Baby boomers are turning 65 at a rate of about 10,000 per day. This should continue for the next 20 years, doubling the senior citizen population to over 89 million by 2050 (the silver tsunami). Along with this, the "age-dependency ratio"(folks age 65 or more as percentage of folks 20-64) is also expected to double over similar time frame - or 5 workers for every "silver" going down to 2.5 workers.
We've likely heard about the need for structural reform to social security...and one doesn't even need to acknowledge current problems to see there might be future problems if these forecasts above are accurate. Yet, today's article isn't about Social Security...it's about living arrangements.
While our history has been single family living units (houses), with a yard, and a pet, will this icon of American living continue? What are the trends around housing today, and how might they evolve?
Today, 63% of Boomers expect to age in place (don't plan on moving). The other 47% that plan to move, only half, plan to downsize! So...for the Boomers staying with the icon looks to be the plan. Yet, the trouble presents itself later in life...when the Boomers hit age 75+(Silvers) and health issues start to dictate housing choices. Today only 1 in 5 Boomers are planning for senior housing - an added cost in retirement to be sure, yet what will the market be for selling that home then?
Historically, we just look to the next generation(s) for buyers. Yet today, Millennials (adults < 35) aren't buying houses - they're renting or living with Mom & Dad still. While housing prices have largely recovered from their pre-crash highs of 2005, Millennial income has gone the other way - is actually down 10%. Couple this with all time high college loan debt, and its simple to see that owning a home is not as affordable for this age group as it used to be.
So, if Millennials aren't buying starter homes, who are the Gen X'er and Gen Y'er going to sell to so they can buy the homes from the Silvers?
Markets tend to work these things out, albeit usually at the expense of value. So, if you are part of the tsunami....planning your future living arrangement may prove valuable in more ways than one.
Adapted by Legg Mason's, from Aging and its Financial Implications.
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