Document title here

Contents

2Introduction

3The Longevity Economy

Increased labor-force participation8Impacting GDP91Meeting the Longevity Generation on its own terms

2

IntroductionConventional 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. 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. 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 Longevity Generation comprised 42% of the over-25 population; in 2013, that proportion reached 51%, and is expected to grow to 53.5% in 2032 (see Fig. 1, below). Fig. 1: Proportion of the working age population by age cohort

Source: Oxford Economics; US Census Bureau Despite the recent economic downturn, todays older Americans are in better economic shape than their predecessors. Since 1974, the proportion of older people with income below the poverty threshold has fallen from 15% to 9%, and the percentage with low incomes from 35% to 26%. Over the same time period, the percentage of older Americans with high income has risen from 18% to 31%.

As consumers, the Longevity Generation has wants, needs, likes, and 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. 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. 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 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).Fig. 2: Total real consumption spending by age segment 20122033 [can we say 2011 $ billions along the y-axis instead of Billions 2011$?]

Source: Oxford Economics; Bureau of Labor Statistics Consumer Expenditure Survey; Bureau of Economic Analysis National Income and Product AccountsChanging 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 education

Source: Oxford EconomicsAdditionally, the Longevity Generation has different preferences from younger consumers as well as previous generations. This 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 anti-aging 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.

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.

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.6There is also a large potential market for at-home devicesbrushes, pads, electro-stimulatorsdesigned 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 at-home treatments as well40%, compared with 32% who have or would visit a professional for non-invasive anti-aging treatments.7Catching up with technologyThe 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. 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.8The 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 20-year-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.

The Longevity Generation and younger cohorts shop online with similar intensity, and roughly the same percentages of both groups make travel arrangements online. Seventy-four percent of individuals between the ages of 50 and 65 and 69% over the age of 65 have looked up medical information online, for example, compared with 66% and 74% for the 1829 and 3049 cohorts, respectively.9Expanding health-care spendingAs this last point suggests, health care is a major part of the Longevity Generations spending, and will become more so. 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.

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 DataThis 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.

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 HealthThe 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.

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 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.

Since 2010, the mobile health marketincluding telemedicine, remote devices, and mobile phone appshas grown at a year-over-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; by 2020 it is expected to represent over $20 billion annually.11By 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%.13Increased labor-force participationRetirement for the Longevity Generation will not mean the end of work. According to a survey conducted by Merrill Lynch, 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

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 retire15 [15] that combine continued income, greater personal meaning, andsocial impact. These jobs typically are paid positions, often inpublic-interestfields such aseducation,the environment,health, government,social services, or with othernon-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.

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 non-profit organizations. Dozens of other companies, including Hewlett-Packard and Goldman Sachs Group, have similar programs.

Impacting GDPWhile 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 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 over-50 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.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% increasesDaniel?] 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).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 EconomicsThere 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: 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, easing pressures on housing and public services; and Employment rates could rise, if accompanied by sufficient job creation for younger people.Meeting the Longevity Generation on its own termsThe 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 health-care 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.

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The Longevity Generation

Generating economic growth and new opportunities for business

An executive summary for AARP

The Longevity Generation today comprises 106.6 million people, and is expected to increase to 135.5 million by 2033.

Since 1974, the percentage of older Americans with high incomes has increased from 18% to 31%.

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

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

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

The Longevity Generations healthcare spending is forecast to increase 178% over the next 20 years.

Nearly 71% of the Longevity Generation want to continue working in some capacity well into their retirement years.

Stephen Ohlemacher, Aging workforce strains Social Security, medicare, Associated Press, April 23, 2012. HYPERLINK "http://www.deseretnews.com/article/765570820/Aging-workforce-strains-Social-Security-Medicare.html" http://www.deseretnews.com/article/765570820/Aging-workforce-strains-Social-Security-Medicare.html.

Jim Jubak, Will the age wars bankrupt us? MSN Money, May 6, 2013. HYPERLINK "http://money.msn.com/investing/will-the-age-wars-bankrupt-us" http://money.msn.com/investing/will-the-age-wars-bankrupt-us (accessed May 30, 2013).

Federal Interagency Forum on Aging-Related Statistics, Older Americans 2012: Key Indicators of Well-Being (Washington, DC: U.S. Government Printing Office, June 2012).

Consumers between the age of 25 and 50 are responsible for $2,840 billion of spending, or $27,200 per-capita. [del hyph]

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.

Kidela Capital Group, Anti-aging treatments: Opportunities in immortality, December 14, 2012. HYPERLINK "http://www.kidela.com/healthcare/anti-aging-treatments-opportunities-in-immortality/" http://www.kidela.com/healthcare/anti-aging-treatments-opportunities-in-immortality (accessed May 30, 2013).

Mintel Press Release [del], American women most likely to use anti-aging face creams, the West leads in NPD, June 15, 2012. HYPERLINK "http://www.mintel.com/press-centre/press-releases/884/american-women-most-likely-to-use-anti-aging-face-creams-the-west-leads-in-npd" http://www.mintel.com/press-centre/press-releases/884/american-women-most-likely-to-use-anti-aging-face-creams-the-west-leads-in-npd (accessed May 30, 2013).

Beth Snyder Bulik, BoomersYes, BoomersSpend the Most on Tech, AdAge Digital, October 11, 2010. HYPERLINK "http://adage.com/article/digital/consumer-electronics-baby-boomers-spend-tech/146391/" http://adage.com/article/digital/consumer-electronics-baby-boomers-spend-tech/146391/ (accessed May 30, 2013).

Pew Internet and American Life Project, 2013, Internet Usage Trend Data Spreadsheet. HYPERLINK "http://www.pewinternet.org/Trend-Data-(Adults)/Usage-Over-Time.aspx" http://www.pewinternet.org/Trend-Data-(Adults)/Usage-Over-Time.aspx (accessed May 30, 2013).

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 health-care 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.

Laurie Orlov, Technology for Aging in Place: 2012 Market Overview. HYPERLINK "http://www.ageinplacetech.com/files/aip/Market%20Overview%20Combined%2011-15-2012.pdf" http://www.ageinplacetech.com/files/aip/Market%20Overview%20Combined%2011-15-2012.pdf (accessed May 30, 2013).

In Your Home, Facts and Statistics for Staying in Place. HYPERLINK "http://www.iyhusa.com/AginginPlaceFacts-Data.htm" http://www.iyhusa.com/AginginPlaceFacts-Data.htm (accessed May 30, 2013).

Justin Fritz, The $7 Billion Tech Trend Changing the Face of Healthcare, Wall Street Daily, March 23, 2011. HYPERLINK "http://www.wallstreetdaily.com/2011/03/23/telemedicine-creating-wireless-healthcare/" http://www.wallstreetdaily.com/2011/03/23/telemedicine-creating-wireless-healthcare/ (accessed May 30, 2013).

Nicole Lewis, Healthcare IT Spending To Reach $40 Billion, InformationWeek, May 16, 2011. HYPERLINK "http://www.informationweek.com/healthcare/electronic-medical-records/healthcare-it-spending-to-reach-40-billi/229500682" http://www.informationweek.com/healthcare/electronic-medical-records/healthcare-it-spending-to-reach-40-billi/229500682.

Merrill Lynch Wealth Management, Americans Perspectives on New Retirement Realities and the Longevity Bonus, May 6, 2013. HYPERLINK "http://wealthmanagement.ml.com/wm/Pages/Age-wave-Survey.aspx" http://wealthmanagement.ml.com/wm/Pages/Age-wave-Survey.aspx (accessed May 30, 2013).

The MetLife Foundation/Civic Ventures, Encore Career Choices: Purpose, Passion, and Paycheck in a Tough Economy, November 29, 2011. HYPERLINK "http://www.encore.org/files/EncoreCareerChoices.pdf" http://www.encore.org/files/EncoreCareerChoices.pdf (accessed May 30, 2013).

Mark Miller, Intels New Approach to Retirement: Encore Careers, Reuters, March 26, 2013. HYPERLINK "http://www.reuters.com/article/2013/03/26/us-column-retirement-newcareers-idUSBRE92P0NS20130326" http://www.reuters.com/article/2013/03/26/us-column-retirement-newcareers-idUSBRE92P0NS20130326 (accessed May 30, 2013).

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.