The Two Lucrative Paths in Today’s Longevity Economy
Retired Baby Boomers have cash and want to spend it ... now. But the longer-term trend will change the economy forever.
Welcome to Longevity Gains, the newsletter for marketers and entrepreneurs who want to succeed in the longevity economy, the largest and fastest-growing market in the world. It’s the $22 trillion opportunity you can’t afford to ignore.
The longevity economy is already here.
That needs to be said again, because when we talk about a demographic shift that’s going to play out over the rest of the century (and likely beyond), it can seem like something to set aside for the future.
But no, it’s happening right now. And it’s happening in two very different ways, both of which provide many potential angles on how to capitalize on a shift to a society where the most spending power is concentrated in older consumers.
One is the current (and potentially last) crop of cash-flush retirees that are spending profusely right now. And the other is the older workers who will remain viable consumers for well longer than marketers have historically given them credit for.
Let’s dig into two paths you can go by.
The Last Big Retirement Party
Despite a roaring job market, diminished inflation, and a stock market surge, many people aren’t feeling prosperous. And yet, while younger people struggle with wage insecurity and rising credit card debt, the U.S. economy manages to keep chugging along.
As you’ve seen multiple times here in Longevity Gains, the answer as to “why” is older consumers, specifically retired Baby Boomers. That’s because Boomers spend 15 times more than Gen Z, have 10 times more wealth than Millennials, and over twice as much as Generation X.
The elder end of the Baby Boomer generation is largely retired, and have been saving up to spend now for decades. Plus, they’re free of much of the economic anxiety that plagues the rest of us according to a recent piece at Forbes:
Retired baby boomers want to spend and have planned to spend for decades, and not a lot can impact them. AI uncertainty doesn’t affect them. Employer surveys they don’t fill out. Layoffs don’t concern them. Inflation hurts consumption, but at the same time, they are one of the few groups where many sources of income are legally indexed to inflation, providing increases that are not showing up in the wages of the general population.
The opportunity is clear: here’s a group of people with money just looking to spend it. And while Madison Avenue continues its Quixote quest to extract dimes from the pockets of struggling Gen Z, the smarter money is on those collecting dollars from enthusiastic Baby Boomers.
This is the first and most immediate aspect of the longevity economy, and it’s fairly straightforward. All that’s needed is some focused attention from marketers and entrepreneurs on these older consumers, and while so far it’s been lacking, I don’t expect that to remain the case.
The question then becomes, how long does this phase of the longevity economy persist? The author of the Forbes article ends with this:
This consumption trend will be a new one, a durable one, and is worth watching.
If durable means the next decade or so, then yes. But beyond that, things shift into a longer-term trend that will see currently ignored older consumers driving the economy in a different way, which we’ll explore in the next section.
The End of Retirement as We Know It
The longer-term trend involves the disruption of retirement itself, which seems like a huge deal until you realize the very concept of retirement is less than 100 years old. Still, people currently in their 50s grew up with the idea that you retire in your mid-60s, so it’s definitely a major shift in thinking.
We’ve explored at length the “unretirement” trend, where Baby Boomers who can otherwise afford to retire decide that a life of purposeless idleness is not for them. And that’s translated into “unretirement planning” for younger Boomers and Generation X, who don’t see themselves retiring at all due to economic pressures combined with longer life expectancies.
Now we have the concept of “flextirement,” introduced late last year in a Fast Company article:
Flextirement has everything to do with striking a balance between employees and employers as opposed to flipping the switch from employee to retiree. Flextirement would allow employees the opportunity to semi-retire, never fully leaving their current job or finding a new opportunity but working in some part-time capacity. This could be focused on key initiatives, a project basis, or a mentorship role.
Rather than becoming a consultant or independent contractor, flextirement acts as a new employee status. Older workers would retain proportional benefits and collect a salary that combined with savings and Social Security could avoid that lifestyle dip and lack of purpose that full-on retirement often brings.
In many ways, this resembles what many of us who choose to own our companies ccan arrange for ourselves. I don't see myself ever retiring, but I’ll definitely want to choose how much I work (and don’t work) as I get older.
With “flextirement” you’re still dependent on the good graces of an employer, which has never been dicier in history. Just look how remote work has been pulled out from under those who thought they could be location independent and remain employed.
Still, the very idea of retirement is, without doubt, changing:
“A lot of people aren’t necessarily going to retire in the traditional sense going forward,” the Milken Institute’s Evans said. “The notion of retirement, we feel, is changing. That’s sort of a paradigm shift.”
Sort of? It’s big, and it not only creates a consumer class that works longer and spends longer, it opens up all sorts of possibilities for supporting older workers, whether traditionally employed or otherwise.
The Retirement Anomaly
While longer lives, dropping birth rates, and the economic disruption of retirement savings are big reasons why older people are working longer, it’s more than that. It’s looking more and more like retirement as we grew up understanding it will be seen as a historical anomaly:
Today’s older Americans tend to have higher education levels than older workers did in the past.Adults with higher levels of education are more likely to be employed than adults with less education.
Retirement plans have evolved. Employers have shifted their retirement plan offerings toward defined contribution plans such as 401(k)s and away from defined benefit plans. The old-style pensions incentivized workers to retire at a specific age, whereas defined contribution plans do not encourage early retirement.
Policy changes have discouraged early retirement. Changes to the Social Security system, which raised the age that workers receive their full retirement benefits from 65 to 67, likely have encouraged older adults to delay retirement and continue working, according to labor economists.
The nature of jobs has changed. Older workers strongly prefer jobs that entail less strenuous physical activity and allow for greater independence and more flexible work schedules. Recent research shows that many occupations, on average, have become more “age friendly” since 1990. Among the most age-friendly jobs are guide, insurance salesperson, proofreader and financial manager, none of which involve heavy physical exertion.
Older Workers Are Growing In Number And Earning Higher Wages (Pew Research)
Later Parenting = Later Retirement
While the implications of the drop in birth rates continues to gain more attention, there’s another aspect of the “kid issue” that is impacting retirement – delayed childbearing.
In short, we’ve been having children later as a society. And that translates to greater participation in the workforce at a time that used to mean winding down for retirement.
Maternal and paternal age at childbirth has risen rapidly for decades, with significant economic and social implications for every generation.
In 2022, 51 percent of births were to mothers age 30-plus, up from just 17 percent in 1972. Similarly, 64.1 percent of 2022 births were to fathers age 30-plus, up from 31.8 percent in 1972.
Parents age 50-plus with a child under age 25 in their household are significantly more likely to participate in the labor force relative to adults age 50-plus who do not have a child under age 25 in their household.
As a rising fraction of people delay their childbearing years, public policies and business practices that combat age discrimination in the workforce will be critical to fostering economic security for every generation.
There you have it, the two big “paths” that you can choose to get started within the lucrative longevity economy. Let me know which is more attractive to you in the comments.