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Investing: Take advantage of the silver economy

By Anne Kates Smith, Kiplinger's Personal Finance on

Published in Senior Living Features

A new report from Bank of America Merrill Lynch says that by the end of this decade, people 65 and older will outnumber children younger than 5 for the first time in human history. In 2050, 2.1 billion people will be 60 or older, more than double 2015's count.

This massive demographic shift is fraught with risk for governments, companies and private citizens scrambling to prepare for the challenges of our increasing longevity. But the shift also presents a huge opportunity for people who adjust their saving strategies and zero in on investments that will thrive in an aging environment.

For starters, retirees must look beyond bonds, says Tracie McMillion, chief global asset allocation strategist at Wells Fargo Investment Institute. A healthy dose of dividend-paying stocks will provide the growth that a decades-long retirement requires. Find them in Vanguard Dividend Growth (symbol VDIGX), a member of the Kiplinger 25. For the bonds you do hold, consider longer maturities. Debt that matures in 20 or 30 years will be in demand as fund managers try to match pensioners' longer life spans. Younger savers should fund health savings accounts, which permit holders to accumulate assets over a lifetime -- an attractive option considering that the average 85-year-old in the U.S. spends nearly $35,000 a year on health care.

An aging population has its drawbacks, but the stocks of companies catering to seniors represent a multi-trillion-dollar silver lining, says BofA Merrill Lynch strategist Beijia Ma. "Financial-services companies have the potential to fill a massive void," she says. The 50-plus age group holds 52 percent of global wealth, but only one in four retirees has used a professional adviser. Stocks that could benefit: brokerage firm Principal Financial Group (PFG).

 

Or ride the age wave with health care firms. Some 80 percent of people 65 and older have a chronic health condition. Innovative companies in search of cures for cancer or dementia will prosper, and managed-care companies will become increasingly important. Check out biotech giant Celgene (CELG) and United Health Group (UNH).

Home is where more than the heart is. Seniors account for nearly half of home-renovation spending, and 87 percent of baby boomers want to age in place -- good news for Allergan (AGN).

(Anne Kates Smith is a senior editor at Kiplinger's Personal Finance magazine. Send your questions and comments to moneypower@kiplinger.com. And for more on this and similar money topics, visit Kiplinger.com.)


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