How to benefit from baby boomers

When it comes to mega-trends, few are as well known as the demographic shift happening in the United States. The age of the population is growing, and fast: Nearly 3 million baby boomers will turn 65 this year, or about 7,500 per day. From 2004 to 2050, the percentage of the U.S. population over age 65 will nearly double, to 21%.

The aging of America has already had an enormous impact on the health care sector and is likely to have an even greater impact over the next 10 to 15 years. Health care spending has grown strongly for years and, since people typically consume more health care services as they age, health spending should see increased upward pressure as the average age of Americans increases. For example, people in their 60s and 70s currently take 2.5 to 3.5 times more prescription drugs than people in their mid-40s, and overall health costs of those 65 years and older can be as high as double the U.S. average.

Financial advice is going to be in even greater demand than it is now, in my view. For the first time, a large number of people entering retirement will have to figure out how they’re going to survive on their savings for the remainder of their lives. More so than ever, retirees will be seeking well-rounded financial solutions—not just recommendations on which products to buy—and certain wealth management companies stand to benefit. This shift is particularly acute among those who are known as the mass affluent—individuals with around $500,000 to $2 million in investable assets, who are reasonably comfortable financially but may not be confident about their ability to maintain their standard of living for the rest of their lives.

Within the consumer staples sector, the aging of America is a slow and subtle trend that will have an accordingly slow and incramental impact on consumer staples stocks. That said, forward-thinking, innovative companies that are prepared to spend on research and development could benefit. For example, firms that make skin care products have opportunities to develop anti-aging and anti-wrinkle technologies that will make their products more appealing to older consumers. Similarly, food companies that can develop low-sodium products without sacrificing flavor or shelf life may gain an edge.

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