In Practice November 12, 2006

Consider Boomer Subgroup When Targeting Communication

To help marketers more accurately target the baby boomer generation, the market research firm of Chadwick Martin Bailey (CMB), in conjunction with Arnold Worldwide, concluded a study by identifying five distinct subgroups of boomers.
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To help marketers more accurately target the baby boomer generation, the market research firm of Chadwick Martin Bailey (CMB), in conjunction with Arnold Worldwide, concluded a study by identifying five distinct subgroups of boomers.

A press release listed those five subgroups as follows:

Status Seekers – The largest segment identified, this group makes up 26% of baby boomers. The group is characterized as materialistic and feels that money is the best measure of success. They enjoy the finer things in life and are willing to pay more for brand names.

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Traditionalists – This group accounts for 23% of boomers. Traditionalists are defined by their conservative political, economic and social views. They have traditional attitudes and belief systems, are known for following the rules, and are smart consumers (interested in value, trust and variety). Forty-five percent of Traditionalists report that they will go out of the way to buy American-made products.

Blue Collar Skeptics – Eighteen percent of boomers fall into this group. The Blue Collar Skeptics are hesitant to trust big businesses and are concerned about the amount of information online. As they fall on the low end of the boomer income bracket, this group is more stressed about time and money than the rest of their generation. 68% of Blue Collar Skeptics fear they have not saved enough money for retirement.

Activists – The most politically and socially active segment, 17% of boomers are Activists. They are generally liberal and also donate a significant amount of time and money to charity. Activists are concerned about the environment, are brand-loyal, and are financially smart.

Achievers – The minority of boomers, just 16% fall into the Achiever category. This group adopts technology early and relies on it heavily. They are focused on success and wealth and are heavily involved in social activities. Twenty-four percent of Achievers claim to be the first among their friends to have new gadgets and devices.

While only one in five boomers consider themselves a “knowledgeable source of information for new technologies,” according to the release, certain portions of the boomer population are much more tech-adept than previously believed. Achievers own significantly more technology devices than their counterparts and consistently rely on technology.

Chadwick Martin Bailey surveyed 1000 Baby Boomers born between 1946 and 1964. For additional information regarding the study, email Josh Mendelsohn at jmendelsohn@cmbinfo.com.

Data & Research November 12, 2006

401(k)s Now Leading Retirement Savings Vehicle

A new study from the Investment Company Institute (ICI) shows that 401(k) plans, originally perceived as a supplement to worker pensions, now have more than twice as many participants as private-sector defined benefit plans.
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A new study from the Investment Company Institute (ICI) shows that 401(k) plans, originally perceived as a supplement to worker pensions, now have more than twice as many participants as private-sector defined benefit plans.

According to an ICI summary of the study findings, 401(k) plans now have 47 million active participants, compared to 21 million who participate in private-sector defined benefit pensions. And 401(k) plans held $2.4 trillion in assets in 2005, compared to $1.9 trillion in assets in all private-sector defined benefit pensions.

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The study also points out that the latest data show 90% of 401(k) plans are the only retirement plan offered by that employer. In 2002, some 350,000 employers offered 401(k) plans as their sole retirement plans, ICI said.

Other findings of the study included:

  • The growth in 401(k) plans generally has been fueled by changes in the economy and the workforce, not by companies dropping traditional pensions in favor of 401(k)s. In particular, newer firms have tended to adopt 401(k) plans. Because traditional pensions generally favor employees with long service with one company, younger workers tend to place more value on defined contribution pension benefits.
  • Mutual funds account for roughly half of the assets in 401(k) plans. Mutual funds have been instrumental in opening securities markets for workers participating in 401(k) plans, offering diversified investments, professional management, and innovative plan services.
  • 401(k) plans offer a powerful savings tool that can provide significant income in retirement. In research with the Employee Benefit Research Institute, ICI has found that more than half of today’s young 401(k) participants can expect to retire with enough 401(k) assets to replace more than half of their pre-retirement income.
  • The Pension Protection Act, passed in August, offers the potential to sharply increase 401(k) participation and retirement income. The PPA makes permanent the updated 401(k) (and IRA) contribution limits; preserves catch-up contributions for workers age 50 or older; and encourages employers to offer automatic enrollment and better default investments in 401(k) plans.
  • If companies fully implement the PPA’s provisions, eligible workers can accumulate significant retirement income. In the lowest income group, the median eligible worker could replace 52% of pre-retirement income if companies implemented automatic enrollment with a default contribution of 6% of pay, invested in a lifecycle fund. That’s up from a 23% replacement rate for the median worker without those reforms.

The full study, entitled 401(k) Plans: A 25-Year Retrospective, is at http://www.ici.org/pdf/per12-02.pdf.

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