American retirees, the next big business for Philippines

The United States experienced a rapid population growth after World War II with 78 million children born from 1946 to 1964.

All those children are now middle-aged or older. The first of the American baby boomers turned 65 on January 1, 2011. The boomers have started to retire at the statistical rate of 10,000 per day.

Yes, 10,000 per day!

This retirement phenomenon will continue for another 19 years. And

immediately in front of the boomers are more than 35 million already-retired American seniors.

Looking at closer neighbors, Japan has the highest proportion of elderly citizens with 21 percent over the age of 65.

The demographic projection for Japan is an increase to 25.6 percent by 2030. Taiwan’s elderly population is near 2.5 million, or 10.63 percent  out of 23.12 million.

South Korea has similar numbers.

According to data by Statistics Korea, the number of Koreans in the senior age group is 5.36 million, or 11 percent.

Chairman Mao Zedong, the founder of the People’s Republic of China, encouraged a high birth rate because he believed a large population would give China military and economic power.

The government later reversed the policy to one-child per couple. Some economists believe that China’s current prosperity can be partially attributed to the population bubble created by Chairman Mao. As their citizens begin to age, under the one-child policy, China will be confronting an enormous challenge. The eventual result, according to Dean Cheng, a research fellow at the Heritage Foundation, is the “4-2-1” phenomenon.

Four grandparents and two parents will be supported by one child.

The Philippine Retirement Authority (PRA) was created more than 25 years ago in 1985 by virtue of Executive Order No. 1037 signed by then President Ferdinand E. Marcos.

According to its website, “PRA is mandated to attract foreign nationals and former Filipino citizens to invest, reside and retire in the Philippines with the end-view of accelerating the socio-economic development of the country, contributing to the foreign currency reserve of the economy and by providing them the best quality of life in the most attractive package.”

With the large number of retirees in Asia and the US, why has the program experienced limited success? Although there are no official numbers published on its website, my understanding is only 30,000 Special Resident Retiree’s Visas (SRRVs) have been issued.

Most applicants are Chinese, followed by Koreans, Japanese and Americans.

By now, the Philippines should have retirement villages for Americans because English is widely spoken. Instead, Americans are going to Spanish-speaking Mexico.

US Census 2010 estimates approximately 2.5 million citizens and legal permanent residents of Philippine ancestry.

One nongovernment survey claims 200,000 Fil-Am senior citizens would really like to retire in the Philippines, but they won’t.

Unlike Social Security, which you can take anywhere, Medicare stops at the border. Fil-Ams are afraid to return home without medical insurance.  Another survey calculates that more than one million American seniors have homes in Mexico. The popularity of Mexico as a retirement destination is because you can simply cross the border back to the US for medical treatment.

The Fil-Am community is asking the federal government to make Medicare portable.

Fil-Am retirees would then have continued coverage under Medicare if they decide to return to the Philippines. While I am a strong supporter of the petition drive, the chances of a policy change are very slim. The American healthcare industry has a very powerful, well-financed lobby in Washington, DC. Any changes to Medicare will be contrary to their business interest.

To attract American retirees, the PRA, which is under the Department of Tourism, needs to partner with the Department of Health and offer medical insurance comparable to Medicare. It could be a program similar to PhilHealth, but instead of P100 to P750 in monthly premiums, American retirees might pay P4,000, provided the quality of medical care is commensurate to paying a higher premium.

The amount suggested is arbitrary and for purposes of discussion only.  P4,000 was selected because most American retirees are paying $99.90 a month for the optional Medicare Part B.

The potential revenue stream from 200,000 retired Fil-Ams is P800 million a month. The amount increases to P4 billion a month if you can attract one million American retirees just like Mexico. This is just for medical insurance. It does not include what retirees will spend living in the Philippines.

The SRRV program requires proof of retirement income. The minimum is $1,500 a month. Wealthier retirees might spend $5,000.  The annual inflow of foreign exchange from one million Americans living overseas in the Philippines can range from $18 to $60 billion. Millions of jobs will be created at this level of expenditure. It could be the next big business for the Philippines.