Baby cash money

The size of the senior population will double over the next 25 years, to more than 70 million consumers, according to projections from MapInfo Corporation. But the jury is still out on what that will mean for consumer spending in the future.

The latest data from the Consumer Expenditure Survey seems to indicate that more seniors will not necessarily mean more spending by them. In 2000, seniors had an estimated buying power of nearly $600 billion dollars. It's an impressive sum--until you compare it with the amount of money younger householders have at their disposal. The average household headed by a person age 65 or older spent $26,533 in 2000, about $20,000 less than Boomer households but about on par with Gen Y householders--young people who are just starting out in the world. If tomorrow's seniors cut back on their spending, and spend in a similar pattern to today's seniors, it does not bode well for cash registers nationwide.

Today's seniors spend less because they're living on the proverbial fixed income. A majority of seniors are on a fixed income; only 22 percent of senior households receive money from job earnings, according to the latest data from the Social Security Administration, which tracks the income of the country's older population. Ninety percent receive income from Social Security, 59 percent are living off income from their assets (i.e., interest on investments), 41 percent receive pensions and other benefits, and 9 percent receive either public assistance or veterans' benefits.

But when tomorrow's seniors--the Baby Boomers--come into the picture, the income mix is likely to be quite different. For one thing, Boomers have had different work experiences than their parents' generation. Boomers are, on average, more educated than their parents, and Boomer women are more likely to have careers than did their mothers, both of which will influence plans for retirement. And, of course, Boomers have quite a different mind-set than their parents' generation. And because that mind-set has had an influence on every life stage of the Boomer generation so far, there's every reason to expect that it will influence their next, and final life stage. "When they get to [their senior years], Boomers are going to have a ton of new and different values," says Charles D. Schewe, principal of Lifestage Matrix Marketing, in Amherst, Mass. (See chart, page 7.)

In fact, Boomers may be less likely than their parents to live on a fixed income during their golden years, which might mean that they'll have more cash on hand to spend in retirement. At least, that's what Boomers are planning on right now. According to a study conducted by Sandra Timmermann, director of the Met Life Mature Market Institute, in Westport, Conn., 50 percent of Boomers said they planned to work beyond retirement. Indeed, many of these Boomers say they're planning to work to continue to finance their lifelong spending habits: One-third said they were planning to work to either maintain their current lifestyle or to enjoy extras.

But businesses may not be able to count on a huge windfall as a result of these plans, because Boomers may not have a very realistic picture of what their senior years will be like, points out Pam Danziger of Unity Marketing, in Stevens, Pa. Even though Boomers are likely to be in better shape than their parents' generation, and are likely to remain that way for longer in their lives, they will not stay youthful forever. They will have to dedicate a larger proportion of their budgets to health concerns, which will siphon money away from other items.

"The aging of the population will dramatically alter the typical basket of goods and services that is purchased by the average American. This will expand markets for some products"--health care and household services among them-- says Jeffrey Humphreys, director of the Selig Center at the University of Georgia.

And though Boomers, ever the consummate consumers, now plan to shop until they drop, Danziger believes that "shopping ennul" could set in eventually. "I see this very strongly in Boomer focus groups already," she says. "You reach a point where you say to yourself, 'I've bought everything in my life that I possibly could ever need. Why do I need more?' There's a whole change in attitude--a been there, done that, have it all and it's not that important to me anymore anyway attitude."

The future of senior spending hinges on how committed Boomers will be to continuing their shopping ways in their golden years.

For more info on seniors' income, click on the Social Security Administration's site: www.ssa.gov/policy/pubs/index.html. For info on spending, click on the Consumer Expenditure Survey site at www.bls .gov/home.