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
I'm a senior who saves money, not squanders it. My bath tissue appears to have a grey
cast, and for cleansers I select fresh mustard greens, not fancy boxed purgatives. Polled
seniors offer the most frugal solutions anyone's likely to encounter. We're making detergent, removing stains with hair spray (kept from the 70s should it make a fashion come-back) or
hair conditioner, rescuing produce at the rate of 19% per item daily -- try tiger veggies for
a real insight. Throw away carrot peels? No way, we've a zip-lock bag for soup veggies which
gets into delicious soup monthly. For entertainment, it's not cruises I assure you, unless
you count my deliciously indulged and ENJOYED thrice monthly grocery trip outing. We
don't pay credit card late fees, smoke expensive tobacco, drink top-grade alcohol or
indulge in high-end fashions. Gambling outings? Hardly, more likely to seek P&G coupon
researching. We avoid vehicle parking/driving tickets, blackmail able incidents and
recommend oranges to youngsters in place of fast-food alternatives. We're Good Ones!
The black man was asked, "what was the name of the person who robbed from the rich and gave to the poor?" His answer, "Obama."
The black man was surprised to learn the correct answer was Robin Hood.
Moral of the story:
Robin Hood, move over, there's a new sheriff in town!
Okay... please stop blaming only the republicans. It is all politicians who are to blame.
And I agree with the fact that there are too many young people getting social security support. I know for a fact that because a child's parent got killed that child will receive benefits forever. There might be more to the why but I can say that if a teenager is receiving benefits and knows that he/she does not need to work well, forget about working and making a living. Why should a person under 30 years of age keep working when they can file for disability and also receive $400-600.00 in food stamps (or whatever it is called today). After all, most doctors will take a patients word that they are disabled so they can start filing medicare. I have worked for a better part of my life and cannot afford to spend that kind of money on feeding my family; it would bankrupt me for sure. Also, I have known since the 1980's that social security was nothing more than another tax and I would never receive what was suppose to be a retirement savings. America, the land of opportunity.
All you old farts (below) who are beating your chests and bragging on how well you have done are full of crap. I'm old too. My entire college ed. cost me about $6000. That won't pay for a semester now.
The times they are a changin'. Life is worse for most people. There are fewer in the middle class. The rich are stealing all that they can with the full knowledge and support of the government. Thankfully I have less than 20 years left, so I'm ok, but my kids, your kids, grandkids... they are all screwed.
It is NOT the fault of Social Security. It is the fault of the government. Yes there are lazy people out there. Some have been on SSI since their teens. They should be on welfare, not social security. The govt has shifted the burden of welfare (at least partially) onto social security.
If you want change, quit electing ****s from either party or nutjobs like the TEA party. DEMAND term limits. No **** should be allowed to make a 'career' out of being elected. Some go into congress close to middle class but in no time at all they are millionares. Who are they going to represent? Middle class? or the ones they now identify with, the rich?
An article distorting reality. The great majority of people retiring have virtually no savings and will not even qualify for the maximum Social Security payment. Not just no savings but negative net worth. The demographic slice that this article addresses is cherry picked and not at all representive of the America. This is feel good article without substance.
about raping women and killing cops is considered "art".
and a complete failure at his job ... be reelected.
nation in recorded history, still spend a Trillion dollars more than it has per year - for total spending of $7-Million PER MINUTE, and complain that it doesn't have nearly enough money.
… or, How obama was Re-elected, and clinton will be too:
When devastating hurricanes struck the East Coast, even
houses of worship were not spared. A local television station
interviewed a woman from New York's Harlem area and asked
how the loss of churches in the area had affected their lives.
Without hesitation, the woman replied, "I don't know 'bout all
them other peoples, but we haven't gone to Church's in years.
We gets our chicken from Popeye's."
Caution: who will not want to buy a new house, maybe, a new trailer? Who will be looking to slow maintenance? Will this be because of dollars or because of being tired? The old who stayed in a house for 40 years might not want to leave. But the ones who lived in 3-4 houses over 40 years will. Living small can means you can live more on a cruise liner. Locations which will have less everyday transport cost will have an advantage. Will they be concerned about making a profit on a resale 15-20 year from now?
I don't know who all these rich old folks are. Since the Obama administration came into office, we have lost more than half of our savings. It just disappeared. Most of the people I know are in the same boat. And yes, I had the funds in a highly regarded investment group with a personal friend handling the investments. We are still friends. It wasn't his fault.
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