What the Longevity Economy Could Mean for You

Aging Americans are often viewed as an enormous financial burden. They are racking up outsized healthcare and retirement obligations that are bankrupting the federal and state governments. Upwards of 10,000 baby boomers are reaching traditional retirement age each day, signing up for Medicare and Social Security, and for those with low incomes, using Medicaid services. Beyond lots of plans and even more talk, there is no overall government strategy in place to deal with these expenses.

[See Choosing Your Mutual Fund Lineup.]

But these very same people are also the dominant consumer-spending force in the U.S. economy and will continue to be for decades. In 2010, more than 32 percent of the nearly 309 million people in the United States were 50 or older. That's nearly 100 million people, with roughly 60 percent of them between the ages of 50 and 64, and 40 percent age 65 and older. Beyond lots of plans and even more talk, there is no overall business strategy in place to capitalize on this market.

"There's such a different orientation in dealing with these issues, depending on where you are," says Jody Holtzman, senior vice president for thought leadership at AARP. "In Washington, all you hear from the pundits is that they all sound like a bunch of Chicken Littles. The sky is falling. There's a fiscal train wreck coming. What they're really saying is that we can't afford all these old people."

But in the private sector, Holtzman adds, businesses and nonprofit organizations look at a market of 100 million people and see things differently. "There, you don't see this as a problem. You see it as an opportunity," he says.

Despite this different mindset, Holtzman says, businesses have tended to see older consumers as parts of different commercial silos and not as part of a powerful and unified new market. So, there are senior housing projects, lots of healthcare products, some efforts at age-friendly home remodeling, travel and leisure services, and a boatload of retirement investment services. But companies have been dealing with this in a compartmentalized way.

[See The Fiduciary Debate: Should You Care?]

For Holtzman, and naturally for AARP, it makes good sense to break down silo walls and help build a unified market for providing products and services to seniors. He and other colleagues have coined the phrase "longevity economy" to describe the age wave in business terms and generate some buzz.

Recognition is the first challenge, Holtzman says. This requires business to see the aging space in terms of a market, identifying the scale of opportunity and the consumption and financial variables that will drive business growth. "That very construct allows you to identify business opportunities that you didn't see before," he says.

"For small companies and particularly the venture community that will provide the capital for their growth," he explains, having this broader viewpoint is needed "for them to move from simply opportunistically focusing on an individual opportunity to seeing this as a larger investment theme, and to be proactive about it."

Consumers age 50 and older already spend $3.5 trillion a year, so on one basis, it could be argued that their needs are being met. Yet Holtzman says products and services that more effectively meet specific aging needs represent enormous business opportunities for innovators to enter and disrupt existing markets.

[See Cheap REITs May Pay Big Dividends Later.]

In consumer electronics, for example, companies remain fixated on younger technology users in part because of biases that older consumers don't understand or want new technologies. What consumers of all ages don't want, Holtzman says, are high-tech products that are not well-designed. When seniors find a friendly product, such as the Apple iPad, they will buy it in big numbers.

"Yet because of the age bias and because of bad design," he says, "the industry has walled itself off from older users--users who would be very happy to spend their money on these products if they were easy to use."

Holtzman has studied age-oriented business developments in numerous industries, including healthcare, housing, entertainment, transportation, food, financial services, and travel. Already, there is a mix of innovation coming from established companies, start-ups, and nonprofits. But that's just the beginning.

"There is no question there is huge need and huge money to be made," Holtzman says, "coming up with new products and services and even new industries." And by more effectively satisfying the needs and wants of the nation's older population, he argues, the longevity economy can and should become a big driver of U.S. growth, allowing aging to be seen as a big opportunity, not a burden.



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