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By Charles Lawton Sunday, May 13, 2007

Nearly a decade ago, the Maine State Planning Office issued its call for us to roll out the Welcome Wagon for a new generation of seniors. Its report -- "A Golden Opportunity II: How Maine Can Enhance The Retirement Industry" -- was issued in December 1999 and called for the state to institute fiscal, housing, cultural and recreational policies to keep Maine retirees in the state and to induce retirees "from away" to come here. The reasons justifying such policies were fourfold.

First, "the retirement industry offers significant multiplier effects." Translation, retirees have lots of money and spending it here supports lots of jobs.

Second, "retirees put little pressure on our State resources." Translation, retirees don't bring school children.

Third, attracting retirees is "one viable strategy for addressing Maine's labor shortages." Translation, some retirees can greet and retrieve stuff for other retirees, they can be part of their own multiplier effect. And, besides, most retirees already have a good work ethic.

Fourth, the nation's demographic structure ensures a large and growing supply of seniors, so retirees constitute a growth industry. Translation, better to invest our tax dollars here than waste them fighting the downward trends in our traditional industries.

While Maine never adopted any formal "Retirement Industry Development Program," I thought it would be interesting, particularly in light of my recent columns highlighting our aging population, to see how we have done with the retirement industry. One way of getting at least an initial look is to examine data compiled from tax returns filed with the Internal Revenue Service.

In 1997, 28 percent of individual federal income tax returns filed in Maine included retirement income (income from Social Security, pensions or annuities, self-employment or individual retirement plans). This income amounted to over $1.6 billion or about 8 percent of the state's total adjusted gross income (AGI). By 2004, 34 percent of Maine returns included retirement income, and it amounted to nearly $2.6 billion, or about 10 percent of total AGI. Maine's retirement income grew by 32 percent over the period, well ahead of the national increase of 27 percent.

Whether this growth reflects success in building and attracting a "retirement industry" or just the natural progression of our demographic structure and work history cannot be determined by these data alone. To answer that question, we would have to look at the addresses of these tax returns to see if Maine is winning or losing in the retiree attraction game.

Some indication of the nature of Maine's retirement industry, however, is evident in the distribution of taxable retirement income by source. Consider the table above.

In Maine, retirees are overwhelmingly dependent on traditional pensions and annuities. These sources of retirement income are found on 51 percent of Maine returns listing any retirement income, and they account for fully 64 percent of reported taxable retirement income. Taxable social security payments, in contrast, are listed on just 25 percent of retirement income returns, and it accounts for only 17 percent of reported retirement income. This relative distribution is explained, at least in part, by the fact that the Maine State Retirement System, that covers state employees and most teachers, serves for its participants as an alternative to Social Security.

Individual IRA distributions showed up on 21 percent of retirement returns, and accounted for 16 percent of reported retirement income. Self-employment plan distributions accounted for about 3 percent of both returns and income. These plans, however, showed the second highest income per return (just over $12,000 in 2004) and by far the highest rate of growth per return since 1997. This growth clearly reflects the increasing importance of these plans for those not covered by a "traditional" pension/annuity program.

In summary, these data do not allow us to say whether or not Maine has been successful in exploiting its "golden opportunity." They do, however, underscore the fact that retirement income is increasingly derived from several sources and, thus, that retirees are likely to be increasingly involved in managing their retirement income and thus increasingly sensitive to state and local policies designed to attract them.

The opportunity still lies before us, and, at a minimum, we should revisit the 1999 study to see how many of its goals we have met.In Maine, retirees are overwhelmingly dependent on traditional pensions and annuities. These sources of retirement income are found on 51 percent of Maine tax returns listing any retirement income and they account for fully 64 percent of reported taxable retirement income.