2/13/2013 4:30 PM ET|
How boomers will shift the economy
As people age, they spend differently than when they were younger. Knowing which industries will benefit could help you grow your nest egg.
In the year 2000, approximately 2.5 million Americans turned 65. This year, more than 3.5 million Americans will pass that milestone. And the number of people joining the ranks of the elderly will keep increasing, at least for the next 20 years, as more and more baby boomers hit their 60s, 70s and 80s. By 2030, the over-65 crowd will expand to 72 million people, up from 40 million in 2010.
The increasing numbers of recent retirees, along with the hordes waiting at the gates, give politicians headaches as they try to figure out how to finance Social Security and pay the health care bills covered by Medicare.
But for those of us looking to invest in the American economy, this burgeoning population means an increasingly lucrative market for products and services focused on the elderly. By the time they're done, some 78 million baby boomers will have survived millions of hip replacements and heart transplants, swallowed trillions of Advil and Viagra pills, and consumed billions of boxes of bran and packages of prunes.
Despite the faltering economy of the past five years, American seniors are richer than ever, in large part because more older people, especially older women, are working than in previous decades. According to a 2012 report from the Federal Agency Forum, the number of senior citizens living in poverty has declined from 15% to 9% since the mid-1970s, while the proportion of older Americans enjoying a "high income" increased from 18% to 31%.
So even while the burgeoning number of retirees will strain government resources, they will provide enormous moneymaking opportunities for public companies. These people will travel. They will move to warmer and friendlier climates. Many will manage their individual retirement accounts and 401k's through financial institutions. They will buy long-term care insurance, pay rent to senior citizen facilities and drop an average of $8,000 per funeral.
At least one financial firm -- JPMorgan -- has taken the trend seriously enough to create an "Aging Population Index" of stocks expected to profit from baby boomers. The list comprises more than a dozen individual companies, from drugmaker Celgene to hotel chain Wyndham Worldwide. These stocks may or may not be good investments. Unless you read their balance sheets and income statements and know something of their plans, how would you know?
The smart way to invest in baby boomers is to identify a trend, then let a reputable expert pick the specific companies that will likely benefit from those prevailing winds. Here are three ideas:But with 78 million baby boomers retiring, can you be wrong?
It doesn't take hard-won experience to realize that older people use more medical products than younger people do. The average 70-year-old gulps about three times more prescription drugs than the typical 40-year-old. Vanguard offers the mutual fund Vanguard Health Care (VGHCX), managed by Jean Hynes, that provides intelligent and low-cost exposure to the industry. Fidelity has its FidelitySelect Pharmaceuticals (FPHAX) and FidelitySelect Biotechnology Portfolio (FBIOX) funds, the latter helmed by Rajiv Kaul. There are also several medical care exchange-traded funds, including Vanguard Health Care (VHT).
Finance and insurance
Retirees are increasingly responsible for their own savings, income and financial futures. Money managers are developing more and more products to meet this need, including annuities, reverse mortgages and other asset management tools. But again, are you in a position to know whether JPMorgan or Morgan Stanley is the better investment (or even know the difference between the two)? Vanguard has an ETF, called Vanguard Financials (VFH), that invests in more than 400 financial stocks. Schwab also has a financial mutual fund; the Burnham Financial Services (BURKX) fund is another possibility.
Older people may not buy that many jeans or video games, but they do purchase personal care products, including wrinkle creams, special cleansers and adult diapers. Vanguard offers an ETF called Vanguard Consumer Staples (VDC). The Rydex Consumer Products Fund (RYPDX) is another choice. These funds invest in companies like Procter & Gamble, which cooks up the fiber supplement Metamucil, and Kimberly-Clark, which deals out Depends.
There's no guarantee that investing in any of these funds will produce better results than putting your retirement savings in a low-cost index fund. But with 78 million baby boomers retiring, can you be wrong?
More from US News & World Report:
- Senior employment driven by choice, not need
- The 10 best places to launch a retirement career
- 10 places with great retirement benefits
VIDEO ON MSN MONEY
Old Geezer 727 Your name surely fits
You are a sad and sorry person who can not get out of the past. You come from a different time. You are what is wrong with this country. This blame mentality that is so prominent today is eating you and thousands of other weak racist self righteous hypocrites. You are a unhappy failure because you chose to be. Life is to short. By the time I am your age, I hope I have reached a point in my life where I have learned not to be a victim. That is not the way to leave this earth.
This will be the last generation to demonstrate such wealth. Our Socialist Government is trying to get what they can from these Boomers. Their savings and prudent mindsets to be self sufficient is now the target of our Democratic party. We who worked our asses off shall now pay into some BS system to reward those who just sat by. Kind of like the story, "Little Red Hen". Read it if you have not. You'll see what I'm talking about. Value system. Diligence and hard work. Raising retirement age and the likes is all a scheme to keep from paying out.
Now their is word that our kids will have to save 25% in order to retire at a comparable style. 25% of minimum wage will never cut it.
Welcome the the new United Socialists of America.
YOUR KIDING, RIGHT! HUSBAND HAS LOST HALF HIS INCOME, I AM UNEMPLOYED, HOUSE A BIT UNDERWATER, HAVE LAND THAT WILL NOT SELL RIGHT NOW TO BE ABLE TO MAKE PROFIT AND AM ABOUT TO GIVE UP MY HEALTH INS. IF I DO NOT GET A JOB WHICH MIGHT BE HINDERED BECAUSE WE ARE VERY MUCH IN DEBT AND THEY ARE STILL HOLDING THAT JOB CREDIT CHECK OVER OUR HEADS. HOW CAN I GET OUT OF DEBT UNLESS I WORK? CANNOT FILE BANKRUPTCY BECAUSE OF OUR ASSETS...SO WHAT ARE WE SUPPOSED TO DO? THE BANKS WONT REFINANCE CUZ WE HAVE A SECOND ...BECAUSE SOMEONE DID OUR TAXES WRONG SO WE HAD TO GET A 2ND MORTGAGE ON THE HOUSE SO WE COULD PAY OFF THE DEBT BECAUSE SEVERAL LAWYERS REFUSED TO HELP US...WHAT DO WE DO? WE PRAY A LOT THAT THE LORD WILL HELP US...AND TRY TO BE POSITVE. WE NEED HELP BUT DO NOT KNOW WHERE TO GO.
I have been trying to Tell People what this is all about. people my age saved to much money. Jimmy Carter started the IRA and People were able to save and NOW the lIBERALS don't like that. NO , They want you to depend on them.
This is why in the Obama health Care, If you have money put away than you will have to pick up your Hospital Bill Because the Government can go into your Savings or 401's, IRA and take it.
Now you have people like Jessie Jackson and other Liberals saying the government should take over of the 401's.
You Know what that means?? GOOD BY 401's
Here is a Guy who Never Worked a day in His Life, Just like Obama, But they know what is best for us.Send both of the Azzholes Back to Africa.
The fortunate and unfortunate aspects about this country is that it is a capitalist and free enterprise economy. When you buy a stock, someone is selling you that stock, so its basically a bet between two people. It's called an investment. You are buying the stock because you hope it will go up in value. The seller is selling because either they need the money for something, or they think the investment will go down in value. Even when we buy a house, we are making an investment or bet that the house will increase in value, but there is always a risk that it can also go down in value from anything ( the neighborhood goes down, earthquake, fire, flood, freaky neighbors.......). We live in a free country where we have to make decisions on whether we continue with school, live in the country or in a city, follow a spouse or job to the west coast or midwest. Every decision matters, sometimes its about luck and sometimes its a concious decision. Its life in the USA!!!!!! No one is expected to take care of us.
The topic of this article is yet another scam aimed at older people who have accumulated some wealth. This is no different than some casino owner trying to get you to play their game. As we get older, our investment strategies should be more conservative, protecting the nest egg. When these scammers aren't playing upon retirees' fear, they resort to greed, making your think there's sooo much to be gained, "you can't win if you do play". Yeah, right...
Don't buy into this, folks-- hang onto your money; think about how much there is to lose and where you would be left without your nest egg.
Copyright © 2013 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.