2019_05_07 — “Demographics”

May 7, 2019

Demographics

Many aspects of the economy and investment market are not easily predictable, but demographics largely are. The U.S. population is aging and people live longer now than they did 20 years ago! We know how many people are in the U.S., we know that with each passing year most of them age a year, and twenty years hence there will be significantly more people over the age of 75: and we can say all that with a lot of surety. To put some numbers behind that:

• In 2019, baby boomers will be between the ages of 55 and 73
• The U.S. has 328 million people (according to the U.S. Census Bureau)
• Americans 65-and-older are projected to double from 51 million today (according to the CIA World Factbook) to 100 million by 2060
• By 2060, the 65-and-older age group’s share of the total population will be nearly 24 percent

Now, of course, 65 is not old; but as the 65-and-older population increases, so does the 75+ and 85+ population. The aging U.S. population will require and expansive set of services and products.

Infograph: Share of the population 65 years and older as a percentage of the total U.S. population from 1950 to 2050*

All this aging will drive the need for senior housing and care. Senior housing can widely be categorized into several categories: Need-driven senior housing like assisted living facilities and senior living campuses, and discretionary senior housing like independent living facilities and entrance fee communities. Because aging options often combine multiple services, drawing distinct lines can be a challenge; below is a generalized list of options:

• Full memory care facilities for those with dementia, memory loss, or Alzheimer’s that need assistance with all daily living needs
• Hospice services are often though of for those that are terminally or chronically ill, but patients can move in and out of hospice for years depending on their condition. Additionally, a hospice can be either a residence that provides comforting services and therapy, or a service that visits one’s assisted living facility or homer
• Nursing homes or skilled nursing facilities (SNIF) for those with sever or debilitating illnesses who need 24-hour supervised care; a temporary stay in a SNIF is also a common safeguard in-between checking out of a hospital and readmission to one’s permanent residence
• Assisted living facilities that provide basic room and board for the elderly; residents receive assistance with daily activities such as bathing, grooming, medication, and memory care services
• Senior living campuses (one or more buildings) combine skilled nursing beds with an independent and/or assisted living facility
• Residential care homes provide some assistance with daily activities but are less costly and less staffed than an assisted living facility
• Independent living facilities are residential units specifically designed for active senior adults and elderly needs, often providing coordinated activities, transportation services, and on-site areas for socializing
• Entrance fee communities, also known as continuing care retirement communities (CCRCs), often include a combination of an independent living facility, an assisted living facility, detached homes/cottages, and a skilled nursing facility on one campus; thus there is no need to relocate as one ages and needs change
• Age restricted or retirement communities are 55 and over housing or apartment facilities where at least one resident in each unit has to be 55 or older. Often these facilities have no special care services other than arranged social activities and areas. It is not uncommon for people to first enter a 55+ community when they are in their 70s
• Adult day-care facilities for short-term daily care
• Aging in place, where a senior continues to live in their own home with the aid of in-home caregivers or family
• Respite care, in home short-term care to fill a temporary need

Services and technology aimed at an aging population is a large and quickly growing market; demographics clearly say so. On a cost scale, memory care tends to be the most expensive, followed in order by nursing home, assisted living, and independent living. Where and how to invest to take advantage of demographics amongst a dizzying array of options are great questions to discuss with your portfolio manager or financial advisor. As a bonus, there is ample opportunity in this area for ecological, social, and governance (ESG) as well as impact investing — meaningful investing that improves workers’ and consumers’ lives.

Lastly, be young at heart; remember, although we may get older, we don’t have to grow up.

Michael Ashley Schulman, CFA

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Disclosure: The views and opinions expressed are those of Michael Ashley Schulman, CFA and are subject to change without notice. The views and opinions referenced are as of the date of initial publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Forward-looking statements cannot be guaranteed; neither can backward-looking nor current-looking statements. This material is provided for informational purposes only and does not constitute an offer or solicitation to purchase or sell any security or commodity or invest in any specific strategy. It is not intended as investment advice and does not take into account each person’s or investor’s unique circumstances. Information has been obtained from sources believed to be reliable, but its accuracy, completeness and interpretation cannot be guaranteed. Past performance is no guarantee of future results.