, then the truly large wave of retirees will start in 2014. (66 + 1948)
This means that the current retirees already in Mexico, are NOT actually representative of the future retirees. Previous retirees to Mexico seem to be heavily populated with early retirees, who didn’t wait until they had full SSI benefits, worked less years, and are likely a bit un-traditional (especially if you know many of them well). Their more staid and conservative counterparts, who did not take the risks of early retirement, who clearly have bigger savings and more assets at retirement, plus larger monthly benefit checks, will likely also behave differently after they retire than their brethren, who risked more and have less ($$$) by retiring early. The early retirement group often describes more freedom to do what they want, less stress, more spontenaity etc as their motivators, than their counterparts who chose to “stay in the harness” working longer, sacrificing longer in hopes of some imagined very good future…
Seize the day! …. or …. Save for a Rainy Day! ???
Then consider: The future waves of retirees are not a monolith or a single group. They are very diverse, and do not fit a single stereotype of the “Average of all Boomer Savings”. The stereotype of the “Average of all Boomer Homeowners” does not exist. Sadly, the data show that there will be “Average Boomer Retirees”, sharing several significant financial characterstics.
Who are they?
Check out the US Census Bureau 2009 official statistics for the top 2 ventiles (40%) of Americans between the ages of 55-64 who will start retiring in 2014: 40% of the future US retirement population eligible for full SSI benefits add up to 100 million fairly affluent “Baby Boomers + 6”, who had really good earning years in the 1960’s, 1970’s, 1980’s, 1990’s – 2008.
Sadly, reality is not always pretty:
(Not every one saved money for retirement.)
We tend to remember repeated Media reports that hype Baby Boomers as the ultimate consumers, who spend spend spend, and have monthly unpaid household credit card balances of $27,000 a month. Blah blah blah, GINGER! .…
Reality? Aesop got it right:
Not everyone is a showy Grasshopper.
The busy Ants are just mostly un-noticed by TV and magazines and windy-politicians – because the Ant’s story of saving and storing is boring, common, … and boring things do not sell papers, nor do they increase our fear, or get us spun-up.
Can we call them Ants?
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Going Back to the Facts:
US census figures show a 2-faced Janus-like picture of future American retirees.
60% of Boomers who begin retiring in 2014 (ages 55-64 in 2009) basically have NO savings and many carry net debt = scary and sad….
Can we call them Grasshoppers…?
But wait, what about the other 40% of eligible retirees? => a paltry 40 million upcoming US retirees.
The net wealth for the top 40% of upcoming US retirees is very very different from the bottom 40%, or even the bottom 60%.
The top 40% of 2014 – 2025 eligible US retirees averaged roughly $410,000 in savings per household in 2009.
The top 40% of 2014 – 2025 eligible US retirees average roughly $440,000 in real estate equity per household in 2009.
This means that even back in the dark economic times of 2009 (the US Census data year for the data quoted above) the ants still had plenty of stored food to retire on. Really, 40% of upcoming retirees averaged $850,000 USD in household savings and paid-off real estate back in the bad economic times of 2009 – $410,000 per household of stored cash by 2009, in spite of the losses in the big 2008-2009 Stock Market and Real Estate Markets.
What has financially happened since 2009 in the USA? Better … or worse, now?
Between 2009 and now: The S&P 500 went from 677 up to 1468 = a gain of 117%.
The facts say that the ants, who did not panic and sell when their portfolios had large paper losses, have actually regained 95% of their original value (unless you had GM stock, since GM went out of business). Instead they stayed at their jobs, toughing-out the 2008 – 2011 economic rough patch, while… many Americans decided to chuck-it-all, roll-the-dice, and Move to Mexico…
Again, here is another pointer that says that the current younger folks who either regularly visit Mexico, live as part-time snowbirds, or already-moved-here-folk, very likely are “wired” very differently than their brethren who hunkered-down and stayed in Canada and the US, working their jobs, and hoped that things would get better without them making any big lifestyle changes.
Also, the ants hold-their-ground, and grind away, as the markets swing wildly, while grasshoppers panic?
This image points to some 3’rd type, the early retiree – The Risk Taker? – who neither panics nor grinds-away, but instead shifts-gears, looks for better opportunities, changes the plan to fit the new circumstances, and wheels off to Mexico – taking Early Retirement ??
Kind of like the brother who left the “Old Country” to make a new life in Amerika
vs. … The more conservative brothers who stayed behind to take care of the family farm. ???
This means that the very REAL 40% (40 Million Americans) of the big wave of 2014-2029 Americans who can retire comfortably, actually now have significantly more assets than the financial loss-ridden 2009 Census data, may likely be more conservative (and less flexible?). These numbers also say that the ant-Boomers+6 will retire with bigger monthly pensions, bigger monthly SSI benefits, and bigger saved cash hoards in retirement accounts.
Also note: These ant-Boomers did not panic sell, and since the Crash, they typically got at least 30% increases, and as much as 117% S&P-based increases since the old 2009 Census data of just $410,000 of savings per upper-level retiree household.
This means that the soon-to-retire Boomers, who personally have more than enough savings & paid-for real estate to actually retire, also likely CURRENTLY have between $530,00 and $890,000 in retirement savings per household, right now – since their retirement accounts balances have recovered nicely since the 2009 financial-crisis low of the 2009 Census data quoted above.
How will these more fiscally-conservative, and more job/work-conservative, and more affluent ant-Boomers spend their money?
40 million upcoming US retirees, with average household savings of $410,000 each, really is a big big number of retirees who will consider visiting Mexico and many will become snow-birds, and some will buy homes or vacation properties.
~ Now, does it really make sense to make claims that current US retirement communities in Mexico “will become ghost towns“, because the INM raised the monthly income levels for new applicants to $1,900 USD a month? ~
~ Will a $1,900 a month INM minor-hurdle, somehow strangle the flow of Canadian and American Ant-Boomers marching to Mexico, … especially when there are 40 million upcoming retirees with average household assets of at least $850,000 USD each and substantial monthly SSI benefits and monthly pension benefits ?
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Looking back: Let’s consider the Average Retirement statistics presented by some Dooom and Glooomers:
Doom and Gloomers often Average mean statistics, that mathematically dump the big debts of the lowest 20%, and the zero assets of the middle 40% (grasshoppers?) – into a single stereotyped pot, mixing the 60% (Grasshoppers?) data in with the substantial large liquid assets of the upper 40% (Ants?) – rather than talking about the Average Retiree…
Remember the image of Bill Gates and the 9 McDonald employees?
Did the average person in the room make $18,000 or was the average mean salary $500,000?
Big Media and worriers imagine that the world is full of tragedies and sadness. Watch the nightly news, and you see an unending trail of apartment complexes that caught fire, single moms struggling to get by, reports of people getting shot or stabbed, homeless folks, and maybe the occasional positive human interest story. Reality? Most people live their lives in ordinary ways, going to work, watching a ballgame, enjoying quiet meals at home, never getting shot .. or stabbed, nor having their homes burn down.
In our analyses, we are talking only about median savings and median assets for average people, not average retirement account values, because we think it is disingenuous and basically intentional misrepresentation to present average (mean) savings and assets that skew artificially low due to including lots of small accounts of people who really have not saved much… That’s why our data presented here are so different from what you find around the web and in Big Media reports…
Instead: Think Ants vs Grasshoppers.
Big Media, the Government, politicians and other poseurs all have their agendas, to try to keep us thinking we must remain dependent on them …. dependent for money, dependent for information, dependent for ideas and understandings….
Well, frankly, we here at Yucalandia value free thinking and independence.
We started Surviving Yucatan to help people to: Think for themselves, Do their own Visas, Import their own cars, Come to Mexico … buy a home….. by knowing the facts ….
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Back to Reality:
Is it reasonable to believe that out of 100 million total eligible retirees between 2014-2030, the net 40 million affluent, newly-eligible retirees, with over $800,000 in net household worth each,
…will be just sitting at home watching TV … or bagging groceries to help out with the bills?
Starting in 2014, 1.2 million Baby Boomers will be eligible for full retirement benefits They will each have an average of between $850,000 – $1.6 million in typical household assets. http://www.census.gov/…/pre-1980/PE-11.html.
Many of these 1 to 2 million a year of fairly affluent new retirees will consider spending money in Mexico to escape the cold snow, will visit here for months, and some will buy homes here.
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Next, take a peek at the peak years for future retirees:
Between 3.8 million to 4.1 million US Boomers were born each year between the peak years of 1955-1959. These Boomers become eligible for full retirement benefits starting in 2019 and roll on through 2023. Then remember, the overall boom of Canadian and US expats coming to Mexico will roll out to 2050…
If the current statistics hold up for the ant-Boomers, there will be 1.6 million new AFFLUENT (upper 40%-ile) Boomers with significant average assets of over $1 million per household.
1.2 million to 1.6 million new US ant-Boomer retirees every year from 2014 – 2024 adds to a big coming wave of 14 million really affluent folks retiring with a lot of money (over $1 million each??) and a lot of time on their hands.
So, if you only-see or only-know “Grasshopper Boomers”
(the 60% with little or no savings and often negative assets = debts and mortgages and houses “under-water/upside-down” with mortgage debt),
then the future of US retirees coming to Mexico … looks grim.
Remember, the ant-Boomers are a pretty quiet lot – not flashy – so they tend not to let people know just how much money they have. Just because some very-vocal people don’t know or don’t have any of the 40 million ant-Boomers as close friends, and just because the Media are more excited to talk about the difficulties of the 60 million grasshopper boomers, and just because some politicians yammer about the poor (under 15% of Americans), then …
Should we really ignore the 40 million upcoming retirees – who really do have a lot of money and real estate?
Is it possible that … instead of Images of Falling Home Values …and Ghost Towns… and Falling Skies….
Reality might actually be:
~ Expats currently living in Mexico may find themselves priced-out of their newly-retired-gringo-popular local real estate markets ??? ~
~ If you already own a home here, will you, instead, likely find your home has instead doubled or tripled in value ?
(due to a 15 year long ~ big wave ~ of 40 million affluent US retirees? )
Don’t worry ??? Be happy ???
If you already live here, and own even a modest home, then INM offices are cutting the $1,900 a person monthly income requirement in HALF for homeowners – which means the real INM income requirement dropped by 25% from the previous $1,200 now down to just $950 per person.
(and remember, all these very real retirement savings $$ and real estate data $$ are for just US born folks in 2009, and do not include immigrants to the USA, nor the Canadian & British Baby Boomers => Even more affluent future retirees – not counted by the US Census Bureau data and $$$ recovered and earned since the 2009 bottom of the Fiscal Crisis)
Of course, all of this depends on Spain and Italy (et al) not going bankrupt, and dragging the World economy back into recession.
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Really, we put all of this together to help people see how things really may change dramatically for people living in Mexico, especially if you live in any areas that might be popular for gringos. We also really hope that folks will chime in with lots of comments about what they see for the future… More fiscally conservative folk, with bigger bank accounts, (and maybe less flexible?), moving here in larger numbers than we have seen…
Will those who already live here, become cultural-mind-set minorities in our own expat communities?
and, When gringo populations exceed … 10%… of the local population, will be still be “the cute & charming” minority, who now threatens to shift the local culture away from previous Mexican norms?
See http://www.yucatanliving.com/…tate-predictions.htm and
http://www.cepr.net/…r-wealth-2009-02.pdf and http://books.google.com.mx/…55-64%29&f=false for more information on the facts and sources used in this article.
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Disclaimer: This information is not meant as investment advice nor as lifestyle change advice. It is for educational and informational purposes only. How should you spend your money? Ask your wife… Where should you buy property? Ask the Uncle, who comes out of every deal smelling like a rose. or See a professional for real advice on important issues.
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