Attracting The Migratory Retiree
CRD-56, June 1993. J. Thomas Chesnutt, Extension Tourism Specialist, Community Resource Development, Auburn University, and V. Wilson Lee, Extension Economist Emeritus, Community Resource Development, Auburn University, and Mark Fagan, Associate Professor, Jacksonville State University Center for Economic Development

• Tourism Attracts Retirees
• The Retirement Industry
• Success Stories
• So You Want To Attract The Migratory Retiree?
• References

The resultant increases in real wealth have allowed individuals to demand the advantages provided by the service-producing sector. Health, life, and retirement insurance have become a requirement of nearly every household. The use of credit cards, personal checking, and other financial services formerly viewed as privileges are increasingly deemed necessities. Individual mobility and opportunities for education and recreation have increased. Society can afford to provide relief from the stresses of unemployment, aging, and physical handicap.

Change in world economic structure is the second major reason for the decreasing importance of goods production as a generator of U.S. employment. Jobs in the manufacturing sector have been escaping the United States at an increasing rate (Drucker 1980; Naisbitt 1982).

As the tasks employed in manufacturing industry become more standardized and the technology is perfected, firms seek more favorable economic climates in other countries, at least in the short run. For example, an increasingly large amount of textiles, leather products, steel, automobiles, and electronics are produced outside the United States. Regardless of future increases in production efficiency, the United States is not apt to regain its former share of these products regardless of future increases in production efficiency.

The major changes in sources of employment have been accompanied by significant shifts in sources of personal income. As might be expected, the percentage of personal income generated by employment in the manufacturing sector has declined, and that generated by employment in the service sector has increased. In the 1980s, only $1 in each $5 of domestic personal income resulted directly from manufacturing, and only $1 in $40 came directly from farming. Nearly half of the dollars available for personal expenditure comes from the service-producing sector. Less well recognized is the large share of personal income controlled primarily by people of retirement age. In 1988, 13.8 percent of personal income came in the form of transfer payments, most of which are social security, Medicare, and Medicaid payments. Another 16.2 percent came from dividends, interest, and rent. This property income also is received in substantial measure by the elderly population. Approximately $3 out of every $10 of personal income represents non-earned income controlled largely by elderly people (see Figure 2).

Tourism is also an important aspect of community economic development. Unfortunately, the economic potential of travel by the public often is not taken seriously. Public decision makers fail to realize the true extent and complexity of tourism, although every U.S. community has a tourism industry of some kind. Almost every business providing goods or services at retail is a part of the industry. Tourism produces profits, jobs, taxes, and rents, similar to most other economic activities. Furthermore, it is compatible with most other economic activities, and almost everyone is a tourist at one time or another.

Tourism Is Economic Development

Long considered "fluff," or a mere nuisance to local residents, tourism today is big business. The U.S. Travel Data Center (1990b) has published impressive statistics related to tourism. Travelers spent $350 billion in the United States during 1989, an increase of 7 percent from 1988. This was equal to 6.7 percent of the gross national product. Spending by travelers in the United States generated 5.8 million jobs in 1989, paid nearly $74 billion in wages and salaries, and produced $43 billion in federal, state, and local tax revenue. If considered as a single industry, the tourism sector is the third largest retail industry in terms of business receipts. Those larger are automotive dealerships and food stores.

Not only are statistics concerning tourism in the United States impressive, but the industry is still growing. Vacation travel in 1989 increased 7 percent over the previous year (U.S. Travel Data Center 1989), making it the sixth straight year of increase in vacation travel.

Alabama has benefited substantially from these changes. In 1990 tourists spent an estimated $3.1 billion in Alabama, a 7.6 percent increase over 1989 and an increase of 26 percent over the past 2 years. These expenditures support more than 53,000 full-time jobs and in 1990 created more than 5,000 new jobs in the state. Alabama directly collected $67.7 million in state taxes and communities collected $70.9 million in local taxes (Davidson-Peterson Associates 1990).

The tourism and travel future for Alabama appears bright. In 1989 the southeast region of the United States received the greatest amount of travel with almost 350 million person-trips, which was 30 percent of all domestic travel. The southeast also enjoyed the greatest amount of growth as a tourist destination in 1989 (Travel Data Center 1990a).

Tourism Is Compatible With Attracting Retirees

Among the economic goals of local communities should be the development of a balanced economic base and the identification of the comparative advantages of the community from its resource and economic base. To achieve this end, many communities have identified both tourism and retiree attraction as one means of achieving economic development goals. Consider the small prosperous town of Hendersonville, North Carolina (population 8,000). Well known for its success in attracting affluent retirees, Hendersonville employed a four-pronged economic development strategy focusing on agriculture, industry, tourism, and retirees. Among significant tangible results is an increase in bank deposits from $16 million in 1961 to $465 million in 1990. Retirees are estimated to account for 60 percent of these deposits (Hoffman 1990).

Officials of Hendersonville recognize that many individuals who have retired in their community first visited as tourists. Even though tourism and retiree attraction are often identified as economic development strategies for a community, few seem to recognize the important link between the two. The community is not going to be able to attract retirees unless they are first able to attract them as tourists.

Recognizing that individuals approaching retirement are likely to embark on travel in an attempt to find the most desirable retirement location opens new and affluent tourism markets to the community.

Current Travel Trends

Travel is now an important segment of American life styles, and the rate of growth in travel during the 1990s should exceed that during the 1980s.

Several trends may have an impact upon tourism related to the mature Americans market. The mature citizen market segment of most interest to communities desiring to attract retirees is the 45 to 64 age group. Those 65 and older are most likely to be currently retired and settled in the community in which they wish to enjoy their retirement years. The mature adults group of interest can best be examined by dividing them into two segments: those beginning to make tentative retirement plans, but who are still examining many possibilities (the 45 to 54 age group), and those very near retirement and likely to make final retirement plans relatively quickly (the 55 to 64 age group).

      The 45 to 54 age group. Between now and the year 2000, the greatest population growth will be in the 45 to 54 age group. It should experience a 63 percent increase. Most should remain in good health for the next decade. Currently, more than 60 percent of this group indicate that their health is good or excellent.

This particular group took 15 percent of all trips in 1987. They are active business travelers and frequent users of air travel, rental cars, and hotels. On the average they are more likely than other groups to take day trips, travel by camper or recreational vehicles, and travel outside the United States (Cook 1989).

      The 55 to 64 age group. Householders aged 55 to 64 have the highest median net worth of any age group. The value of their assets is 21 percent greater than the average. Most members of this group are in good health and physically able to engage in a variety of leisure activities.

Fourteen percent of all trips taken in 1987 were made by persons of age 55 to 64 (Cook 1989). They are less likely to spend discretionary income on purchases of material possessions than on items that offer social reinforcement and enjoyable experiences, such as leisure activities and travel. This group is more value-sensitive than price-sensitive. If they believe a product or service is worth the cost, price becomes less important and only a matter of what they can afford.

Tourism Marketing Implications

To be successful in attracting both tourists and retirees, a marketing plan is necessary. Few communities can be all things to all people. Priorities must be established, audiences targeted, and a marketing strategy developed. Based on current population and travel trends, several marketing strategies warrant consideration.

      Concentrate On Nearby Large Metropolitan Areas. Although Americans are taking more vacation trips, they are spending less time on each trip. In 1985 the average stay was 5.7 nights per trip. By 1989 this had slipped to 4.7 nights. There is a definite trend toward more weekend vacation travel. In 1980 there were 311 million weekend vacation person-trips. This increased to 427 million by 1989 (U.S. Travel Data Center 1990a). Such data support a marketing effort targeting large metropolitan areas within a day's drive of your community.

      Do Not Ignore Other Large Metropolitan Areas. This does not suggest that local leaders ignore markets several days' distance from their communities. While the length of stay per trip is decreasing, individuals of more than 45 years of age take fewer weekend trips and travel farther (U.S. Travel Data Center 1989). Obviously, this is a group to target when attracting potential retirees. Therefore, tourism marketing areas should extend to other regional metropolitan areas.

      Concentrate On Specific Segments Of The Mature Market. An aggressive approach in marketing to the 55 to 64 age group is necessary, because they will be finalizing retirement plans. Off-season travel should be popular with them. Most have fewer time restrictions, so travel enticements should focus on opportunities for personal growth in specific interest areas rather than on age.

In most cases, there is ample time to reach the 45 to 54 age group, but they must be contacted early so the idea of retiring in a given community will have time to mature. With above-average financial resources, reduced expenses, and more leisure time, this age group tends to travel more often. Travel that offers opportunities for personal growth is also attractive to this group.

      Develop Group Tour Packages. Communities should aggressively market themselves to the escorted group traveler, or tour group. A recent study indicated that while about 10.3 million American adults participated in group tours in 1989, more than 15 million plan to take an escorted tour within the next 2 years. This represents 11 percent of the entire adult traveling public. Current tour group participants tend to be females of more than 60 years of age, retired or homemakers, with less than $25,000 household incomes. However, examination of those planning to join a tour group within the next 2 years indicated that future tour group travelers were likely to be younger, just as likely to be male as female, better educated, and most likely to be in either the $25,000 to $49,000 or $50,000 to $74,000 income ranges (National Tour Foundation 1990). Since people in the 55 to 64 age group will be looking for convenience and ease, special group tours designed to provide these qualities and social companionship should be attractive.

Care must be taken to remember that these are broad-based generalizations. While they may be valid for the entire population, each community should carefully examine its particular strengths and weaknesses to determine which generalizations apply locally.    Back to Contents

Economic development has occurred mostly in urban areas as a result of manufacturing growth. Rural areas and smaller communities have difficulty competing for the relocation of manufacturing plants and have typically depended on agriculture for economic development. Such communities are discovering that they have the infrastructure to support tourism and another newly developing industry--the "retirement industry."

Older migrants in the United States are relocating to areas with amenities to provide them with a comfortable life style for their retirement. They have steady incomes that are not vulnerable to normal down cycles in the national economy. Their income is used mostly for discretionary spending, which usually occurs locally and leads to economic development and job creation in the community of relocation.

Persons of age 50 and above in the United States have:

• 77 percent of the nation's personal financial assets.
• 80 percent of the money in savings accounts.
• 68 percent of all money market accounts.
• Nearly 50 percent of all corporate stocks.

• Earn 42 percent of total after-tax income.
• Buy 48 percent of all domestic new cars.
• Own their houses in 80 percent of the cases, and 80 percent of those are mortgage free.
• Have accounts with brokerage firms in 27 percent of the cases.

• Financial assets that are 80 percent larger than average.
• Savings accounts that are 90 percent larger than average.
• Checking accounts that are 50 percent more than average.
• U.S. savings bonds that are 50 percent more than average.
• Other securities that are 50 percent more than average.
• Houses worth 20 percent more than the U.S. average.

A 1986 study by the Federal Reserve Bank of Kansas City found that rural counties where incomes are based on retirees have out-paced all others in per capita income growth. Also, counties designated as retirement sites witnessed the largest increase in personal income and employment among all non-metropolitan counties (Haas and Serow 1990).

The "retirement industry" boosts the local economy and increases the tax base. Large investments in infrastructure or tax abatements are not required by government. Retirees do not pollute or destroy the environment. They increase the number of volunteers and contributors benefiting many organizations. Obviously then, retirement is a good industry to recruit for economic development.

As a result of understanding the net benefits of the retirement industry, more towns, counties, and states are beginning to recruit retirees. Some governmental units are getting involved with project financing and efforts to develop retirement housing that will attract retirees and create jobs. Examples are common in housing and community development in Florida, Arizona, and Arkansas.

Retirement income can lead to job growth in the same way that industrial payrolls generate jobs. Retirees spend their income in the local economy, creating a demand for goods and services. When the demand:supply ratio becomes more favorable for investment and employment, capital and labor follow, stimulating economic growth. Retirement income benefits local economies by increasing the demand for local goods and services, creating a source of investment funds, and generating a deposit base for financing community development projects.

Local communities are benefiting from the wave of incoming retiree dollars. That trend is expected to continue and will transform the economic structure of many more communities in the future. Non-durable goods and services will be major aspects of these local economies with food, travel, recreation, entertainment, and health care dominating.

The number of older migrants will continue to increase and they will have multiple income sources, better education, better health, earlier retirements, and longer lives. They will continue to be a favorable source for economic development.    Back to Contents

Guntersville, Alabama

In 1989 a mail questionnaire was sent to 185 in-migrants in Guntersville, a small community in the Mountain Lakes Region of Alabama. This community has a large river reservoir along with many other attractive amenities for retirees. The results showed that retirees had a major economic impact in the community. For example:

• 94 percent purchased a house.
• 21 percent took out mortgages.
• 85 percent bought a single family house.
• 7 percent moved into mobile manufactured houses.
• 30 percent valued houses at more than $60,000.
• 43 percent had annual income greater than $30,000.
• 25 percent had annual income between $20,000 to $20,999.
• 30 percent valued their net worth at more than $300,000.
• 17 percent had a net worth between $200,000 and $299,999.
• 80 households had savings accounts.
• 65 households had CD accounts.
• 55 households had real estate investments.
• 55 households had mutual fund accounts.
• 34 households had bond accounts.

A unique survey of in-migrant retiree households from the Panama Canal Zone to the southeastern Alabama town of Dothan was completed in 1991. The purpose of this survey was to determine the economic impact of this group on the local community. The respondents were members of the Panama Canal Society composed of 84 retiree households in Dothan. Selected results are shown below:

Annual household income:

• 15 percent had incomes of $10,000 to $19,999.
• 23 percent had incomes of $20,000 to $29,999.
• 62 percent had incomes of more than $30,000.

• 26 percent valued their net worth at $50,000 to $100,000.
• 30 percent valued their net worth at $100,000 to $200,000.
• 7 percent valued their net worth at $200,000 to $300,000.
• 2 percent valued their net worth at $300,000 to $400,000.
• 9 percent valued their net worth at more than $400,000.

• 23 percent valued homes at $30,000 to $60,000.
• 51 percent valued homes at $60,000 to $90,000.
• 17 percent valued homes at $90,000 to $120,000.
• 6 percent valued homes at more than $120,000.

• 43 households had savings accounts.
• 38 households had CD accounts.
• 19 households had bond accounts.
• 14 households had real estate investments.
• 8 households had stock accounts.
• 8 households had mutual funds.

Western North Carolina

The Appalachian Regional Commission funded a 1990 study of retirees moving into Western North Carolina. Some results are summarized below:

Annual household income:

• 22.3 percent had incomes Of less than $20,000.
• 25.3 percent had incomes of ;20,000 to $30,000.
• 22.7 percent had incomes of ;30,000 to $40,000.
• 29.7 percent had incomes of more than $40,000.

• 78.9 percent located to non-MSA counties.
• Average household deposits are $44,868.
• Average investments of $198,092 were reported by 485 households.
• Expenditures each week averaged $332 per household.
• Mean value of houses purchased was $108,884.
• 630 households reported spending $22.6 million with a multiplier effect totaling $45.1 million.
• 943 jobs were created with average annual salaries of $14,900.
• Tax revenues by local governments amounted to $384,300 in property tax and $331.800 in sales tax.
• State government received $708,120 in income tax; $189,000 in intangible tax; and $497,070 in sales tax.
• 76.7 percent are volunteering an average of 7.4 hours a week.
• 54.7 percent are in positions of leadership in community organizations.
• 41 percent had an opportunity to vote on a school bond issue and 82 percent voted in favor of it.

Most retirees come into the community and immediately purchase a house. They then invest significant liquid assets in the host community financial institutions. Net gains from home sales and purchases are a major portion of the asset transfer. For example, a typical house sale scenario may be as follows:

In-migrating retirees house exchange:

• $175,000--Sales price of house in old community.
• $160,000--Cleared after commissions and fees.
• $ 80,000--Price of house in new community.
• $ 80,000--To be invested at approximately 10 percent yield.
• $ 8,000--Increased annual income from investment.
• $ 3,000--Saved annually on real estate taxes and housing costs.
• $ 11,000--Net annual increased income from house exchange.

In-Migrant Retirees And Economic Development

Responding to the economic opportunity that the elderly represent, economic development agencies in non-metropolitan areas are mounting efforts to attract elderly migrants. This is leading to sharpened competition among destinations for elderly migrants. Consequently, newly designated retirement counties will be found throughout the Southeastern United States (Graff and Wiseman 1990).

Benefits Of Attracting Retirees

• Increased tax base (retail and property).
• Increased number of positive tax payers, because as a group retirees use fewer services than they pay for in taxes.
• Increased bank deposit base, which can be used for commercial and industrial financing.
• Increased retail sales.
• Increased economic "multiplier" effect.
• Increased local expertise in a variety of areas.
• Increased number of volunteers.
• Increased church contributions.
• Increased employment.

      Attracting Retirees Will Not:

• Strain social services.
• Strain health care services.
• Strain school systems.
• Strain criminal justice system.
• Create major environmental problems.

• Real estate industry.
• Financial industry.
• Insurance industry.
• Utility companies.

• New single family dwellings.
• Condominiums.
• Mobile manufactured houses.
• Condominiums with amenities.
• Apartments and duplexes.
• Dwellings in retirement villages.

Migrating retirees are classified into three types: amenity, return, and dependency. Amenity migrants are looking for amenities such as lakes, beaches, mountains, and temperate climates. Return migrants have earned their retirement pensions and are looking to move back to their home states to enjoy relatives, nostalgia, and a lower cost-of-living. Dependency migrants move because they are getting more disabled and they move to be closer to someone who can help care for them. Amenity and return migrants seem to be looking for a combination of the following:

• Good medical care.
• Quality housing at reasonable prices.
• Safe, quiet neighborhoods.
• Low cost-of-living.
• Recreational attractions.
• Cultural attractions.
• Convenient shopping.

A 1988 Idaho survey showed that those who intend to retire would choose the following counties (Junk 1989):

• 33 percent preferred a county with a city of 10,000 to 49,000 people.
• 33 percent preferred a county with a city of 50,000 to 149,000 people.
• A county with a city of 500,000 or more was least preferred.

Graff and Wiseman (1989) concluded the following about retirement counties:

Retirement county preferences as chosen before retirement:

• Are typically non-metropolitan.
• Have smaller populations.
• Are located near a metropolitan center.
• Have low population density.

• 89.4 percent preferred a community with people of all ages.
• 9.9 percent preferred a community of mostly older people along with people of all ages.
• 0.6 percent preferred to live in a community of only older people.

Tourism and attracting retirees go hand in hand as methods of economic development available to local communities. Even if a community is unsuccessful in enticing a particular tourist to retire in the community, an economic benefit has been gained from his or her visit. No individual or family is likely to retire in a community without first visiting it. There is a close relation between the two that should be recognized and utilized by tourism and retiree attraction groups and committees at all levels of government.

Marketing and advertising a community as a retirement location is a developing concept. Most of these efforts build on efforts to market the community to tourists. The community needs leaders to organize and assess their community's strengths and weaknesses so their target-market can be identified. The retirement life styles that the community can provide needs to be determined to find retirees who can find fulfillment in retirement in that community. Marketing and advertising to potential retirees includes techniques of communicating the community's message to mature adults. This involves the development of promotional literature to encourage people to visit for a closer look. The organizing of a retiree attraction committee and the specific techniques for marketing communities as retirement destinations is beyond the scope of this publication but is available in other publications (Fagan 1988).

The continuing flow of tourists and retirees into a community has the same effect on its economy as an industry that produces mainly for out-of-state buyers. Local communities benefit from the wave of incoming dollars brought by tourists and retirees. That trend is expected to continue and will transform the economic structure of many more communities in the future. Non-durable goods and services will be major aspects of these local economies with food, travel, recreation, entertainment, and medical care dominating.

Tourists and retirees boost the local economy and increase the tax base. They do not require large investments in the infrastructure or tax abatements by government. They do not pollute or destroy the environment.

Projected incomes of householders aged 55 and older will continue growing faster than average in the decade ahead. "Households in this age group with incomes of $50,000 or more should increase by fully 70 percent, from 3.5 million in 1986 to 5.9 million in 2000" (Exter 1987).

According to the Congressional Budget office, higher personal incomes have recently placed a separate residence within reach of most people 65 and over. Independent living is likely to become increasingly prevalent over the next 50 years because the elderly are expected to attain higher incomes and face fewer financial constraints. Projections are for a significant growth in the number of elderly people living only with their spouses by 2030.

The number of older migrants will continue to increase and they will have multiple income sources, better education, better health, earlier retirements, and longer lives than the generation currently retiring. They will continue to be a favorable source for economic development.

Despite all the positive aspects of attracting retirees, there is some concern that once these citizens are relocated, the new location will experience an increased demand for medical and social services for which the state government will be responsible. According to many studies, this has not been a big problem for the states attracting return and amenity migrants. These people are more healthy and affluent than those who do not migrate. Also, when they become more dependent they usually move to the state where their closest relatives reside in order to receive needed assistance (Crown 1988).

Communities with successful programs to attract and relocate retirees will benefit economically in the form of jobs, increased tax bases, and increased deposit levels from the financial activity of these retirees. Local financial institutions will have more funds available for development purposes. Communities involved in the "retirement industry" will do well to plan for growth that win occur and to insure that retirees continue coming to replace others who leave in order to keep all of the segments of the industry functioning. Attracting tourists and retirees are viable economic development options. They are activities for which many rural areas have the necessary infrastructure and activity that "best fit" the existing economic situation in those rural areas.

Attracting retirees is no economic panacea, although it does allow for economic diversification and stabilization. It is a low risk strategy with a good return on investment. Even if not one retiree household relocates to a community, there will be increased tourism, increased curiosity, and image enhancement. Like any other economic development strategy, it takes time to develop and reap the benefits.    Back to Contents

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U.S. Travel Data Center, 1990a. 1989 Domestic Travel: A Historical Perspective. Washington, D.C.

U.S. Travel Data Center. 1990b. The 1989 Economic Review of Travel in America. Washington, D.C.    Back to Contents