Ageing population: the golden age of silver spending
Older people are set to have a profound effect on businesses and potential investment opportunities. We previously introduced the ageing population trend and examined investment opportunities in healthcare resulting from a global population that is living longer, but also wants to live better as it ages. We covered the Pharma and biotech and Medtech sectors.
However, healthcare is not the only sector which is set to be transformed by a rapidly ageing population. By 2040, 1.3bn people are projected to be over 65, double the level in 20151,and by 2050 the over 60s will account for one in five people globally2. This older generation, growing both in scale and influence, will increasingly shape and even create new markets through its spending.
Power of silver spending
Older generations, or so-called silver spenders, collectively control an increasingly significant share of global wealth and spending.
The global spending power of consumers aged over 60 years old is set to reach US$15tn by 2020, up from $8tn in 20103. Notably, those aged 55 and over in the US spend twice as much as millennials aged under 35 today4.
The older generations are also set to dominate global spending in the future; the 60-plus age segment will account for nearly 60% of consumption growth in western Europe and north-east Asia.
Shifting spending habits
Through different stages of our lives the way we spend our money changes. Historically, older people spend more on areas such as healthcare, nursing homes and housing maintenance, while the cost of schooling, consumer durables and eating out decreases.
Expected demographic changes will create several profitable opportunities for many sectors from the over 55s while creating challenges for others. For instance, PGIM forecasts real annual spending on nursing homes in the US in 2070 will be $325bn higher than today, solely due to the ageing of the population5.
However, with people living longer and healthier lives, the traditional stages of life may also change. This has the potential to completely reshape the way the older generation spend money. This would come from a longer retirement, which is more active, independent (due to the healthcare developments previously covered) and includes a longer period of working which could include career changes.
The surge expected in the number of people over 65 in coming years, who have a longer consumption time span, could effectively create a new spending segment in the population. So, how can investors position themselves to capture the opportunities related to this trend?
With an older generation who have become accustomed to seeing the world, and likely will have more time, we expect the travel and tourism sector to see a substantial boost from the silver spenders. The healthy living and lifestyle sector will see increased spending as the desire to look and feel good boosts fitness and anti-ageing products and services.
However, silver spenders will have to fund this spending. While there is talk of the intergenerational wealth transfer that will put substantial wealth in the hands of the younger generation; people will need to grow and protect their wealth to fund a longer retirement. So financial services is another sector to explore.
Overall, the considerable spending power of silver spenders has the potential to alter the global economy – in essence, a golden age of silver spending.
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