Boomers Will Shift the Economy
By Tom Sightings, U.S. News & World Report
people age, they spend differently than when they were younger.
Knowing which industries will benefit could help you grow
your nest egg.
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.
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.
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.
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%
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
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?
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?
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
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.
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?
Management Group, Inc. P.O. Box 10 Bible School Park, NY 13737