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Investment Coach The age wave revisited

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Posted: Tuesday, July 31, 2012 9:46 am

Years ago, Dr. Ken Dychtwald wrote his seminal book, “Age Wave: How the Most Important Trend of Our time Will Change Your Future.” The book detailed how the baby boomer bulge, the pig in the python, would change the marketplace, consumer attitudes and buying patterns, and societal evolution.

Founded over 30 years ago, Dychtwald’s firm, Age Wave, continues as the nation’s foremost thought leader on population aging and its profound business, social, healthcare, financial, workforce and cultural implications.

Marketers and economists have been fascinated by the baby boomers, the largest generation in American history. With the leading edge of boomers reaching age 66 in 2012, and the trailing edge marking age 48, the impact on retirement and health issues and increasingly strained safety nets, is becoming obvious as the nation at large, families, and individuals grapple with tax and debt issues.

Looking forward, the Age Wave prognosticators see key themes in “The Age Wave Vision: Boom markets Ahead if You Know Where to Look.” “The rising age wave will continue to produce many demographically driven revolutions in the consumer marketplace. As the boomers pass through middlescence and on to maturity, four key factors will reshape supply and demand: 

• Their concern about the onset of chronic disease and their desire to do whatever is possible to postpone physical aging.

• Increasing amounts of discretionary dollars (for many) over the long term as a result of escalating earning power, inheritances, and investment returns.

• Entry into new adult lifestages, including empty-nesting, caregiving, grandparenthood, retirement, widowhood, and rehirement—each with its own challenges and opportunities.

• A psychological shift from acquiring more material possessions toward a desire to purchase enjoyable, satisfying, and memorable experiences.

Some observations. We have heard for years about the money boomers will inherit. Can we be so sure? Many boomers are having to help their aging parents, even as some aging parents bail out their adult children.

Have discretionary dollars been eroded by the difficult markets of the past decade, low returns on money market funds and other “safe” investments, and the insidious creep of inflation? Even those tagged as the “most fortunate” are in for potentially large tax hikes as government claims a higher share of individual and national output.

In a October 2011 piece in Caring magazine, Dychtwald said, “The true costs of aging related-health care go far beyond government entitlements. Medicare only covers about 50 percent of a typical elder’s health care costs and doesn’t even reimburse for may of the expenses associated with either disease prevention or long-term care.”

Too many searches for “the number” in retirement planning underestimate health care related costs.

For those with money, we see rising interest in healthy living, everything from dietary changes to a new status symbol—a personal trainer. The leased BMW in the driveway and the mortgaged-to-the hilt McMansion are out. Dave Ramsey is in. Recently, several boomer clients have bragged about driving paid-for 10 year old cars.

Dr. Dychtwald notes a shift away from more material possessions toward “experiences.” Less and less do pre-retirees talk to us about “more stuff.” They want to travel, see grandchildren, indulge in hobbies, and age in place. Increasing numbers want to work past 65, touching on the Age Wave theme of rehirement, continued working but on their own terms. This trend alone could take pressure off of Social Security.

Consider the impact on the second home market. What happens to prices when the boomers want to sell their beach or mountain homes? Or their boats, or businesses? With a “birth dearth” coming up behind the boomers, there will be fewer buyers. Something to ponder.

The boomers will continue to impact markets, economics, and politics. We’ll have more to say in future columns.

The Investment Coach 1994, Walker Capital Management Corp. Lewis Walker is President of Walker Capital Management Corp. and Walker Capital Advisory Services, Inc., a Registered Investment Advisor (R.I.A.) Securities and certain advisory services offered through The Strategic Financial Alliance, Inc. (SFA). Lewis Walker is a registered representative of SFA which is otherwise unaffiliated with the Walker Capital Companies. 3930 East Jones Bridge Road, Suite 150, Norcross, GA 30092 770-441-2603 (Fax) 770-441-7936

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