How To Prosper On Retiring Boomers
There are a lot of baby boomers out there and there's a lot of potential money to be made off of their retirement. Just be prepared to apply unconventional thinking to fit the habits of nontraditional people.
Where retirees of earlier generations gravitated toward nursing homes, boomers will be looking for age-restricted housing developments. Where the World War II generation favored rocking chairs and Geritol, boomers will be looking for more advanced technological gadgets and medical treatments — not to mention better running shoes.
Whereas earlier generations preferred a quiet retirement, boomers will be looking simply to start another chapter in their lives — and may not even retire at all.
This year marks the first time boomers, born between 1946 and 1964, can begin seeking retirement benefits from the government — and that means opportunities for investors tuned into a changing way of life for a new class of senior citizens.
"When you look at the dichotomy and the dynamics of who these folks are, in most cases they're very entrepreneurial. They've done very well, much better than our parents did financially," says Nadav Baum, managing director of investments at BPU Investment Management in Pittsburgh and a 46-year-old boomer himself. "Because of that we're going to still be involved in a lot of different aspects when we retire."
Given that dynamic lifestyle, never mind considerable wealth, we took an informal poll of money managers and investment advisers about how to play the baby boomer retirement boom.
Jordan Kimmel, managing member and portfolio manager at Magnet Investing Group, finds three stocks especially attractive: Video game maker Activision (Guitar hero, anyone?), Motorcycle manufacturer Ducati, and Research in Motion, whose BlackBerry has become an emblematic appendage for the generation. Kimmel likes the three companies in part because they also have global appeal.
"When you look at the baby boomer generation now, it's not only the population in America, which we thought of as gigantic, but now it's reaching international markets," he says. "People are seeing things on the Internet and buying them on every continent because the free market is spreading."
Similarly, Joseph Keating, chief investment officer at RBC Bank, recommends tech and companies with an international flavor such as United Technologies , Nike and Honeywell.
"The aging of the baby boomers is a major secular trend that is going to affect the financial markets for the better part of the next two decades," Keating says.
Baby boomers also will seek out casual leisure places unfamiliar, if not non-existent, to their predecessors, sipping Starbuck's coffee at Barnes & Noble bookstores to pass the time, according to Walter Schubert, chairman of the finance department at LaSalle University in Philadelphia.
"The key is to look for any dramatic trends either way," Schubert says. "Will boomers eventually go to one car from two? When will it happen?"
Of course, that doesn't mean the only companies to benefit will be those that can build a better video game console.
Some of the holdovers will remain in play, with health care and retirement communities standing to benefit from a new clientele.
Chanie Swartz, president of A Vested Interest Wealth Management in New York, recommends Ventas and Senior Housing Properties Trust, both of which are real estate investment trusts weighted toward nursing homes.
Howard Hook, an advisor at Access Wealth Planning in Roseland, NJ, also believes in iShares ETFs weighted toward health care and nursing homes. iShares offers four: the Dow Jones US Healthcare Providers Index Fund; the Dow Jones US Healthcare Sector Index Fund; Dow Jones US Medical Devices Index Fund and the S&P Global Healthcare Sector Index Fund.
Hook also advocates funds that invest in home builders of age-restricted communities and annuity companies.
Also in health care, Peter Miralles, president of Atlanta Wealth Consultants, is among those who wants to take advantage of a combined need for medical care and an active lifestyle. He backs Express Scripts, which focuses on cutting health care costs; and Stryker, a medical technology company that provides implants for damaged knees, spinal systems and hips, as well as other body areas that wear down from an active lifestyle.
To capitalize on leisure activities, Miralles likes hotel chain MarriottInternational and gaming company WMS Industries.
Also backing health care for a boomer play is Joan Kane, founder of Investment Planning Solutions in Fairfax, Va.
Kane also likes Sunrise Senior Living, which operates nursing homes.
"The people who are retiring now are giving a very nice leading indicator of what the baby boomers are going to behave like, so I would definitely pay very strong attention to what the just-retired are doing with their money," says LaSalle's Schubert. "I think that's a very sound strategy to say there are industries that are going to win and there are industries that are going to lose."