Baby Boomer Blues
Accompanying demodirt.com’s recent story on the aging of American Baby Boomers, The Gray Tidal Wave, veteran financial commentator and publisher of The Grandich Letter, Peter Grandich contends that the next great crisis to hit America will not be the result of terrorism or environmental issues, but the aging of America. Grandich discusses the top three categories in which the tidal wave will hit.
Of all the groups of people in the U.S. right now, the seniors are hurting the most. Why? Because there were always three absolutes they could count on that are no longer a sure thing:
First, is their ability to live off their investments. Baby Boomers were raised to believe that if they saved enough during their working years, when they retired they could live off the interest of their savings. Obviously, with interest rates on CDs at 3 percent or less, that’s no longer true. To make matters worse, they “chased yield”—trying to make up some of their losses on riskier investments like real estate, which tanked even harder.
The second thing that has clobbered the Baby Boomers financially is the decline of their two most important investments: their stock portfolios and their homes. Everybody knows what happened there. Boomers planned on cashing in when they liquidated homes and stocks, which are now worth a fraction of just a few years ago…and they do not have the years to wait for a rebound.
Finally, they always knew that no matter what, they’d have good, affordable health care, thanks to government-sponsored programs like Medicare and Medicaid. Yet, the only conceivable way forward from here is a dramatic change in the way medical coverage is provided, which will impact seniors financially and physically.
Political and Social Effects
A few years ago there was a dramatic shift in America’s population, and for the first time in our country’s history we have more people over 65 than under 18. That’s important because seniors are now the single largest voting block and possess the most net wealth of any age group in the country.
We have yet to see the senior community flex its political muscles, but I fear the result nationally will be what we’ve been seeing in towns across America: school budgets and programs for younger families will be voted down because they don’t benefit seniors.
We have a political, social and economic battle of the classes brewing between the empty nesters and the young families. The Boomers won’t want to pay for schools since their kids are all grown, yet the younger Americans won’t want to pay for unlimited hip replacements and elder surgeries because they just can’t afford it.
Impact on Business
As far as businesses are concerned, I think the aging of America will obviously be a boon to healthcare companies, but I also see it affecting the home building industry. Big homes are becoming dinosaurs. As we get older, homes are shrinking. In the future, builders who build McMansions will not do as well as those who deal in senior housing and communities.
Also, industries that deal with purely discretionary spending will be hurt as times get tougher. Baby Boomers on a fixed income will ask themselves, “Do I buy this $400 autographed football, or do I buy groceries and medication?” There’s a real opportunity for social media that specializes in seniors, as well as the leisure and entertainment of seniors. They are the group that has most of the wealth in America.
A real negative of the aging Baby Boomers can be seen in the growth of the reverse mortgage business. Reverse mortgages have become popular among seniors who receive payments from the bank against the equity in their homes. Essentially, what they are doing is pawning their homes. The problem with that is the worth of the house is wealth that could or was going to be passed on to the next generation, but now wealth is going to the bank or mortgage company.
Twenty years ago, they predicted that the “great wealth transfer” would take place when the Boomers passed their homes and estates on to their children. Now it is going to the mortgage companies, not to the families.
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