4 Benefits of a Surging Senior Population

Why the aging of America is mostly a good thing for seniors.

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It is easy to forget that the aging of America (and the world) is mostly a good thing for seniors. We are obsessed with bad news on all fronts—the economy, Washington gridlock, and daily acts of senseless terror, often within our borders. Even the weather has turned against us, first with spring tornadoes, then a century-worst East Coast earthquake, and last but hardly least, Hurricane Irene.

[See The Future of Social Security.]

Any kind of news, good or bad, involving the demographic trends of seniors is suspect. It's one thing to learn something about birth rates and even death rates. This is new information, after all. But to say that we've suddenly discovered something about people who've already been around for six or seven decades is not far off from Congress suddenly discovering that being $14 trillion in debt is not such a good thing.

The latest dose of demographic medicine is that aging consumers don't spend as much as younger ones, and thus might not generate the kind of economic growth we're used to seeing. A related financial message is that older investors tend to liquidate portfolios to fund retirement, and that this bias toward selling securities will be a drag on future investment gains. Really?

At the same time older consumers are a drag on the consumer-goods economy, has anyone looked at healthcare spending lately? This is where the discretionary dollars of older consumers have been going, and it's where government spending has been going as well. No wonder healthcare has been the economy's growth star. And during the recession, which for most people has not ended, it's been the spending of older Americans that has supported lots of extended households. Far from being a drag on consumer spending, seniors have often been the strongest rowers in the boat.

In investment markets, the mantra for older investors has been not to sell, but to stay in the market. Longevity gains have extended retirements and thus the period over which retirement nest eggs must last. To earn above-inflation returns and build assets for this longer haul, stocks are the best choice. It's hard to see seniors bailing on investment markets, at least not for some time.

[See 6 Ways to Insulate Your Portfolio From Shocks.]

Meanwhile, the powerful benefits of being part of America's fastest-growing population group are often either overlooked or viewed as problems.

Voting power. The reason AARP has so much clout, of course, is that seniors show up to vote. More than 70 percent of Americans between ages 65 and 74 voted in the 2008 national elections—the highest turnout of any age group. The second-highest turnout was nearly 66 percent, among voters age 75 and older. For all Americans of voting age, 58 percent went to the polls. Older Americans will be comprising growing percentages of our overall population, so senior power at the polls will only grow.

Social Security and Medicare. This voting power represents a strong reason why the rhetoric to cut senior entitlement programs will not be matched by action. Social Security needs only relatively minor changes to regain its long-term financial soundness. Medicare requires a bigger fix, but the odds that older Americans will lose meaningful components of their healthcare benefits are very small. Meanwhile, the percentage of older Americans living in poverty has steadily fallen since Medicare was enacted in 1965. Along with Social Security payments that are indexed to inflation, these twin financial support pillars have helped reduce poverty rates among seniors, from more than 30 percent to less than 9 percent—half the rate of children and the lowest of any age group. Seniors should feel pretty good about this trend, but it's hard to find anyone willing to say anything good these days about senior benefits.

[See Get Ready for 2012 Social Security, Medicare Changes.]

Spending power. Boomer retirements will differ from earlier generations in many ways, not the least of which will be a voracious appetite for continuing everything they've been doing—working, learning, traveling, and other pursuits that cost money. Consumer-product companies are already well into the transition of developing new marketing and advertising strategies to capture the dollars of older consumers. Staying in the materialistic mainstream will have enormous practical and psychological benefits to seniors.

Cultural power. It's fashionable to call 70 the new 50, and to roll out glamorous and virile septuagenarians to prove that point. But well before 2030, when 20 percent of Americans will be at least 65 years old, you won't have to look young to receive support and accolades for being old. Social attitudes toward aging and the elderly are moving steadily to healthier and more accepting norms. It may not feel good some days to be old, but there's never been a better time to grow old.

Twitter: @PhilMoeller