Investing in the Silver Dollar Generation
Baby boomers continue to be a driving force in economic growth and innovation in the United States and throughout the world. In fact, people age 50 and older (which technically combines boomers and seniors) have been dubbed the Silver Dollar generation in deference to their rich economic clout. In the United States, Silver Gens represent about 80 percent of the country’s personal net worth and hold spending power of more than $7 trillion.
One reason this demographic continues its influential path is due to longer life spans and lower birth rates. Silver Gens are expected to reach a population of 2 billion seniors by 2050, representing more than one-third of the global population.
Even now, seniors over age 65 are one of the fastest-growing groups of consumers, with 5.3 million earning at least $150,000 a year. This means that whatever discretionary luxury items they are buying bolster profits for those companies, ranging from fine wines and champagne to art and antiques.
Forward-thinking companies are positioning themselves to meet the future needs of this generation. For example, healthcare, home improvement, long-term care services, senior housing and insurance companies are poised to benefit over the next several decades.
Already, spending has jumped in retail cosmetic and skincare products focused on mitigating the effects of aging. Moving forward, we can expect increased consumption of healthcare products and services. Today, the average senior in the United States spends approximately 200 percent more on healthcare than the average person. In particular, pharmaceutical manufacturers, retail pharmacies and drug stores will remain viable industries since seniors are the largest consumers of prescription drugs. With the even larger baby boomer generation next in line, these industries show no sign of slowing down. In fact, the recent trend for retail drugstores and pharmacies to offer in-store clinics and act as one-stop healthcare shops will continue, as the country shifts its focus to overall wellness initiatives.
Today, 83 percent of seniors say they want to “age in place” in their own homes. Apply that percentage to the baby boomer generation and the number explodes exponentially, likely driving new innovations in senior housing. In fact, members of the Silver Dollar generation currently are responsible for 50 percent of home renovation spending. Many have both the income and motivation to seek alternative resources for long-term care. For example, new virtual retirement villages are cropping up all over the country. These communities help seniors live independently by charging an annual fee in exchange for access to resources such as transportation, health and wellness programs, home repairs, and social and educational activities. According to Village to Village Network, presently there are more than 160 of these senior network villages in existence in the United States, with at least that many in development.
However, home renovations and community resources will not cure all the ills of old age, and despite their desire to continue living at home, most seniors have a 40 percent chance of entering a nursing home at some point. Therefore, economic analysts view long-term care facilities and services as a significant growth industry. This indicates significant upside opportunities for investments in healthcare Real Estate Investment Trusts, which own up to 20 percent of U.S. senior housing and healthcare properties.
Retirement Income Insurance
Since pensions began their rapid decline during Baby Boomer careers, the onus for providing financial security in retirement has now shifted to individuals. This phenomenon is further exacerbated by longer life expectancies, so retirees today and in the future will have to provide income and growth over a longer time horizon. Insurance companies have responded with a spectrum of products designed to provide retirement income with riders to pay for later-stage health and long-term care, as necessary. These products, which include life insurance and annuities, help protect seniors against outliving their savings.