The Longevity Generation

Generating economic growth and new

opportunities for business

An executive summary for AARP

Contents
Introduction

The Longevity Economy 3

Increased labor-force participation
Impacting GDP

Meeting the Longevity Generation on its

own terms 12

The Longevity Generation

May 2013

Introduction
Conventional thinking presumes that an aging population is
bound to be a burden on the US economy in the decades ahead.
An aging population and an economy that has been slow to
rebound are straining the long-term finances of Social Security
and Medicare, the government's two largest benefit programs,
the Associated Press reported last year, noting that the latest
annual report from Social Securitys trustees forecast the
programs trust funds would run out in 2033, three years earlier
than they had projected a year earlier.1 It's clear, wrote MSN
Money columnist Jim Jubak in a recent article, that the next
stage in the painfully slow recovery from the global financial
crisis/Great Recession is a war between the young and old. 2
But our research reveals that the Longevity Generation (those
aged 50 and older) will have a far more positive impact on the
economy, one that defies this simple, pessimistic picture.
Older Americans are often more financially secure than other
age segments, consuming everything from health care and
financial services to automobiles, technology, and luxury goods.
Besides living longer, they are also working longer, increasingly
past the traditional retirement age and often in so-called
encore careers.
This creates enormous opportunities for businesswhat we
refer to as the Longevity Economy. Responding to and
harnessing the consumption power of the Longevity Generation
represents an unprecedented, multi-billion-dollar opportunity to
generate significant economic growth.
The Longevity Generation is dramatically different from previous
consumer age groups, and even, in some respects, those that
will follow:

The Longevity Generation is largeand still growing. In 2000, the

The Longevity
Longevity Generation comprised 42% of the over-25 population; in 2013, that
today
proportion reached 51%, and is expected to grow to 53.5% in Generation
2032 (see Fig.
1,
comprises 106.6
below).

Fig. 1: Proportion of the working age population by age

cohort

million people,
and is expected to
increase to 135.5
million by 2033.

Stephen Ohlemacher, Aging workforce strains Social Security, medicare, Associated Press, April
23, 2012. http://www.deseretnews.com/article/765570820/Aging-workforce-strains-Social-SecurityMedicare.html.
2
Jim Jubak, Will the age wars bankrupt us? MSN Money, May 6, 2013.
http://money.msn.com/investing/will-the-age-wars-bankrupt-us (accessed May 30, 2013).

The Longevity Generation

May 2013

Source: Oxford Economics; US Census Bureau

Despite the recent economic downturn, todays older Americans are in

Sincethe
1974, the
better economic shape than their predecessors. Since 1974,
proportion of older people with income below the poverty threshold
has fallen
percentage
of
from 15% to 9%, and the percentage with low incomes from 35%
to
26%.
Over
older Americans
the same time period, the percentage of older Americans with high income has
with high incomes
risen from 18% to 31%.3

As consumers, the Longevity Generation has wants, needs, likes, and

from 18% to 31%.
dislikes that are distinct from those of previous and younger generations. For
example, their consumption of clothing and food has steadily decreased since
1990, while their spending on recreation and education has increased (see Fig.
3).

The Longevity Generation is perhaps the most tech-savvy in history

their adoption of the internet and mobile devices has been rapid, and they
spend more money on technology, even than younger Americans.

has increased

While these trends create new opportunities for a variety of

businesses, an aging population still presents challenges for the
wider economy. Labor-force participation is forecast to decline
over the next two decades, creating a drag on GDP growth.
Older persons remaining in the job market will be competing
with younger workers, many of whom are struggling to get in.
Nevertheless, companies that can anticipate and cater to the
Longevity Generations evolving needs will tap into an
expanding source of consumer demand while easing a critical
economic transition.

The Longevity Economy

The economic clout of the Longevity Generation in the US will
be enormous. Consumers over the age of 50 will be responsible
for $3.01 billion in consumer spending in 2013, representing
approximately 51% of consumption expenditures by all
consumers over the age of 25.4 This represents per-capita
consumer spending of $28,200 per annum.
Manufacturers and retailers will have to adjust the way they
interact with consumers to meet the over-50 contingents
3

Federal Interagency Forum on Aging-Related Statistics, Older Americans 2012: Key Indicators of
Well-Being (Washington, DC: U.S. Government Printing Office, June 2012).
4
Consumers between the age of 25 and 50 are responsible for $2,840 billion of spending, or
$27,200 per-capita. [del hyph]

The Longevity
Generation will be
responsible for
over $3 billion in
consumer
spending in 2013.

The Longevity Generation

May 2013
demands and preferences. Doing so requires a more complex
set of responses than business has applied to younger cohorts
or previous generations of retirees, however. The Longevity
Generations demands vary by region, income, and lifestyle.
Learning to sell to older Americans will only become a more
pressing issue over the next 20 years, as their spending is
expected to increase by 58%, to $4.74 billion, while spending by
the 2550 cohort will grow by only 24%, to $3.53 billion (see Fig.
2).

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May 2013
Fig. 2: Total real consumption spending by age segment
20122033 [can we say 2011 $ billions along the y-axis
instead of Billions 2011$?]

Spending among
older Americans is
expected to
increase much
faster over the
next 20 years than
that of younger
consumers.

Source: Oxford Economics; Bureau of Labor Statistics Consumer Expenditure

Survey; Bureau of Economic Analysis National Income and Product Accounts

Changing spending habits

The spending habits of older Americans have also changed over
the past 20 years (See Fig. 3, below). In real terms, their
spending on food and clothing has decreased 11% and 35%,
respectively, while their spending on recreation and education
has grown 23% and 90%, respectively, between 1990 and 2010.
Fig. 3: Spending by the Longevity Generation over time
[can we get into the Excel file to split Overtime?] on
clothing, food, recreation, and education5

Source: Oxford Economics

Additionally, the Longevity Generation has different preferences

from younger consumers as well as previous generations. This
5

Spending for each category in 2010 is equal to 100. Values below 100 imply that the spending in
that year is less than spending in 2010; values above 100 imply that spending is greater than
spending in 2010. Increases in the index value over time mean that spending in a particular area is
increasing, while decreases in the index value mean that spending is decreasing.

The Longevity
Generations
demands and
preferences will
lead to both
expansion of
some existing
industries and
creation of entirely
new ones.

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May 2013
will likely lead to the significant expansion of some existing
industries, as well as the creation of entirely new ones, such as
for anti-aging products and treatments (see Box 1) and
telemedicine and mobile health (see Box 2).
Box 1: The anti-aging market
Age will not stop the Longevity Generation from consuming; in fact, anti-aging is
creating significant new consumer needs and demands. The market for anti-aging
products and treatments, including everything from creams to expensive hormone
therapies and cosmetic surgery, has blossomed into a multi-billion-dollar industry,
which is largely fuelled by the Longevity Generation.
Market research forecasts that over-50 consumers will lift the US market for antiaging products and treatments from about $80 billion a year in 2009 to well over
$115 billion by 2015. This includes everything from cosmetics with anti-aging
benefits to professional services, new biotech products, and cosmetic surgery. Over
the same time period, the global market for anti-aging products is projected to grow
to over $290 billion, fueled by similar demographic trends in the rest of the
developed world. 6
The first to capitalize on this demand have been cosmetic companies that have
developed cosmeceutical productscosmetics such as wrinkle cream, facial
serums that also include pharmaceutical ingredients. Market research places the size
of the anti-aging skincare market for cosmeceuticals at $2.5 billion per year, and
growing. In addition, over 47% of new skin-care products launched in the US between
2009 and 2011 included some sort of anti-aging claim. 7
This demand has also inspired a new wave of biotech start-ups focused on
regenerative medicine. Current research places the size of the regenerative market
in the US at $1.6 billion today; it is forecast to grow to more than $20 billion per year
by 2025, with 400 products on the market and an additional 600 in development. 6
There is also a large potential market for at-home devicesbrushes, pads, electrostimulatorsdesigned to help reduce fine lines and wrinkles. According to a survey
by the Mintel Group, while only 4% of US women have used an anti-aging device,
another 35% would be open to trying one. US women seem more interested in athome treatments as well40%, compared with 32% who have or would visit a
professional for non-invasive anti-aging treatments. 7

Catching up with technology

The Longevity Generation is much more technologically savvy
than its predecessors, and research suggests they spend more
on technology than younger consumers. According to Forester
Research, in 2010, individuals over 50 comprised approximately
25% of the population, but accounted for over 40% of
technology spending.8 In addition, on average, members of the
Longevity Generation spent more online than younger
generations over a three-month periodan average of $650,
compared to $581 for Gen X and $429 for Gen Y. 8
6

Kidela Capital Group, Anti-aging treatments: Opportunities in immortality, December 14, 2012.
http://www.kidela.com/healthcare/anti-aging-treatments-opportunities-in-immortality (accessed May
30, 2013).
7
Mintel Press Release [del], American women most likely to use anti-aging face creams, the West
leads in NPD, June 15, 2012. http://www.mintel.com/press-centre/press-releases/884/americanwomen-most-likely-to-use-anti-aging-face-creams-the-west-leads-in-npd (accessed May 30, 2013).
8
Beth Snyder Bulik, BoomersYes, BoomersSpend the Most on Tech, AdAge Digital, October
11, 2010. http://adage.com/article/digital/consumer-electronics-baby-boomers-spend-tech/146391/
(accessed May 30, 2013).

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May 2013
The misconception that boomers do not appreciate tech
crosses all generations. I've heard it from fellow baby boomers
who say, 'Wow, you're so into technology,' and on down to 20year-olds who are also surprised, Marilynn Mobley, a strategic
counselor for Edelman in its Boomer Insights Generation Group,
told Ad Age in 2010.8 But while a March 2000 survey by Pew
Internet and the American Life Project found that only 36% of
respondents aged 50 to 65 and 12% of those over 65 had used
the internet, by August 2012, the response had risen to 85%
and 58%, respectively. This compares with 96% of respondents
aged 18 to 29 and 93% between 30 and 49. 9

The Longevity
Generations
healthcare
spending is
forecast
to
The Longevity Generation and younger cohorts shop online with similar
intensity,
and
roughly the same percentages of both groups make travel arrangements
online.
increase 178%
Seventy-four percent of individuals between the ages of 50 and 65 and 69% over the
over the next 20
age of 65 have looked up medical information online, for example, compared with 66%
years.
and 74% for the 1829 and 3049 cohorts, respectively. 9
Expanding health-care spending
As this last point suggests, health care is a major part of the
Longevity Generations spending, and will become more so. 10 In
2013, over-50 consumers will account for $1,640 billion in
health-care expenditures, representing some 75% of this
category for individuals over 25 (see Fig. 4). In real terms,
health-care spending by the Longevity Generation is forecast to
increase 178% over the next 20 years, to $4.74 billion, while
spending by the 2550 cohort will increase 114% to $1.23
billion.

Pew Internet and American Life Project, 2013, Internet Usage Trend Data Spreadsheet.
http://www.pewinternet.org/Trend-Data-(Adults)/Usage-Over-Time.aspx (accessed May 30, 2013).
10
Health-care spending estimates are based on data obtained from the Centers for Medicare and
Medicaid Services National Health Expenditure Account Data. The data includes personal healthcare spending on hospital care, physician, dental, and other professional services, home health care,
nursing-home and assisted-living facilities, prescription drugs, and durable and non-durable medical
equipment.

The Longevity Generation

May 2013
Fig. 4: Total Real Health-Care [we shd hyph this in table
head too] Spending by Age Segment 20122033 [I think
(in 2011 $ billions) would be better than Billions
2011$. And delete .0 from the y-axis numbers]

Source: Oxford Economics; Centers for Medicare and Medicaid

Services National Health Expenditure Account Data
This vast expansion of healthcare consumption is likely to
translate into a large increase in the demand for particular
types of services, such as nursing homes and home care. In
addition, demographic trends make clear that there will not be
enough care-givers to meet the projected demand. 11
This will likely lead to expanded use of technology to help
reduce the demand for traditional health-care services, helping
members of the Longevity Generation live independently for a
longer period and better manage their chronic health conditions
(see Box 2, below).
Box 2: Telemedicine and Mobile Health
The Longevity Generation is much more likely than previous age
groups to want to age in place. Nearly 90% of seniors say
they want to stay in their own homes as they grow older, and
even once they begin needing day-to-day assistance or ongoing
health care, 82% would still prefer to stay at home, according to
the AARP.12
Telemedicine offers a solution for family members and doctors
to monitor patients without having to send them to a nursing
home or to the hospital for extended periods. For example, a
sensor-based system can be installed in the home, transmitting
live data directly to doctors and family members. This data can
range from such simple things as tracking movement between
11

Laurie Orlov, Technology for Aging in Place: 2012 Market Overview.

http://www.ageinplacetech.com/files/aip/Market%20Overview%20Combined%2011-152012.pdf (accessed May 30, 2013).
12
In Your Home, Facts and Statistics for Staying in Place.
http://www.iyhusa.com/AginginPlaceFacts-Data.htm (accessed May 30, 2013).

The Longevity Generation

May 2013
rooms and how often a person takes medicine, to more
sophisticated data collection like sleep activity and blood sugar
levels. Such a system can also be programmed to send an alert
in case the person becomes confused and tries to walk out of
the house in the middle of the night. 13
Since 2010, the mobile health marketincluding telemedicine,
remote devices, and mobile phone appshas grown at a yearover-year rate of about 17%; it was estimated to be worth some
$2.1 billion at the end of 2011. The market is expected to grow
at nearly 22% CAGR from 2012 to 2015;14 by 2020 it is expected
to represent over $20 billion annually. 11
By delaying or eliminating the need for assisted living and
nursing-home care, telemedicine can save patients, their
families, and the overall health-care system considerable sums
of money. For example, four days of heart monitoring in a
hospital costs around $25,000, but a Tufts Medical Center study
found that by using telemedicine, hospitalization time and costs
can be cut as much as 72%.13

Increased labor-force participation

Retirement for the Longevity Generation will not mean the end
of work. According to a survey conducted by Merrill Lynch, 15
71% of pre-retirees would ideally like to include some work in
their retirement years, with most seeking a flexible
arrangementon the job part-time, remotely, or with the ability
to mix periods of work with periods of leisure (see Fig. 5, below).
Fig. 5: The Longevity Generation and Retirement

Employment

13

Justin Fritz, The $7 Billion Tech Trend Changing the Face of Healthcare, Wall Street Daily, March
23, 2011. http://www.wallstreetdaily.com/2011/03/23/telemedicine-creating-wireless-healthcare/
(accessed May 30, 2013).
14
Nicole Lewis, Healthcare IT Spending To Reach $40 Billion, InformationWeek, May 16, 2011.
http://www.informationweek.com/healthcare/electronic-medical-records/healthcare-it-spending-toreach-40-billi/229500682.
15
Merrill Lynch Wealth Management, Americans Perspectives on New Retirement Realities and the
Longevity Bonus, May 6, 2013. http://wealthmanagement.ml.com/wm/Pages/Age-wave-Survey.aspx
(accessed May 30, 2013).

Nearly 71% of the

Longevity
Generation want
to continue
working in some
capacity well into
their retirement
years.

The Longevity Generation

May 2013

Source: Merrill Lynch (2013)

Some will need to work because they are not financially

prepared for retirement. But others plan to work because they
want to: Nearly half of all respondents to the Merrill Lynch
survey said they plan to work for the stimulation and
satisfaction it affords, rather than a paycheck. The figure rises
to nearly 70% for those with over $250,000 of investable
assets.
In addition, slightly more than half of respondents said they are
planning to begin encore careers once they retire 15 [15] that
combine continued income, greater personal meaning,
and social impact. These jobs typically are paid positions, often
in public-interest fields such as education, the
environment, health, government, social services, or with
other non-profits. A 2011 MetLife Foundation/Civic Ventures
study found that nearly 9 million people between the ages of 44
and 70 are currently in an encore career, and an additional 31
million individuals are interested in possibly pursing one. 16
Some companies are creating programs and incentives for
employees to make the transition. Intel Corporation recently
began offering employees nearing retirement a $25,000
fellowship to help them cross over into new careers with nonprofit organizations. Dozens of other companies, including
Hewlett-Packard and Goldman Sachs Group, have similar
programs.17

Impacting GDP
While for some members of the Longevity Generation, working
later in life is increasingly the norm, many others will still stop
working around the time they reach traditional retirement age.
This will push down the labor force participation ratea critical
factor in GDP growth.
Declining labor force participation is already a recognized
phenomenon in the US, having fallen from an average 66% from
1994 to 2002 to just over 63% today. Oxford Economics expects
16

The MetLife Foundation/Civic Ventures, Encore Career Choices: Purpose, Passion, and
Paycheck in a Tough Economy, November 29, 2011.
http://www.encore.org/files/EncoreCareerChoices.pdf (accessed May 30, 2013).
17
Mark Miller, Intels New Approach to Retirement: Encore Careers, Reuters, March 26, 2013.
http://www.reuters.com/article/2013/03/26/us-column-retirement-newcareersidUSBRE92P0NS20130326 (accessed May 30, 2013).

The Longevity Generation

May 2013
the US labor-force participation rate to further decline, to just
over 61% by 2033. Assuming that labor productivity follows its
current trend, declining labor force participation will contribute
to reducing the average annual real GDP growth rate from 2.9%
between 2013 and 2023 to 2.5% between 2023 and 2033. This
is significantly below the average annual real growth rate of
3.4% seen in the US between 1960 and 2005.
If more members of the Longevity Generation elect to keep
working, however, they could help mitigate this trend. While the
overall labor force participation rate is expected to continue
falling, the US Bureau of Labor Statistics estimates that for over50 workers, it will rise from 41.8% in 2013 to over 44% in 2020.
And recent research suggests those numbers could go even
higher as more of the Longevity Generation find they either are
not financially prepared for retirement or simply want to
continue working.

10

The Longevity Generation

May 2013
Fig. 6: Forecast Labor-Force Participation Rates [can we
delete ed from Forecast and hyph Labor-Force in
the chart too?]

Source: Oxford Economics and US Bureau of Labor Statistics

Should this scenario play out, the gains could be considerable. A

2.5% increase in the Longevity Generations labor-force
participation rate, from 42.9% [this looks below 42% in the
chart] in 2013 to 44.9% [that number is off the chart above] by
2020, would boost annual growth in the potential output of the
US economy an average 2.4% over the 201320 period,
compared with 2.3% in Oxford Economics baseline forecast.
This translates into an additional $115 billion in potential output
in 2020. If labor-force participation by older Americans exceeds
the BLS forecast by 5%, [these dont look like 5% increases
Daniel?] from 43.9% in 2013 to 45.8% in 2020, potential US
economic output would grow at an average 2.5% annual rate
over the same period and yield an additional $225 billion in
potential output by 2020.
Increased workforce participation by the Longevity Generation
will have complex spillover effects, however, not just on the
economy in general but also on employers and younger workers
(see Fig. 7).

11

The Longevity Generation

May 2013
Fig. 7: Potential implications of increased labor-force
participation by the Longevity Generation [lowercase
disposable income in first column; delete all periods;
change Less employment opportunities to Fewer
employment opportunities; change healthcare costs
to health-care costs; change the short-term to the
short term [no hyph]]

Source: Oxford Economics

There are some clear dangers spelled out in the above scenario:

Sluggish job creation, combined with crowding out by older workers, could lead
to higher rates of youth unemployment, harder-to-tackle deprivation, and
possibly, disillusionment with the returns to education; and

The income gap between rich and poor households could widen, if more affluent
people remain in the labor force and generate income, while the less affluent
stop working.

At the same time, longer working lives for the Longevity Generation could yield
significant benefits that could boost economic output, leading to greater employment
opportunities for younger workers as well. For example:

18

A larger pool of economically active workers will increase the potential output of
the economy;

Businesses should benefit from the retention of experienced skilled workers;

The potential for increased entrepreneurship will increase;

The economy will be less reliant on foreign migrants to fill job opportunities, 18
easing pressures on housing and public services; and

There will always be a proportion of the working age unemployeda body of individuals either not
prepared for work or whose skills do not match those demanded by domestic businesses. This trend
could worse as the economy becomes increasingly skills hungry. Consequently, commuting and
movements of foreign migrants often act together to address hard-to-fill vacancies. At a national
level, migration is the key factor.

12

The Longevity Generation

May 2013

Employment rates could rise, if accompanied by sufficient job creation for

younger people.

Meeting the Longevity Generation on its

own terms
The Longevity Generation clearly represents a significant
growth opportunity for businesses; companies that are able to
recognize and capitalize on this will enjoy a market of over 106
million potential consumers that is expected to grow in size by
over 30% in the next 20 years. However, the demands of this
market can be more complex than those of younger consumers.
Meeting the Longevity Generation on its own terms will require
important shifts in understanding and approach:

Recognizing new spending habits. The Longevity Generations distinct

wants, needs, likes, and dislikes continue to shift, not always predictably.

Understanding the digital side of the Longevity Economy. Companies

must not dismiss technology as irrelevant to the Longevity Generation, and
instead determine which technologies these customers prefer and best support
their needs.

Keeping ahead of health-care trends. The Longevity Generations healthcare spending habits are evolving, dictated in part by their preference to age in
place.

Adjusting to longer working lives. As more over-50 workers opt to stay in

the labor force, employers that want to retain their skills may need to offer
greater flexibility.

Adjusting to a multigenerational labor force. Likewise, employers will have

to create an inclusive culture that accommodates both younger and older
workers.

13

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