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Potential Macroeconomic Consequences of an Aging Population with Insufficient Savings

January 11, 2013

 

In this paper, we explore the potential impacts of the aging population on both the economy and the ?nancial markets over the coming years.
-Manning & Napier

  • “Dependency ratio” - As the Baby Boomer generation retires, the ratio of the retiree-age population to working-age population) will increase as the population of those over 65 expands more quickly than the working-age population.
  • Prime Spending Years - The number of people entering their prime spending years (ages 35 to 54) does not make up for the number leaving (Chart 5). The 40-49 age cohort is projected to have negative growth over the next ten years.
  • Labor Force Productivity - Companies are facing pressures due to the aging Baby Boomers, both in terms of labor force productivity as well as changes in consumer spending patterns
  • Economic Effects - Although the slower growth in the working age population could lead to wage growth and a decline in unemployment, it also has the potential to lead to inflationary pressures. However, immigration has the potential to change what appears to be very well-defined demographic realities for the next few decades.
  • Industries to Watch - As the mix of Baby Boomer purchases change, so too will the beneficiaries of their spending. Investors need to be mindful of the fact that industries that were beneficiaries of this tailwind in the past are likely going to encounter demographic headwinds going forward.

 

 

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