Putting the ‘Boom’ in Boomer Retirements

Did you know we are 13 years into one of the greatest economic crises of our time? In 2011, the first Baby Boomers started turning 65, commencing the slow march of America’s largest generation from the workplace to lives of leisure and relaxation, which would allegedly knock consumer spending as this massive cohort stopped dressing and commuting for work and began pinching pennies while living on fixed incomes. For fun, I read an old Brookings Institution report from 1997, which purportedly documented Boomers’ grim financial future.^[i] Sooooo, how did that prediction work out? Not so hot, according to a City Journal essay, published last month, which pointed out that Boomers have a collective $78 trillion in assets.^[ii] To which I say, assets schmassets—a lot of that is real estate, and a lot of people choose not to sell the family home. So please let me show you a perhaps better way to know that, far from being the economic drain predicted for decades, Boomers are kind of a, well, boom in their old age.

You see, while I sit somewhere ‘twixt Gen X and Millennial, depending on the source defining these generations, it seems my television tastes run a bit, um, old. How do I know? When I do my morning workout, I tend to put on an old episode of the original Star Trek recorded off one of those cable channels specializing in retro shows, and the television commercials decidedly do not target me. I am an anomaly in a sea of people to whom William Shatner suddenly ages 55 years from show to commercial to hawk C-PAP machines. And people to whom companies are marketing next-generation hearing aids, subtitle transcription services for video chats, fancy walk-in tubs and a medicine cabinet full of pills to reduce the visible and invisible effects of aging.

Boomer-targeted marketing isn’t limited to these cozy re-run channels. Nor are they all hokey I’ve fallen and I can’t get up low budget-type deals peddling niche products for $9.99. No, we are in the era of ads touting luxury dating services for the silver set. And high-net-worth retirement communities. And luxury cruise lines for seniors only, featuring well-dressed Boomers who clearly work out a lot, order expensive mixed drinks and clink glasses while looking toward the exotic travel destinations to which they are sailing.

What this tells me: Boomers have a lot of money to burn and are a major consumer spending cohort. If they weren’t, then companies wouldn’t be creating new products and services aimed at them explicitly. In business, you always go where the money is, and businesses are increasingly flocking to the silver dollar, as it were. Exhibit 1 proves the point, highlighting the rising share of spending by folks 65-74 years old and 75+ versus 25-34 year olds.

Exhibit 1: Older Folks’ Share of Spending Is Up

Source: Federal Reserve Bank of St. Louis, as 1/11/2024.

This isn’t a new concept. The Brits had it down decades ago, observing businesses that marketed to the “grey pound.” (There are other colors of pounds for other demographics, natch.) What is new is the high expense associated with all of it. Companies are increasingly clear that, far from being Social Security-reliant penny pinchers, Boomers are pretty spendthrift. Not all of them. But a lot of them, enough to make them worth targeting as a large, high-spending cohort.

From this, we can glean two things. One, far from being a drain on consumer spending, Boomers are adding to it. Two, they are creating jobs, in a way, because they are inspiring new businesses—new businesses that hire people to create and sell products and services for them. Their spending is driving new investment, which means new opportunities for younger cohorts to take risks and build wealth.

Which is pretty cool! And exactly the opposite of what all the straight-line math in the 1990s and 2000s said would happen. Demographic projections saw only risks, but real people in the real world correctly spotted opportunities and turned the alleged Boomer headwind into a big fat wealth-generating tailwind.

Where else might we apply this same logic today? Welllll, how about all those projections of climate doom? The long arc of economic history shows society repeatedly adapts to challenges real and perceived, finding opportunities in the process. Same goes for the widely feared baby bust in the Western world. Even if populations do fall, which is hardly a given, you don’t think clever people will still find ways to innovate and grow through investment, technology and productivity gains?

Adaptation happens, always. It also happens very slowly, unfolding over years and decades—almost invisibly. The world morphs around you in ways few consciously note, but which are plainly visible when you take the long view 10 or 20 or 30 years later.

This adaptation is key to capitalism’s long-term vibrancy and growth’s persistence despite myriad challenges. But it isn’t a near-term stock market plus any more than the associated fears were market killers. All of this stuff, allegedly bad or secretly good, is too far flung and, if unconsciously, well-appreciated to have any meaningful power over returns in the here and now. Instead, it fades into the backdrop.

Boomers’ retirements were known and mapped out decades in advance. Now headlines look at their $78 trillion and hype the huge wealth transfer that will allegedly occur as they pass those assets to their heirs, as if this will be some massive economic driver. Friends, I wouldn’t get any more excited over that than you were scared over Boomer retirements. Good or bad, long-term projections mean little and rarely come true. Whatever the retrospectives on Millennials’ supposedly big inheritances look like in 40 years, they will probably bear little resemblance to expectations today—and stocks will do what they do regardless.