The silver economy: Ignored, misunderstood, and wealthy as heck.

All the media hype & focus today is on the youth. Millennials and Gen Z dominate headlines & discourse, despite the fact that half of all global consumer spending​​ is by people aged 50+.

This ignorance is especially bizarre, because we’re all getting older. Literally every one of us ages. It’s one of the only things every human being has in common.

If the “new old” differs from the “old old,” then their consumption habits differ too — unlocking overlooked and undervalued investment opportunities.

Today, we’re exploring the aging economy; (also known as the silver economy) — from consumption preferences, to services, to startups to watch.

You’ll learn:

  1. Why (and where) is the median global age increasing?
  2. How fast is global life expectancy climbing?
  3. Is this caused by more old people, or fewer young people?
  4. Which countries have the best and worst fertility rates?
  5. What does “old” even mean anymore?
  6. What is HALE?
  7. How do consumption preferences shift as people age?
  8. 🎟️ What’s the first rule of selling to old people?
  9. 🎟️ How are companies using stealth marketing to seniors?
  10. 🎟️ What three tech areas give more value to older consumers than younger ones?
  11. 🎟️ What are the best senior-focused startups to watch?
  12. 🎟️ Do seniors need to keep working, or do they want to?
  13. 🎟️ What is senescence research?
  14. 🎟️ What % of global consumer spending will be powered by older people?
  15. 🎟️ What does the great wealth transfer mean for alternatives?
  16. 🎟️ What are the impacts of aging on financial markets?
  17. 🎟️ What does “aging in place” mean for home equity investments?
  18. 🎟️ What can we learn from Japan?

Let’s go 👇

Note: This issue isn’t sponsored by anyone. But to read the whole thing you’ll need the All-Access Pass. 🎟️

The world is aging gracefully

Wouldn’t it be nice if we could predict the future? It’d certainly make investing a lot easier.

Unfortunately, the most critical issues are usually the most uncertain. Technological changes, global wars, and long-term climate impacts.]

But there’s one forecast we can make with certainty: the world will get older.

Since 1970, the global median age has ​increased by ten years​ – a trend that’s been particularly pronounced in the rich world.

Globally, the percentage of the population over 65 has climbed by 4.5 points since 1970. But in the OECD, a club of mostly rich countries, that figure has climbed 8.7 points. ​​Data and chart courtesy of the​ OECD​

And this global aging process shows no signs of stopping – in fact, the factors underlying this trend could be accelerating.

Why is the world getting older?

Reason 1: Better healthcare

Unsurprisingly, healthcare improvements that extend the human lifespan have been a main driver.

Since 1900, life expectancy at birth in the United States has climbed from about ​50 to almost 80​.

On average, since 1950, global life expectancy has climbed about ​18 weeks a year.​

While wealthier countries have greater life expectancies than poorer ones, all areas of the world have seen improvements in the past century. Chart courtesy of ​​The Economist​

Of course, we should be careful about reading too much into life expectancy figures, because some of this improvement comes from reductions in the infant mortality rate.

To strip out the impact of infant mortality, industry leaders refer to conditional life expectancy, which is the average number of years remaining at a certain age.

Back in 1900, a 30-year-old man was six times more likely to die within a year than today. Since then, conditional life expectancy at age 65 has ​increased by 7 years (for both men and women).

In other words, better preventative medicine, surgical techniques, and disease understanding have all made a genuine difference in lengthening human lifetimes.

Reason 2: Falling fertility rates

But the world isn’t just aging because there are more older people – there are also fewer young people.

The fertility rate is the average number of children a woman is expected to have throughout her life. And if there’s one trend everyone needs to be aware of, it’s that fertility rates are dropping precipitously almost everywhere in the world.

The replacement level is the level needed to maintain a stable population, around ​2.1 children per woman​ in developed countries. About ​half​ of the world’s population now lives in countries with fertility rates below replacement levels.

Total fertility rates around the world. While estimates of China’s fertility rate vary, with some suspecting the government of ​​fudging the numbers​​, the country’s demographic issues have been described as a ​​long-term time bomb​. ​Image Courtesy of Wikipedia user ​Korakys​

This phenomenon is most pronounced in ​Asian countries​. Taiwan, South Korea, and Singapore all have fertility rates below 1.2.

In Japan, with a fertility rate of 1.4, politicians are ​warning​ the country is on “the verge of whether we can continue to function as a society”. In a sign of the times, ​adult diapers outsell baby diapers​ in Japan.

But don’t for a minute think Western nations are immune to the trend. The United States, Australia, and almost every European country has ​below-replacement level fertility​.

Only one continent is comfortably above replacement fertility – Africa, at about ​4.1 births per woman​.

Reason 3: The baby boom aftershock

The post-WW2 ​baby boom​ is well-documented. As the Western world exited a period of war and entered one of relative peace, a massive number of kids were born.

Now, 80ish years later, those Boomers are all grown up. The huge jump in the number of older people is, in part, simply the inevitable aftershock of this boom.

Fertility rate in the US from 1900 to 2020. The increased births starting around 1945 and lasting until the 60s is known as the “baby boom.” Chart courtesy of ​​Statista​

Together, these three trends have been the driving force behind the increase in the proportion of older people around the world.

But when looking at this data, an important question often goes unaddressed: What exactly does “old” even mean?

Today’s seniors are younger than ever

Longer lifespans haven’t just stretched out the time people spend alive, but also the time they spend healthy.

That’s an important distinction. While gains in healthy life expectancy (HALE) have been less dramatic than gains in outright life expectancy, improvements are certainly there.

Since the year 2000, in the United States, HALE at age 60 has grown by ​over 6 months​. Gains in Europe have been even greater — France and Germany have added about 1.7 healthy years, with the UK adding almost 2 years.

As a more concrete measure of youth, ​one study in Finland​ had a group of 75-to-80-year olds complete a battery of cognitive and physical tests in 2018, comparing the results to the same tests in 1989.

They found that older people of today have:

  • Faster walking speeds (about a foot per second faster)
  • Grip strength which is 5-25% stronger
  • Better verbal fluency, reasoning, & working memory

This study highlights the inadequacy of thinking about age exclusively in terms of calendar years. Remember, aging is a biological process, and improvements in healthcare and education have slowed that process down.

If the “new old” differ from the “old old,” then their consumption habits will differ too – unlocking overlooked and undervalued investment opportunities.

In other words, ​​70 really is the new 60​​. And for investors, this distinction truly matters.

The business of aging

It doesn’t take an economist to understand that a 40-year-old and an 80-year-old don’t spend their money the same way. As populations age, consumption preferences shift.

The most obvious area of increased spending is traditional healthcare – like doctors, medicine, and surgery. If the current trajectory continues in the US, health spending could reach ​​26% of GDP by 2040​​.

Similarly, long-term-care (LTC), which includes retirement communities and home aides, will grow. By some estimates, over ​70% of older people​ will eventually need some form of LTC.

But the obviousness of these changes reflects an outdated, traditional view of what it means to get old.

The current expectation is that older people will just get sick, move to assisted living, and die. But in reality, there are a host of overlooked places older populations will spend their money – if you can figure out how to sell to them.

The first rule of selling to old people…

It’s not “don’t talk about old people.” But it’s close.

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Brian Flaherty

Brian Flaherty

Brian's interest in finance started from an early age, when he used money saved from working summer jobs to purchase his first mutual fund at 15. He went on to pursue the field in school, eventually graduating from the University of Virginia with a Bachelor's degree in Economics. After graduation, Brian put his expertise to work advising institutions and high-net-worth investors as a strategist at a wealth management firm. Recently, Brian transitioned to pursue a career as a financial writer, where he leverages his writing skills and his financial knowledge to help investors uncover the best opportunities and make intelligent use of their capital.

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