Where Baby Boomers Will Spend Their Money Next

Harry S. Dent | Wednesday, September 11, 2013 >>

When the Baby Boomers were first having kids in the mid-1960s, Gerber baby food was a brand leader in a major growth segment.

As those kids became teenagers in the ’70s, rock music and Levi jeans dominated.

When the Baby Boomers became adults in the ’80s we had a major auto and housing boom focused on starter homes, not McMansions. The latter only came in the 1990s with the luxury car boom.

In the decade ahead, as Baby Boomers increasingly deal with age-related health issues, health care will become the growth industry to watch.

My point is that everything we do – from cradle to grave – is as predictable as when we’ll die. Life insurance actuaries predict our deaths down to the decimal point. We predict most of the rest, thanks to decades and decades spent digging deep into the Bureau of Labor Statistics’ annual Consumer Expenditures Survey, which covers more than 600 consumer-spending categories, including potato chip purchases!

Food purchases predictably shift from baby food to fast food to more upscale restaurants as we age. I remember giving a speech to the Las Vegas Chamber of Commerce way back in the mid-1990s…

I said to the audience: “You’ll see a major transition to more upscale hotels and restaurants as the massive Baby Boom ages.”

Since then, the Boomers have moved away from the likes of Circus-Circus in Las Vegas to places like Bellagio and Wynn. And that’s where you’ll find the best restaurants and chefs in the world because Boomers have snubbed the bland buffet in favor of “real cuisine.”

The real estate market saw starter homes boom through the 1970s and 1980s and then saw the savings and loan bust, after developers and lenders over-invested and over-lent into that trend.

Then the sector enjoyed the trade-up home and vacation-home boom into 2005, and the first major real-estate bust since the 1930s.

And I called it. In my monthly Dent Forecast newsletter I predicted the U.S. housing bubble would peak in September of 2005. People thought I was nuts. “Real estate never goes down,” they said.

Look how wrong they were!

But there’s more…

We know from our research that car demand goes from low-end vehicles to light trucks to mini-vans and SUVs to heavy pick-ups to luxury and sports cars as people age from their early 20s into their early 50s.

Guess what comes next?

Recreational vehicles (RVs): the Homer Simpson retirement dream that peaks around age 60!

This tells us that the current surge in car sales is not long for this world. We expect car sales to fall off a cliff around 2014 or 2015, just like home buying did in 2006.

You see cars are the last major, durable, debt-financed item we buy in our lifetimes (on average). As Baby Boomers move through this late stage in their predictable car-purchasing habits, fewer new, expensive cars will leave the showroom floor.

We also know that travel changes from regional trips to national ones, then global ones (when we’re between the ages of 54 and 60), and then on to cruise ships (when we’re between 60 and 70 years old).

As we age, we predictably forget the long travel, jet lag and customs. The consensus becomes: “Just stuff me with food and booze and I’m happy!”

Interestingly, cruises are good for low-cost weddings as well, which is where the industry-phrase, “we attract the newlyweds and the nearly dead,” comes from.

Key to note here is that our spending patterns change as our borrowing habits change. We tend to borrow the most when we’re between the ages of 27 and 41 because that’s when we’re buying our homes… then raising the kids… then sending them off to college. As we get older, we borrow less and save more.

Now the Baby Boomers are done with borrowing. They will only pay down debt in the decades to come. And remember, even as they decline, this generation will remain the largest and will still have higher incomes for years when compared to the younger generation.

And the Echo Boomers aren’t rushing in to fill the borrowing gap their parents are leaving behind. They’re more cautious about taking on the burden after seeing the debt bubble crash in 2008.

With all of that said, here are the top 10 sectors to be in as the Baby Boomers move into the next phase of their spending cycle:

1) Discretionary health care and wellness

2) Nursing homes and assisted living facilities

3) Health and life insurance

4) Retirement and financial planning

5) Home maintenance services

6) Convenience and drug stores

7) Pharmaceuticals and vitamins

8) Urban townhouses and condos

9) Active retirement communities and vacation homes

10) Recreational Vehicles (RVs)

We have a new special publication called Spending Waves: The Scientific Key to Predicting Market Behavior for the Next 20 Years. Businesses, marketers and investors alike can use this resource to see what’s going to boom next out of hundreds of consumer spending categories.

That’s where the boom opportunities lie ahead.

Harry

P.S. Get your copy of Spending Waves now. Details here.

 

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About Author

Harry studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of the profession that he turned his back on it. Instead, he threw himself into the burgeoning New Science of Finance, which married economic research and market research and encompassed identifying and studying demographic trends, business cycles, consumers’ purchasing power and many, many other trends that empowered him to forecast economic and market changes.