Aging Baby Boomers

RECENT NEWS
Forbes  May 10  Comment 
Back in the fall of 2008, an HR executive at an international oil and gas company shared a bit of a silver lining that came out of the stock market collapse. His organization felt it had dodged a bullet because the large number of Baby Boomer...
New York Times  May 2  Comment 
Throughout the country, communities are being retrofitted to accommodate the tsunami of elders expected to live there as baby boomers age.
Forbes  Apr 30  Comment 
Hey, Millennials in the business community: Here are Five Ways to Spot a Baby Boomer, which could also serve as Five Ways Baby Boomers In Business Should Mend Their Ways, my take on a recent presentation by author and researcher Jason Dorsey, at...
Clusterstock  Apr 29  Comment 
FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors. Baby Boomers are facing a new retirement "crisis" (Wealthmanagement.com) One of the biggest things Baby Boomers have...
The Economist  Apr 29  Comment 
ONE of the economic mysteries of recent years is why productivity gains have been so slow. It is a big issue for the developed world since, with workforces likely to stagnate or shrink as the baby boomers retire, productivity will have to do all...
Clusterstock  Apr 28  Comment 
Millennials are way more optimistic than Baby Boomers. In fact, the younger generation has never been more optimistic about the future than older people. Ac cording to a chart shared by Deutsche Bank's Chief International Economist Torsten...
Clusterstock  Apr 25  Comment 
The Pew Research Center recently analyzed US Census Bureau population estimates of America's population as of July 1, 2015, and they found that last year, millennials outnumbered baby boomers for the first time ever. There is no formal...
NPR  Apr 21  Comment 
Journalist Michael Kinsley was diagnosed when he was in his 40s. Now in his 60s, he says he feels like he's "a scout for his generation." His new book is Old Age: A Beginner's Guide.
Forbes  Apr 18  Comment 
A survey carried out by VPN service provider Hide My Ass! revealed a striking disconnect between what people want and what they do about their own online security. The survey also uncovered some surprising differences between the baby boomers and...
NPR  Apr 15  Comment 
Medicare now pays doctors $86 to discuss end-of-life care in an office visit that covers topics such as hospice, living wills and do-not-resuscitate orders. But how should doctors get a chat rolling?




 
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