The Baby Boomer Generation consists of Americans born between about 1946 and about 1964. Many individuals in this generation are approaching the typical retirement age, as defined by the U.S. government’s tax and benefit policies. While some are delaying their retirement thanks in part to recent poor stock market performance, underfunded nest eggs, and the need for continuing income, retirement is still a concern.
Financial companies that create products designed for retirees will likely have several successful decades. With would-be and actual retirees interested in stretching and perhaps guaranteeing income for the remainder of their lives and likely beyond, investment and insurance companies will devise new products to sell. Annuities will probably be the core of any set of products marketed towards retirees, with the promise of guaranteed returns regardless of a stock market that has scared many people away from riskier investments.
Those of us who have several decades before retirement should consider taking advantage of this growing business by investing in companies that offer products to retirees and Baby Boomers.
While I occasionally hear suggestions that investors should leave the stock market now before the mass exodus of Baby Boomers who rebalance from primarily equities to primarily bonds, that shift will probably be too slow to make a difference to an average investor. Baby Boomers won’t suddenly shift from stocks to bonds by virtue of their age or employment status. In order for funds to last as long as possible, Boomers’ investments will have to stay somewhat aggressive.
So I don’t think that it’s a good idea to try to get out of stocks before Baby Boomers do, but I do believe that if your time horizon is beyond the next few decades, invest in the financial services industry. This industry, and therefore the investors in this industry, stand to gain from the number of individuals thinking about retirement in an age group that is both large and willing to spend money on financial services.
Is this market timing? Maybe, but it doesn’t have to be stock trading. The only question that remains is whether the next twenty or thirty years of profits is already considered or included in the share prices of companies in the financial services industry.
Published or updated July 7, 2010.