February 26, 2007
Leslie P. Norton

JOSÉ RASCO’S MID-LIFE CRISIS COMMENCED in earnest last year. He began popping more pills than he’s ever taken in his life. He started to see somebody, quite seriously, who is not his wife. Both developments were occasioned by a health scare. Rasco insists the new object of his affection isn’t romantic: It’s a holistic chiropractor who also prescribes vitamins and minerals for him. Soon, his social circle will widen even more: He plans to visit a nutritionist.

The 45-year-old Merrill Lynch strategist is experiencing the afflictions that come with time. But like other baby boomers, he’s begun seeking “wellness” and other holistic approaches that aim to both cure aches, pains and ailments and retard aging. Every eight seconds, an American turns 50. Last year, the first boomers — members of the generation born between 1946 and 1964 — turned 60. That’s likely to send consumer and investment dollars flooding to a number of companies (for a sampling, see table, For Them, Oldies Are Goodies).

The National Association of Home Builders figures that by 2014, there will be 85 million Americans over age 55 — versus 67 million now. And many of them will not be acting their age, at least by the standards of a generation ago.

It’s something the advertising and marketing industries will have to come to grips with, something they’re not too enthusiastic about. For decades, the hucksters of Madison Avenue, Hollywood, Television City, Radioland and even Detroit have mainly focused on 18-to-49-year-olds, while generally treating older people like crazy aunts and uncles who show up uninvited for Christmas dinner. The reality is that consumers aged 50-plus already spend more than $1.7 trillion on goods and services each year, including heavy outlays at restaurants, for gourmet cooking and for travel.

In fact, the 78 million baby boomers are collectively richer than any group in history. The 50-plus crowd now controls 50% of all U.S. discretionary income, accounts for 75% of all prescription and drug spending, and has 65% of America’s household worth, according to Deloitte & Touche. By 2030, boomers will control nearly 80% of private investments, forecasts the MetLife Mature Market Institute.

THE MIGHTY AARP, WHICH DROPPED THE WORD “retired” from its name a few years ago and became simply an acronym, now has 38 million members — and expects that number to hit 50 million in the next five years. “This is a pivotal moment,” says Bill Novelli, 65, the group’s Washington, D.C.-based chief. “All these boomers are coming into their mature years, and have more longevity than ever. Very decidedly, this country can afford to grow older, and we’ll be a better society because of it.”

That’s apparently news to some people in the advertising, entertainment and media worlds. We requested interviews with a few of the Food Network’s celebrity chefs, including Emeril Lagasse (age 47) and Paula Deen (age 60). A Food Network functionary regretfully declined, confiding that “the talent doesn’t really like to be associated with an older age group” because it brings in lower ad revenue. Says John Kottmann, director of strategic planning for McCann Erickson: “Twenty-five to 54 is still a very traditional market for many products. Media really lives and dies based on its appeal to 18-to-34-year-olds, and, increasingly, younger [age groups].” On average, a prime-time TV show that caters to a 35-to-49-year-old audience can get 30% more per advertising minute than one that caters to people 55 and above.

It’s the same story on Wall Street. We checked in with the Minneapolis-based Leuthold Group, a well-regarded tracker of markets and investment trends. Leuthold once had a “Graying of America” basket, but discontinued it in 2000 because it was too broad. Leuthold replaced it with a “Fountains of Youth” portfolio — companies that provide health and beauty products that purport to retard, or at least mask, aging. But that group hasn’t covered itself in glory, rising just 11% last year. “The entire health-care complex is not capturing Wall Street’s imagination,” says Leuthold research chief Jeff Leadholm.

Echoes Merrill Lynch strategist Rasco: “People have forgotten about this theme.”

Yet the great demographic shift is already affecting American households and companies. Dump the terms senior citizen, golden years, sunset years, Geritol junkies, retirees or, heaven forfend, the aging. New York Times columnist William Safire once reminisced about the hate mail he received for using the term “geezer.” One piece bore the nom de plume “Gerry Atrix.” Clever rascals, those graying Americans.

Enter other euphemisms. “We prefer the terms older boomers, which is age 50 to 61, or active matures, which is 62 to 75, or more generically, aging consumers,” says Tim Henderson, a consumer strategist at Minneapolis-based think tank Iconoculture. And what of these folks’ lifestyle, especially after they’re finished their primary careers? “We’re calling this unretirement, rehirement, and refirement,” Henderson continues. “This consumer doesn’t get old. The stereotype of aging — where you get a gold watch, putter around, then die — is being erased. This is like Risky Business, except it’s the aging consumer, not Tom Cruise, dancing around in his underwear.”

The bottom line, says Pat Conroy, senior managing principal at Deloitte and Touche: “You’ve heard 60 is the new 50 and so forth? You are ignoring this market at your own peril.”

Open this month’s issue of AARP Magazine or More, and the inside covers display photos by celebrity photographer Annie Leibovitz of nude women of a certain age (an example is nearby). This is the generation that bared its breasts at Woodstock, after all. Unilever (ticker: UL) says the campaign, for its Dove soap, challenges the “only-young-is-beautiful stereotype.”

Consider the success of retailers Chico’s (CHS), Talbots’ (TLB) J. Jill, and Gap’s (GPS) Forth & Towne unit, aimed squarely at more seasoned fashionistas.

Need another example? Last year, the crossover vehicle started outselling the sports-utility vehicle. George Pipas, Ford’s (F) top sales analyst, notes that boomers drove the growth of minivans in 1980s — “the perfect vehicle for people forming households and having children” — and of SUVs like the Ford Explorer in the ’90s. But now, gas prices are up, nests are empty, “and as we get a little older, it’s a little harder to get up into a [conventional] four-by-four,” says Pipas.

It’s a demographic trend that the troubled Ford is pursuing assiduously: In the mid ’90s, alarmed by higher fatality rates for over-50 drivers, Ford developed the “Third Age Suit” that mimics for designers the physical limitations that can mark old age. It even includes goggles that simulate cataracts. Today, it’s being used by other firms to design products friendly to users with a lot of miles on the odometer.

Unlike stiff-framed SUVs, which have a tougher time absorbing bumps, crossovers are built on car platforms. Pipas, age 59, still has an SUV because he’s moving from Detroit to South Carolina. Once the move is complete, he plans to lease a Ford Edge. Other crossovers in Ford’s lineup: The Lincoln MKX, the Freestyle, the Escape and the Mercury Mariner. Pipas predicts that more than three million crossovers will be sold by 2010, up from 500,000 in 2000.

America’s shifting demographics are also on the mind of Pulte Homes (PHM) of Bloomfield Hills, Mich., which bought the Del Webb development company in 2001 when “we kept running into them trying to capture the ‘active-adult’ market,” says Richard Dugas, Pulte’s chief executive officer. There are now 51 large Pulte communities in 20 states aimed at adults aged 55 and over, up from 14 when the merger took place. These communities are more profitable, bear higher margins and have low contract-cancellation rates; nearly 50% of buyers pay cash and so are unfazed by the interest-rate worries now hammering the overall housing market.

These communities “have company-leading returns on invested capital. And while there’s a tremendous demand in active-adult, there’s not a lot of competitors,” Dugas boasts. “People assume they’re very capital-intensive and you have to build these giant communities. We’ve proven that’s not the case.”

Pulte is adding seven “active-adult” communities this year. Each has a full-time “lifestyle director” to organize events: In North Carolina, one development has a canoeing club that goes out on the Catawba River.

And, says Dugas, “people are misguided in the notion that this buyer is only interested in the Sun Belt. About 60% are interested in living within 100 miles of where they are today.” Next on the list: Midrise buildings aimed at active adults in cities.


  • People are working longer, partly because they’re living longer. Don’t expect them to stop working. Surveys say nearly three-quarters of boomers have no plans to do so. They’ll either stay at their current jobs, or find others after they “retire.” Even if the actual percentage turns out to be just half of that, it represents millions of Americans who will have more money to spend than they would have if they stopped working. Right now, half of AARP members are still on the job, and the figure is expected to surpass 70% in five years. And the Labor Department says the percentage of 55-to-64-year-olds still working bottomed in 1994.Consider investment strategist Ed Kerschner, 53. After working for years on Wall Street, he left UBS in 2003 and taught part-time at New York University. Today, he’s a full-time strategist again, for Citigroup. “After six months at NYU, I realized that working filled many of my needs. It’s wrong to assume boomers will do what their parents do. I’m a textbook case,” says Kerschner, who’s put together a basket of stocks to capitalize on the aging of the boomers.
  • Boomers’ expertise can be monetized. Retailers Home Depot (HD), RadioShack (RSH) and Borders Group (BGP) are recruiting older workers. “They know what good customer service is like,” says Iconoculture’s Henderson. Professionals like doctors and lawyers don’t want to throw their knowledge away, and are rejoining the workforce. Waste Reduction Partners of Asheville, N.C., hires retired engineers and chemists to work on environmental solutions. Plenty volunteer. IBM (IBM) pays and retrains employees to get teacher certification.
  • The world of housing is shifting dramatically. According to the National Association of Home Builders, 40% of all households will be headed by someone 55 or older by 2012. Those not moving are outfitting their houses appropriately for their needs, a trend called “aging in place,” by turning kids’ rooms into dens, installing larger door handles and light switches, nonslip floors and wider hallways. Moen, a unit of Fortune Brands (FO), launched a line of showers with handrails. And expect to hear more about the “active-adult communities” that Pulte, Shea Homes and others are building, and about “new communes” — complexes housing aging consumers whose apartments are wired to monitor their residents, so that help can be sent if anything is amiss.
  • Ditto for retailing. “Grandparent discounts,” like those already offered by toy maker Fisher-Price, a unit of Mattel (MAT), will become more common. Grocery stores for years have been trying to get older consumers to do their shopping on generally slow days like Tuesdays. Drugstore chains and personal-care product makers should do well, as people start buying more anti-aging products on impulse, along with more pharmaceuticals.
  • In the past, scientists assumed aging meant a slow mental decline. That view is changing; you can even argue that aging is good for your brain. (Check out http://web.mit.edu/agelab/, home of the AgeLab of the Massachusetts Institute of Technology, and http://www.aaas.org, home of the American Association for the Advancement of Science, which offers numerous links to studies on the most recent thinking about aging.)

For instance, mental exercises — “braintainment” — can help maintain cognitive functions. Lynn Lipton, 67, of Poughkeepsie, N.Y., does the New York Times crossword and a Sudoku puzzle each day, and is learning how to play the upright bass, so she can perform in a bluegrass band. But last year, when she tried out Nintendo’s (7974.Japan) new Brain Age game, “I was astounded by how I’d forgotten my multiplication tables,” she recalls ruefully. “The eights and sevens had disappeared. I felt awful.”

Since then, she’s acquired a Brain Age game of her own, and it tells her she’s pushed her brain age down to 20. “I do it every single day. I take it on the train. I remember sequences of numbers better.”

Brain Age is now one of America’s best-selling games. Other providers of Braintainment include Posit Science, backed by Draper Fisher Jurvetson and other prominent venture capitalists, and Cognifit Science, which markets to retirement communities.

  • Technology will be adopted to ease aging. One pioneer was Helen of Troy’s (HELE) Oxo Good Grips, which makes appliances with large, easy-to-grip handles. Other examples: The Jitterbug phone from Great Call, which has a big screen, big buttons and a loud ringer. LG Electronics (LGEAF) makes one that measures your blood sugar if you’re a diabetic. Then there’s the Exmocare Watch, which allows the wearer to be monitored 24/7. Equally helpful gadgets are featured on www.goldviolin.com.
  • As you’d expect, financial services and health care will boom. Investment firms are busy redesigning Websites to lure older boomers. Annuity seller Ameriprise Financial (AMP), for example, developed the Dream Book, which helps boomers far from retirement to envision their plans. And forget the conventional wisdom that retirees want only income-producing stocks. Citi’s Kerschner believes longer-lived boomers will want to keep building capital. Of course, lots of health-care outfits are strong candidates for investment. The biggest likely beneficiaries, according to Merrill’s Rasco, include drug and medical-device makers, diagnostic-testing outfits, vitamin companies, vaccine producers and medical-waste-disposal specialists.

Rasco cautions that his stocks are “on a five-to-10-year time horizon,” although he believes people will embrace the Aging of America investment theme as they see “all these different angles coming together.”

Corporate America may embrace it more quickly. The Mature Markets Group of ad agency JWT will shortly relaunch itself as JWTBoom and double the size of its staff to 40, says Lori Bitter, a senior managing partner. “The perception that older people are set in their ways is absolutely not true. People over age 40-50-60 are just as likely to switch brands as anyone else — and they have trillions of dollars to spend.”

That certainly hasn’t been lost on AARP, which markets a variety of services to its members, including car insurance from Hartford Financial (HIG), investment and banking services from JPMorgan Chase (JPM), and health insurance from UnitedHealth (UNH).

“Boomers are perceived as self-centered and a little fickle,” says AARP chief Novelli. “They live in the present and they’re interested in immediate gratification.” In other words, they’re quite different from the traditional retiree. “That’s the audience we have to learn more about as we go along.”

Advertisers, marketers and businesses will have to do that, too, if they want to tap into the immense — and growing — wealth controlled by Americans over 50.