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| Seniors in the US have become a recognized spending force. (Source: Getty) |
Spending motivation deserves recognition
According to updated data from the US Census Bureau, as of August 2023, people over 65 years old accounted for 17.7% of the country's population, the highest level since 1920 and a sharp increase compared to 13% in 2010.
Not only is the elderly population growing rapidly, they are also a group with a fairly stable financial foundation, rarely need to borrow to cover expenses such as buying a house, and are also a group with a lower risk of being laid off compared to other consumers.
This fact makes seniors in the US a worthy spending force. A survey conducted by the US Department of Labor and released in September 2023 found that Americans over 65 contributed 22% of total spending in 2022, the highest share since the agency began compiling such statistics, and up from 15% in 2010.
“They are the consumers who will be influential in the years to come. The larger share of spending from older consumers provides a foundation for consumption at times like this, when job growth is low, interest rates are rising, and student loan payments are starting to recover,” said Susan Sterne, chief economist at Economic Analysis Associates.
The high spending among older adults reflects health, financial, and possibly psychological effects of the pandemic. “I’ve been saving money all my life. Now I have money in the bank and I’m spending in a way that brings me closer to my friends and family than I ever have before,” said Maureen Green, 66, of Cape Cod, Massachusetts.
Green, a real estate agent with four children living across the country, estimates her spending is up 25% and her travel time is double what it was in 2019. She recently visited Syracuse, New York, to see friends and attend a photography exhibition, then visited Rhode Island with her son and a female friend.
“There are about 1 million Americans who have died during Covid-19, and that’s part of the reason. It made me realize that I can’t afford to waste time, before I knew I didn’t have much time left,” Ms. Green shared.
Longer life expectancy, better living standards and more numbers
According to Marshal Cohen, Chief Retail Advisor at Circana, a consumer behavior research firm, seniors’ lifestyles have changed. They are more active than ever. This has led to a wider menu of travel and entertainment options to meet demand.
“Older people now bike, hike, travel, and enjoy those activities for longer periods of time than before,” said adviser Marshal Cohen.
Data released by the U.S. Department of Labor shows that spending by households with people over 65 is expected to increase by 2.7% in 2022 compared to 2021, an inflation-adjusted increase. Meanwhile, spending by households with people under 65 is expected to increase by just 0.7%. Spending by households with older people is now up 34.5% since 1982, while spending by younger households has increased by just 16.5% over the same period.
Updated data for 2023 are not yet available, but according to a survey conducted by the Fed, consumers over 60 had a 7.9% increase in spending in August 2023 compared to the same period last year. Spending increased by 5.1% for those aged 40-60 and just 4.6% for younger consumers. These figures are not adjusted for inflation.
The surge in spending among older consumers is driven by the high number of people in this group, who were born during the US baby boom (1946-1964), with the youngest now turning 59 and retiring en masse.
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| Senior Americans are willing to spend a lot of money to experience 5-star amenities. (Source: Getty) |
American Cruise Lines, which specializes in cruises aimed at older consumers, said it has seen double-digit sales growth this year. The Guilford, Connecticut-based company added three new ships to its fleet this year and extended the cruise season by a month on some popular routes.
“River cruising has traditionally attracted an older clientele. And as baby boomers retire each year, we are seeing strong growth and demand for longer, more adventurous experiences,” said Charles B. Robertson, President and CEO of American Cruise Lines.
“Silver bullet” for the economy
Another reason seniors are spending is that they have a solid financial foundation. People over 70 in the US now hold 26% of household wealth, the highest level since 1989, according to the Fed.
Many economists still see the U.S. economy as at high risk of slipping into recession in the next few years. But Ed Yardeni, president and chief investment strategist at Yardeni Research, is not one of them. Citing the Fed’s own data, Yardeni said that baby boomers now have amassed a net worth of $77.1 trillion.
They also have less debt, minimal student loans, and are more likely to own their own homes and apartments. Many restructured their mortgages at record low interest rates after the Covid-19 pandemic. They are also less likely to move due to multigenerational families and less likely to change jobs than Gen Z and Millennials, thus avoiding the impact of rising housing costs. Retirees also received an 8.7% increase in Social Security payments in January, the largest annual increase since 1981.
These factors help seniors avoid the “double whammy” of high inflation and rising interest rates. Most are retired, so senior consumer spending is less vulnerable to the rising unemployment that many economists predict in the coming quarters.
Todd Bezold, marketing director for the Cincinnati Opera Summer Festival, said demand has been surprisingly strong this year, driven largely by older audiences. “Despite a decline in ticket sales over the past few years, we’ve seen a 3% increase this year. That surge in demand comes despite a significant increase in ticket prices, with the majority of ticket buyers coming from the baby boomer generation,” Bezold said.
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