Aging Baby Boomers

RECENT NEWS
guardian.co.uk  May 14  Comment 
Advertisers are using the latest technologies in stunts mixing digital and real worlds to grab the attention of young audiences When a bunch of balding baby boomers gets together to discuss the future and how to engage a younger demographic,...
Forbes  May 12  Comment 
Of those turning 62 in 2013, just 36% of men and 40% of women put in for early retirement benefits, down dramatically from 1996.
Financial Times  May 4  Comment 
Jobs freed up by retiring baby boomers could prove solution to record unemployment
Motley Fool  May 2  Comment 
As one of the nation's largest demographics enter their Golden Years, obstacles are on the horizon.
Forbes  Apr 29  Comment 
Called by at least one group of authors “The $10 Trillion Opportunity,” a lot has been made of the deal activity expected to arise from baby boomers retiring or otherwise exiting from their businesses.
Times Online  Apr 29  Comment 
Ageing baby boomers threaten to overwhelm the NHS with rising rates of drug abuse, alcoholism and suicide among the elderly,...
Motley Fool  Apr 19  Comment 
The stock market may be well off its 2009 lows, but a sizable number of baby boomers are still in very poor financial shape leading up to, and into their retirement. Here are five recent statistics that show just how serious a problem boomers...
Motley Fool  Apr 1  Comment 
Not enough people are paying attention to this.
Forbes  Mar 31  Comment 
There has always been tension between the generations, especially in the workplace. Remember when the people who lived through the Second World War poured scorn on the Baby Boomers and their idealism and self-absorption? Or when Generation X-ers...
Forbes  Mar 30  Comment 
It’s a safe bet that most Millennials and Generation Xers, and probably even many Baby Boomers, think that “globalization” is a modern phenomenon, having its start in the very latter part of the 20th Century.




 
TOP CONTRIBUTORS

As the Baby Boomers continue to enter retirement, the U.S. faces one of the most dramatic demographic shifts in its history. The baby boom ran from 1946 to 1960, during which time the fertility rate in the United States was nearly twice its 20th century average. Because a high proportion -- slightly under a quarter -- of the current population was born in that period, their age has a strong influence on the average of the population. Thus the U.S. is, on average, growing older because of the baby boomers. This shift has strong implications for factors that depend on the age distribution of the population, like per-person productivity, health care costs, the savings rate, and social security funding.

78 million of us will begin turing 65 in 2011. over the next 18 years between 3 and 4 million of us will do so each year. Our investment philosophy will change, like a ship at sea, slowly and inexerably from growth to income. The nearly $6T that we control in investments will become driven by our need for income to support our retirement lifestyle. A further $7T of inherited wealth will move to our generation over the same time frame. Those who manage their portfolios to support their income needs with a more Graham-like approach will succeed. Those who choose to speculate will have less chance of success. Dividends at a reasonable price will supplant growth at a reasonable price for at least two decades.

Investments that give us monthly income - bonds, dividend paying stocks, bank CDs - will take precedence over growth oriented portfolio elements. Retail and institutional investors will aim for income as a significant component of their wealth strategy. The resulting move of corporate balance sheets assets to the bottom line (for dividend distribution) from top line management reward devices will shake the corporate boards' world. Bonds from firms with debt to equity ratios less than 1:1 will command a premium; those from more highly geared firms will trade at discounts and demand higher yields for the perceived increase in risk. The yield on the S&P 500 was once 10%. Will it happen again? The direction is certainly clear. Low debt, strong free cash flow, sustainable dividend paying companies will be more valued than growth firms heavily endebted that share little or none of their profits with their stakeholders

Who Benefits from an Aging Population

For all its difficulties, the Boomers’ retirement will have very definite benefits for some aspects of the U.S. economy. On the whole, the leisure, health care, and financial industries are likely to benefit most.

  • Carnival Cruise Lines (CCL) and Royal Caribbean Cruises (RCL) stand to benefit from an increase in senior traffic, as both derive a large percentage of their income from passengers over 55. Royal Caribbean in particular has more than doubled its market capitalization in the last five years, and may continue to benefit as more seniors gravitate toward warmer-weather vacations. Retirement means more time to one’s self, and for many Boomers, that means time to travel. This is the generation of Woodstock and Timothy Leary; they have an expansive worldview and enjoy extending their horizons.
  • Merck (MRK) and Pfizer (PFE) are pharmaceutical giants that will almost certainly benefit as seniors require more prescriptions and Medicare coverage is expanded. Advanced Medical Optics (EYE), which manufactures products for cataract surgery, laser vision correction, and contact lens care, stands to benefit as well.
  • Affordable Residential Communities (ARC), which manages more than 350 senior living communities nationwide, has seen solid appreciation over the last five years as analysts anticipate strong growth in demand for senior housing.
  • Brookdale Senior Living (BKD) offers senior living facilities which cater to independent and assisted living seniors. They also have been selected to assist in many elderly housing expansion projects.
  • Merrill Lynch (MER), Charles Schwab (SCHW), Principal Financial Group (PFG), and MetLife (MET), all of which have invested substantial resources in developing their retirement services, will likely reap large rewards as retirement assets under management grow over the next decade. For many Boomers, retirement will require specialized financial planning as life expectancies expand and estate planning becomes more complex.
  • Stryker (SYK) offers surgical drills, saws, rasps and even cement mixers. Orthopaedic Implants segment manufactures replacement joints, spinal rods, screws, as well as many other implants. Stryker also offers rehabilitation services in over 31 states. Zimmer Holdings (ZMH) offers similar services.
  • Stericycle collects and disposes of medical waste. An aging population uses more medical services than a younger population and consequently produces more medical waste for companies like Stericycle.

Cosmetic Surgeons and Plastic Surgery equipment,wholesale suppliers and vendors of Cosmetic surgery technology all stand to profit from the aging baby boomer generation. In big boomer cities such as Phoenix Arizona plastic surgery is a soaring trade. The new economy has crated a boom in cosmetic procedures and the tech market in this field will flourish. Check out the stocks in Allergan (botox) if you have any question of ROI.

Impact on Medicare and Social Security

Most immediately, the Boomers will begin to draw government benefits such as Social Security and Medicare. Both entitlement programs will be exceedingly costly. In 2006, Social Security cost U.S. taxpayers about 4.2% of GDP, or approximately $554 billion. This figure is expected to increase to 6.2% of GDP by 2030, and to continue rising.

Meanwhile, the potential long-term costs of Medicare are even more severe. Currently, Medicare costs U.S. taxpayers about $230 billion per year, or 3.1% of GDP. However, these figures are expected to rise dramatically over the next 20 years as more Boomers pass age 75. In fact, government analysts estimate that by 2018, Medicare will have surpassed Social Security in terms of its annual cost.

Given these figures, the Social Security and Medicare Boards of Trustees stated in their 2007 Annual Report that, “…currently projected long-run growth rates [for the programs] are not sustainable under current financing arrangements.” Translation: Either long-term-benefits must decrease, or taxes must increase if benefits are to continue at their current levels.

Dependence on Foreign Countries

This quandary poses several difficulties for the U.S. government and for taxpayers. If current budget deficit levels persist, the federal government will be forced to pay for Social Security and Medicare by issuing new debt in the form of U.S. Treasury bonds. While this may lend long-term support to the price of the U.S. dollar, it will also allow foreign buyers—mostly Chinese and Japanese—to exert greater control over long-term U.S. interest rates.

Such a situation could become precarious if foreign buyers perceive that Treasuries no longer represent the best investment for their export-driven foreign currency reserves. For example, if euro-denominated government bonds become more attractive on a long-term basis, foreign buyers may liquidate Treasuries in large numbers, in which case long-term U.S. interest rates would soar. The resulting impact on U.S. credit and real estate markets could be severe.

Labor Burden on Younger Workers

For taxpayers, the Boomers’ retirement means that younger workers will have to bear a much larger burden in order to support the burgeoning ranks of retirees. Currently, there are 3.3 U.S. workers to support each retiree, but by 2030, this number will fall to only two. Given the political clout that seniors have and are likely to retain in the future, an increase in payroll taxes to support the Boomers’ needs seems entirely plausible. Extrapolated over a 10 to 20-year period, such an increase could represent a significant drag on U.S. economic growth. While increases in per-worker productivity may offset some of this burden, it remains to be seen how the U.S. will deal with what is arguably one of the most difficult financial burdens it has ever faced.

Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki