Every year between now and 2020, Florida is expected to increase in size by a population equal to that of Orlando — and at this rate will soon pass New York to become the third largest state in the nation. Most of Florida’s new residents will be baby boomers and recent retirees. By 2030, one quarter of Floridians will be older than 65, up from one in six today.
To Florida’s Office of Demographic and Economic Research (EDR), this shifting balance is a good thing. But is it?
When it comes to a state’s economy, the ratio of seniors in the population matters in complex ways. In the “con” column, seniors contribute less in terms of income taxes (not relevant in Florida), don’t generate as much economic activity through employment-related activities, are often on a fixed income and thus spend less on goods, and finally, they utilize a whole lot more than younger residents in terms of health care and social services. With greater demand for goods and services comes increased costs of living, impacting housing and health care as well as other infrastructure, such as roads and water. Particularly if retirees end up moving back in with family or other shared housing, municipalities gain little in terms of new revenues in the process.
That said, an influx of seniors means greater revenues through real estate sales, and economic activity related to home construction and purchases. Seniors don’t have young children and therefore don’t burden public services like schools, are less likely to strain the criminal justice system, and oftentimes, they travel and volunteer. US News & World Report contributor Tom Sightings writes that while the burgeoning number of retirees will strain government resources, retirees also provide enormous money-making opportunities for public companies — particularly in the financial and funeral industries.
So how do all of these factors truly play out in a state like Florida? Should the state continue its efforts to attract new seniors the way it looks to attract businesses and jobs from other states?
First it is important to make a distinction between the overall aging of a state’s existing population and in-migration of residents from other states, both of which are expected to occur in Florida.
Research suggests that migrating retirees have, on average, more financial resources than retirees who are aging in place; and that the additional taxes paid by these more affluent retirees cover their own costs as well as some of the state-funded medical expenses of less affluent retirees.
According to an economic impact analysis in North Carolina, most retiree income is generated from unearned income such as transfer payments and pensions which produce “high employment multipliers since they are spent on goods and services.” Further, because many of these income streams are fixed, they don’t vary as much with economic conditions and can help stabilize a local economy.
A lot of this is academic, though. In terms of what seniors have been experiencing over the past many years, it is clear that their livelihoods and assets are not recession-proof. A June 2013 report found that seniors in most every state are falling short when it comes to affording their golden years, and are living off a median income that is roughly 57% of that of younger residents. And much of this rests upon Social Security, which is the primary source of income for well over half of retirees.
Seniors also rely on state resources — or, put in other terms, the portion of seniors who utilize state resources account for a high percentage of total dollars spent. Florida’s elderly and disabled Medicaid enrollees account for about one third of the program’s caseload but represent about 60% of Medicaid spending. This population has a high utilization of acute and long-term care, along with a high demand for new services, procedures and drugs.
At the same time, in terms of property taxes which fund various local and state services, Florida offers various income-based exemptions and tax advantages for senior citizens that will become increasingly utilized as baby boomers hit retirement years. According to Florida’s EDR, about one-third of boomers are projected to have limited assets when they retire.
So this leaves Florida in the same spot as all other states: where it would be ideal to recruit new, affluent seniors who will buy and build homes, and bring plenty of assets and fewer burdens; while crossing fingers that the state’s workers and families are able to care for the increased demands of an overall aging population.
It is without question that migration is great for the housing market and the industries it supports. But if Florida could wave a magic wand and boost its ratio of any demographic to spur the economy, seniors would still be a tough sell.
Karen Cyphers, PhD, is a public policy consultant, researcher, and mother to three daughters.