Over the next decade, the mighty baby boomers, more than 80 million strong, will enter their golden years. With life expectancy on the rise — today’s 65-year-old can expect to live about 19 more years, on average — an aging population will put a huge strain on an already beleaguered federal budget.
By 2016, outlays for Social Security will begin to exceed income collected from payroll taxes. Spending on Medicare will continue to soar. Meanwhile, demand for all the goods and services that older folks need will rise as the population 65 and older explodes, from 40 million today to nearly 55 million in 2020.
Demand for caregivers, quality medical care and retirement housing will increase, as will the market for financial products that create a steady stream of income in retirement. For those seniors who are healthy and wealthy, more leisure time will translate into more travel, which will give a boost to cruise lines and hotel chains.
To cash in on the demographic inevitability of an aging society, you could invest in companies that make products or offer services that appeal to the senior set. At the top of the list are health care-related stocks, such as Allergan (AGN), which makes Botox, the frown line smoother, and Ozurdex, the first drug to win regulatory approval for the treatment of macular edema, a major cause of vision loss among diabetics.
Another compelling health care stock is Stryker (SYK), a maker of replacement hips and knees. If you prefer a fund, consider T. Rowe Price Health Sciences (PRHSX). In the leisure time area, a good choice is Carnival Corp. (CCL), which owns 92 cruise ships.
