I have been thinking a lot about aging of late. For one thing, I have an elderly father in a nursing home. Second, several of my mentors are retiring. Third, I have observed a significant uptrend in snappy red convertible automobiles being driven by people with gray hair. Fourth, anyone involved in the pension industry is acutely aware of the changing demographics around the world and the economic impact for company sponsors and participants, respectively. Whether focused on an investment strategy for a defined benefit plan or selecting choices for a defined contribution scheme such as a 401(k) plan or both, fiduciaries are understandably focused on how longer life spans are likely to alter the money landscape.
According to the Administration on Aging, part of the U.S. Department of Health & Human Services, the numbers tell an important story.
- Approximately one person out of eight Americans is characterized as "older."
- Those persons over 65 years of age numbered 41.4 million in 2011 and are expected to grow to 79.7 million in 2040.
- Persons aged 85 years or more are expected to increase from 5.7 million in 2011 to 14.1 million in 2040.
- Approximately 3.6 million elderly persons had means that put them in the "below poverty level" category in 2011.
- The primary source of income, as reported by 86% of "older persons" in 2010, is Social Security. Income from assets is reported as a source of income by 52% of older persons. Only 27% report private pensions as a source of income. An even smaller number - 15% - cite government employee pensions as a source of income.
Other statistics can be found in "A Profile of Older Americans: 2012."
Whether you see this wave of senior citizens as welcome news or cause for worry about how programs will be financed, demographic patterns are a reality. As a result, performance-hungry investors are searching for winners.
One possibility is non-medical care companie
s that offer services such as grocery shopping and driving seniors to doctor appointments. Karen Axelton, Chief Content Officer for GrowBiz Media and former executive editor of Entrepreneur Magazine, describes the "big opportunity" for franchise companies to play a vital role for those persons who can afford help and want to live at home. She adds that senior relocation is another revenue generation opportunity, citing a large jump in companies that have joined the National Association of Senior Move Managers. Adult day care is yet another suggestion. See "Franchisees Profit from Growing Senior-Care Market."
Rizwan Koita writes that health care spending in the United States continues to grow, from $2.4 trillion or 17 percent of GDP in 2008 with an expectation of $4.4 trillion in spending or 20 percent of GDP by 2018. A CNBC commentator and CEO of health care analytics company Citius Tech, Koita explains that venture capital and private equity professionals are funding businesses in what is seen as a fast expanding health care technology industry. "Given the high level of inefficiency in the health care ecosystem today, there is significant potential to reduce costs while still protecting the financial interest of all stakeholders...[t] is tremendous opportunity in using technology to enhance health care delivery for the aging population and reduce costs." See "Aging Populations Mean Big Opportunities in Health Care IT," CNBC Commentary, November 1, 2012.
"The Prophet of the Coming Aging Boom" by Forbes reporter Susan Adams (October 19, 2011) credits Ken Dychtwald as being upbeat about "a potential explosion of products and services, from new dating websites to longevity insurance to new kinds of food" that cater to the preferences and needs of mature consumers. This CEO of the specialized research and consulting firm, Age Wave, is excited about the chance to innovate and "make serious money" from the gray hair movement. His recent presentation entitled "Transforming Retirement" is worth the 43 minutes it takes to watch on You Tube.
In the April 2013 issue of "Health Capital Topics," senior industry guru Bob Cimasi describes the massive overhaul underway for numerous stakeholders as the result of new regulations. A strong case can be made that business opportunities abound to assist consumers, employers, states and healthcare providers, respectively, as the implementation of the Patient Protection and Affordable Care Act ("PPACA") proceeds.
Interested readers can visit the vast library of articles provided by Health Capital Consultants. "Global Population Ageing: Peril or Promise?" (World Economic Forum, 2012) includes numerous statistical tables and discussions about the economic implications of changing demographics. The American Society on Aging website may likewise be of interest.
Disclaimer: This post is not intended to provide investment, financial, accounting or legal advice. It is left to the reader to perform adequate due diligence about any investment being considered or in place already. Furthermore, this blog post does not present an exhaustive list of the investment implications being discussed as the result of a global aging population.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.