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| Seniors in the US have become a recognized spending force. (Source: Getty) |
The spending motivation deserves recognition.
According to updated data from the US Census Bureau, as of August 2023, the number of 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 needing 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 reality makes seniors in the US a worthy spending force. A survey conducted by the US Department of Labor and published in September 2023 shows that Americans over 65 contributed 22% of total spending in 2022, the highest rate 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 in 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 levels of older adults reflect health, financial, and possibly psychological effects of the pandemic. “I’ve been saving my whole life. Now I have money in the bank and I spend it 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.
Ms. Green, a real estate agent with four children living in various parts of the country, estimates that her expenses are up 25% and her travel time is double that of 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 a lot. They are more active than ever. This has led to a wider menu of travel and entertainment to meet the demand.
“Older people now ride bikes, hike, travel, and they enjoy those activities for longer periods of time than before,” said Advisor Marshal Cohen.
Data released by the US 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% compared to 1982, while spending by younger households has increased by only 16.5% over the same period.
Updated figures for the full year 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. This increase in spending for those aged 40-60 was 5.1% and younger consumers was just 4.6%. These figures are not adjusted for inflation.
The rise in spending among older consumers is due to the large number of people in this group, born during the US baby boom (1946-1964), the youngest of whom are now 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 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 a recession in the next few years. But Ed Yardeni, president and chief investment strategist at Yardeni Research, is not one of them. Yardeni, citing the Fed’s own data, said that baby boomers now have amassed a net worth of $77.1 trillion.
They also have less debt, minimal student loan debt, and are more inclined 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 like Gen Z or Millennials, thus avoiding the impact of escalating housing costs. Retirees also received an 8.7% increase in Social Security payments in January, the largest year-over-year 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 Cincinnati Opera Summer Festival, said demand has been surprisingly strong this year, driven by an older demographic. “Despite a decline in ticket sales over the past few years, we’ve seen a 3% increase this year. That surge in demand has come despite a significant increase in ticket prices, with the majority of those who have signed up are baby boomers,” Bezold said.
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