18

Kicking Back During the Golden Years

OK, SO YOU can now forget everything I wrote in the previous chapter because we Boomers aren’t going to die. Nope, we’re going to kick off our shoes, relax, and change the face of retirement and assisted living like Medusa getting a facelift and new hairweave.

Actually, you can take everything I wrote in the previous chapter and just replace “death care” with “retirement/assisted living,” because the same dynamics that will impact the death care industry are at work with retirement and assisted living. Though with a huge difference in scale and scope, as retirement and assisted living encompass so many more parameters than dying. In fact, the “retirement” component can’t really be called a “sector,” as it is multidimensional and potentially impacts so many other sectors both on the macro and micro level (for example, retirement housing would be macro, while retirement leisure activities such as golf would be micro). The assisted living component does serve as a distinct sector, but one that also incorporates to some degree healthcare (which will be covered in the next chapter).

Those folks currently working in businesses that cater to retirement and assisted living can’t perceive the size of the wave that’s about to roll over them like . . . well, like a tsunami! And with this tsunami the seismologists have detected the earthquake under the seabed, and have activated the warning bells and sirens to let everyone know it’s coming, but no one really sees a tsunami until it hits land. Everyone knows it’s big, but because of the vastness of the ocean and the undulation of the waves, people cannot discern how truly massive a tsunami can be. And let me tell you, this Baby Boomer tsunami is a giant.

The Baby Boomers will make the population of those 65 years and older in America the largest such cohort ever both because of their existing size and because they are expected to live longer than any previous generation. In fact, the Harvard School of Public Health, among others, projects that those Boomers who make it to age 65 can expect on average to live to the age of 83. So, the population of those 65 years and older is about to expand like a bicep on steroids.

In fact, the expansion has already begun, as in just six short years since 2010 the population of this age group has grown by more than 5 million. This is the leading edge of the tsunami and, despite its size, it hasn’t really been noticed yet. Boomers don’t like the idea of growing old, are not turning “elderly” as their parents did, and, due in large part to the Recession of 2008, postponed their retirement plans. Well, the recession is over and the retirement party has begun!

And what a party! The population of those over age 65 is projected to more than double from 2010 to 2050, from the 40.2 million in 2010 to an estimated 88.5 million in 2050.

If you think finding a tee time at your local golf course is tough now, wait a few years.

If you’re one of those people who work in the assisted living sector and have been seeing a lot of empty beds over the past fifteen years, well that bed space will soon enough start getting filled. And yes, I know that you’ve heard that before, but that’s because you listened to those “graying of America” geniuses who couldn’t count and were fifteen years too early with their projections.

Well, I can count, and I know that the number of people age 85 and older—those most likely to need assisted living services—has grown by about 700,000 in just the past six years and is only going to keep growing. In fact, the Census Bureau estimates that the population of this age group will almost triple by 2050, from some 6.3 million now to a projected 17.9 million by 2050. Now that’s a lot of potential assisted living bed space.

I was born in 1947. Do the math. If I were my parents, I would be old. I am not old. Apart from a couple of minor maladies, everything still works, and I plan on keeping it that way with good nutrition and quality healthcare. I don’t really feel any different than I did when I was younger. And put me behind the wheel of a high-powered car and the age disappears completely. I still love to go through the gears and hear the motor wind tight. I hope I never grow out of this. I know I am not alone, so I don’t see the Boomer love affair with the automobile disappearing anytime soon. I hope Detroit doesn’t forget us.

If ever there was an economic opportunity to position yourself in front of a demographic wave it would be in the South or one of the prime Western retirement states selling anything to Baby Boomers. Can you imagine Baby Boomers’ consumption of everything pharmaceutical and geriatric?

Remember that Boomers have redefined just about everything in America as they passed through the different stages of life, and there is little doubt that they are going to redefine retirement and everything retirees consume. So it’s a new ball game. I don’t think they will be buying rocking chairs. Boomers have already redefined the golf cart in communities that use them for the principal transportation. Golf carts that look like cars that are hot-rodded. This should partially satisfy the Boomers’ love affair with the automobile. Boomers will never grow up. Remember, Baby Boomers are not going to suddenly want to listen to big band music. Can you picture an 80-year-old Boomer doing air guitar to Led Zeppelin? Not a pretty picture, but we’re undoubtedly going to be seeing it in the not-so-distant future.

I am certain that Boomers will consume the latest electronics until they die. So everything computer and television, whatever form it morphs into, will be big with the Baby Boomers until further notice.

Boomers will never lose their affection for sweatshirts, jeans, T-shirts, sneakers, and sandals. The new elder uniform.

Say good-bye to the Harley-Davidsons. They won’t be able to hold them up at traffic lights (more on this in Chapter 21). Sure, Harley is managing to entice some Boomers with its three-wheeler, but I doubt it will ever enjoy the popularity that the bikes did. Maybe Harley needs to design a golf cart.

That axiom for selling anything to Boomers? If you’ve already forgotten it, you’re probably a late-stage Boomer, as I just mentioned a few pages back: Make my life easy, save me some time, don’t rip me off, and I will buy from you. And try not to forget it again because it still works.

Baby Boomers love to have their houses cleaned, cars washed, and stuff delivered—bodes well for cleaning services, car washes, UPS, and Federal Express.

Boomers have always loved to travel, and with more free time and money to spend, they are going to go see those parts of the world that they didn’t see in their youth.

Cruises will continue to flourish, but their personalities will adapt to Boomer culture. A Motown Cruise? A heavy metal cruise? A marijuana cruise? I don’t believe it’s as far-fetched as you might think.

Remember, Boomers like to change things. They are not their parents and never will be.

What about Baby Boomer food? What’s next? What will they eat? Based on the number of Boomers who are obese, they will apparently eat anything and all the wrong things. Baby Boomers can thank Generation Y kids for the big changes that are coming in the supermarkets. Think prepared foods and total transparency about nutrition. I think the meat counter will go away because Generation Y can’t deal with the concept of raw meat. I believe they will still eat meat, but not in any form that they can identify. Spaghetti with meat sauce is fine. A sirloin steak? No way. Indirectly, the changes in the supermarket will benefit Boomers. Prepared foods are easy to serve. Boomers like easy and will better be able to control their portions.

Transparency about nutrition is a no-brainer that will benefit everyone. I believe that eventually food will be sold and valued based on nutrition and not on weight. Think about it, as it makes sense on so many levels.

So what about restaurants? Trust me, they are Baby Boomer–driven. Think big portions and doggy bags (remember them?). The way we buy food is changing. We now routinely buy several days of food when we eat out. My office is in my home. What I have for lunch is very often a repeat of what I didn’t finish at an earlier dinner or lunch at a restaurant. Essentially we are doing a lot of our prepared food shopping at restaurants. The only difference between a restaurant and a supermarket is the fact that we eat some of the prepared food in the restaurant before we bring it home. In a supermarket we will bring our entire prepared food purchase home.

Do you ever think about doggy bags? Why were they called doggy bags? They were called doggy bags because thirty- or forty-plus years ago the only time you would ever bring leftovers home from a restaurant was to feed it to a dog. Worked back then, but not the case so much today.

A friend of mine related a recent restaurant story about his wife asking that her unfinished T-bone steak be put in a doggy bag. When the bag arrived at the table, it was big and heavy. The wait-person, aiming to please, included other bones from other tables for the dog to enjoy. My friend and his wife did not have a dog, or a cat for that matter. His wife simply wanted to enjoy the remaining steak at home, but she did not tell the waitperson of her intentions because that was not done. Everything is changing.

The issue of Baby Boomers and sleep should definitely be looked into by somebody, as it probably represents several untapped markets—something I realized back when our advertising agency, KGA, was doing about $40 million in billing a year in the late 1990s.

We were not a big national agency by any means, but on the regional level we were a force to be reckoned with. We were very successful with mass media, especially broadcast and specifically television. We could buy television surgically because we analyzed where the viewers were and knew exactly who was watching what. Young male blue jean buyers clustered around sports and entertainment shows. Cosmetics and household products found their efficiencies in television spots bought on the soaps where women viewers abounded. When we wanted to sell high-end Rolex watches to middle-aged men, we bought the CBS Evening News. I can remember being somewhat vexed when one of our clients wanted to sell a product called a Stair-Glide, a chair on rails that would transport an elderly or physically challenged person up and down stairs in a two-level home. The chair system enabled folks to be able to stay in their homes longer at a fraction of the cost of an elevator. Elderly people loved it and loved the idea of staying in their homes. So how do we reach the seniors? At first I believed the answer was a four-color Sunday newspaper insert. Problem was you could not see the chair in action and feel comfortable that it could really solve your problems, maintain your freedom, and keep you in your own home. Television was the obvious answer, but where was the efficient buy? In what time slot could you entice senior viewers without wasting money on viewers who were way too young to care about Stair-Glides?

Our senior media buyer knew exactly what time slots to buy. “Overnights,” he said. The television shows that air between 1:00 A.M. and 5:00 A.M.

“Why is that?” I asked.

He replied, “Old people can’t sleep; they wake up and watch television.”

He was right. We bought overnight programs and successfully sold Stair-Glides to seniors using a ninety-second infomercial-type spot that told the whole story. And it didn’t cost a lot of our client’s money.

Baby Boomers can’t sleep now and they are not elderly yet. Are we going to have a whole generation of vampires? Baby Boomers never slept like babies; I don’t know why. Maybe we have too much brain activity. Want to print money? Help Baby Boomers get a good night’s sleep. This is the largest generation in the history of the United States ever to face the sleepless years. I don’t know what the answer is, but there must be one. My lovely wife of forty years used to accuse me of having a second family somewhere that I would visit at night because I stayed up so late. Then we bought a very high-end Tempur-Pedic–type mattress with memory foam. Now I don’t sleep—I go into nightly comas. I dream vivid dreams like never before. I look forward to and look for excuses to go to bed early. My wife says I still snore. I am addressing that issue now.

A new industry, Baby Boomer sleep? It is worth billions with a capital B.

Wherever Baby Boomers age, they establish new dimensions, set new boundaries. Don’t expect anything less from Baby Boomer retirement. As I’ve said, it will be retirement on steroids.

I do not specifically follow businesses that serve retirement and assisted living needs but assume that hundreds (if not thousands) of them will undoubtedly benefit from the Boomers’ vast numbers as they age into this last (and likely long) stage of their life span. No doubt that you were thinking about which companies might be involved with any of the aging-Boomer subjects I touched upon in the preceding pages, but let’s not forget about healthcare and its cousin assisted living.

Think about it: Money spent on healthcare needs for the age 65 and older set is going to double in the years ahead, while money spent on related assisted living needs for the over 85 set will likely triple. With this in mind, hundreds of healthcare companies will undoubtedly benefit from the aging Boomer population.

Which publicly traded companies make hip and knee replacements, or perhaps stents and pacemakers? You think their sales are going to increase in the years ahead? Ka-ching! I certainly do.

And how about drugs? Sure, a lot of Boomers were into drugs back in the 1960s and 1970s, but they’re going to be way more into drugs going forward than they were back then . . . just not the kind designed to get you high. Drug makers who offer pharmaceuticals that treat arthritis, diabetes, heart disease, and hypertension will undoubtedly see a massive increase in sales in the coming years.

Assisted living? What did I say a few pages back about the population of those 85 and older? Something about a potential customer base that is poised to triple over the next twenty-four years? Ka-ching!

Now, just because the potential customer base is going to triple doesn’t mean that the estimated $330 billion assisted living industry is going to triple. Perhaps up to one-third of spending by this growing customer base will be limited by how much Medicare will be willing to pay. And the industry has been in transition over the past decade, with traditional nursing homes closing down while options for “independent living,” “senior living communities,” and “adult day care” have increased, which in some cases means higher costs that not all Boomers will be able to afford. Nevertheless, the industry’s growth, even if it only doubles, represents a significant increase.

With that in mind, of the ten biggest players within the assisted living industry, only two are publicly traded:

Brookdale Senior Living, Inc. (BKD)

5 Star Quality Care (FVE)

Both of these stocks were trading at the bottom end of their ranges as of mid-2016, probably due in part to the dearth of potential Silent Generation customers. Several other large players were taken private in the past few years, likely at bargain-basement prices, but there may be a few smaller publicly traded companies still listed. While neither Brookdale nor 5 Star offer a dividend, based strictly on demographics I would have to say that their long-range growth prospects look good.

As an outlier, and one with a 7 percent dividend yield, you could look at HCP, Inc. (HCP), a real estate investment trust that makes almost half of its earnings through senior housing. In fact, the above-mentioned Brookdale Senior Living is one of its biggest customers.

Do I have to mention “do your own due diligence”?