Richest. Seniors. Ever.
The most prosperous generation in history can’t stop raking it in — but they are learning to love spending it.
TToday, the typical senior is nine times richer than the typical Millennial.... Barring a high-paying job, most young people today will be pressed to replicate the financial success of their grandparents and parents. — Sal Guatieri, Bank of Montreal economist
hey get the sweetest discounts on movies, transit and restaurant meals, but a lot of Canadian seniors hardly need them — they’re richer than ever
Canadians 65 and older have amassed wealth like no other age cohort before them, having been blessed enough to work in an era where generous pensions plans were still standard, where stock portfolio growth was spectacular, and with gains in housing prices that no future generation might ever see again.
But even with all those assets, their pile of cash just keeps getting bigger, since so many young-feeling seniors refuse to stop working, enjoying the lowest unemployment rate of any segment of society. They have high-paying jobs and, increasingly, highly comfortable lifestyles. Younger generations, from Baby Boomers to Millennials, should be so lucky — but they probably won’t be.
“Seniors have never been better off financially,” says Sal Guatieri, an economist with Bank of Montreal.
There is no doubt a segment of those 65 and older continues to struggle at the bottom end of the wealth ladder, even though the poverty rate in Canada among seniors is among the lowest in the world, according to a report last year from the Organization for Economic Co-operation and Development.
“If you broke it out by quintile, you would probably a good chunk of the gains have probably gone to the upper two quintiles,” Mr. Guatieri says.
But a research report he issued this month nevertheless shows that the median net worth of families headed by someone 65 and older was up 312% in 2012, to $460,700 from $111,693 in 1984, even after inflation was factored in. He notes the TSX Composite Index rose 530% during that period while home prices swelled by 430%.
Boomers aged 55 to 64 have watched their wealth grow too, but only by 222% from 1984 to 2102, using constant dollars. And the poor Millennial, born in the ’80s, has only seen an 81% increase in net worth during the same period.
“Today, the typical senior is nine times richer than the typical Millennial,” Mr. Guatieri says.
That has the potential to have a huge impact on retailing: companies catering to that segment of the population will “thrive,” he says, and those who don’t risk missing out on a lucrative target market.
Seniors will account for 27.7% of the Canadian population in 2033, up from 18.2% today. But will they spend? Some will splurge, but studies in the U.S. show seniors only spent about 80% of what the typical shopper spent in 2012, according to the U.S. Bureau of Labor Statistics. Still, that appears to be rapidly on its way up: the pace of spending by American seniors has increased faster than any other segment of the population over the last decade.
The big winner will be home renovators as seniors retrofit their houses for extended living, or simply hire an outside contractor to do the kind of fixing up they might have done themselves when they were younger. says Mr. Guatieri.
That home-renovation market may already be benefiting from a bump in spending which hit a record $63.4-billion in 2013, according to a recent study from Altus Group Canada.
But the big-ticket senior spending is spilling well outside the home. Multigeneration vacation travel, where grandma and grandpa pick up the tab to bring the kids and grandkids on plush holidays, has become more and more common, reports one travel agent.
Meanwhile, senior wealth is a key driving factor behind the fastest-growing segment of the car market: luxury vehicles. “They are empty nesters and typically the bills are paid,” says auto analyst Denis Desrosiers. “They’ve worked so hard their whole life and helped so many people except themselves. Now it’s their turn.”
About 10 years ago, luxury vehicles represented 5% of the auto sales market; today it’s double that, and seniors could represent as much as a third of that market, says Mr. Desrosiers. He says Mercedes, BMW and Audi are doing particularly well because they have specifically targeted the senior crowd.
“One of the interesting things is, it will probably be the last vehicle in their life because these cars are so well built,” says Mr. Desrosiers. “Why not buy it?”
Keith Silverberg, president of the Suntastic Travel agency in Toronto, sees a huge, growing market in senior travel.
“We find seniors are buying vacation homes elsewhere, because the recent run up in the Canadian dollar and de-escalation of housing prices in the U.S. created the perfect storm for housing prices for seniors to enter that market, and it’s led to greater travel. People are going back and forth like never before,” says Mr. Silverberg.
“The other aspect is seniors buying high-end vacations, be it world cruises or high-end safaris,” he says — often with all the frills. “We are talking vacations where you spend $50,000. You get young seniors doing that.”
His company just booked a private trip for a couple to Africa. It included business-class flights from Toronto to Cape Town, South Africa, top hotels, a private tour guide, helicopter rides and a safari with overnight accommodation at some of Botswana’s finest game lodges.
“You are doing things that ordinary people and ordinary tours just don’t do,” says Mr. Silverberg. “People are looking for different trips and experiences that they’ve never had. Or will ever have again.”
He says creating memories is what seniors are looking for most, and families taking multi-generation vacations are all part of that. “The grandparents just pay the shot for everybody. We do a ton of that. They pay for 10 cabins [on a] cruise and bring the whole family.”
Even those who aren’t quite loaded enough to drop six figures on a luxury sail up the Alaskan coast for 15 or more people are still finding ways to spoil the brood. “At every level there are players,” says the travel industry executive. “There’s just more wealth trickling out.”
But as fast as those indulgences are piling up, says certified financial planner Lise Andreana, senior clients are continuing to accumulate money, working and investing in what might seem like indefatigable pursuit of success.
“It’s not as difficult for them to draw down on that pot as it is to get them to actually retire,” says the Niagara-onthe-Lake planner with Continuum II Inc.
The unemployment rate of seniors who are actively looking for work is lower than any other Canadian demographic, and their workforce participation rate keeps rising; they just keep plugging away. Bank of Montreal statistics show active employment for those 65 and older had climbed to 12.9% in May 2014, up from an average of 6.7% from 1984-1988. Seniors are also earning bigger paycheques than ever. The median income for those 65 and older grew 30% from 1984 to 2011, the last year for which statistics are available), using constant dollars.
“They seem to want to know they have the money still rolling in. There’s this real fear that once they draw down on the pot they’ll run out, even though it’s completely illogical to think that way,” says Ms. Andreana. “Sometimes we are talking about people worth $10- million.”
She adds that her clients are passing out money to their children and grandchildren too. “They are overly generous with kids, to almost incapacitating them.” They pay for the their offspring’s weddings, house down payments, and family trips, she says.
All the gifts aside, it’s going to be hard for the Millennials to ever catch up to their parents or their grandparents, in terms of wealth.
“Barring a high-paying job, most young people today will be pressed to replicate the financial success of their grandparents and parents,” says Mr. Guatieri.
All the younger generations may be able to hope for is that the pile stays large enough to last until it’s ready to be passed down.
“That will give Millennials a boost,” says Mr. Guatieri. “Eventually, they get that money.”
And given that so many seniors can’t seem to resist raking it in as fast as they can spend it, that seems a real possibility.