Boomernomics

What Is Boomernomics?

Boomernomics is the economy of the baby boomer generation, which can inform an investment strategy to capitalize on the consumption patterns of the group. In the U.S., those born between 1946 and 1964 held roughly 51% of the nation's net household worth in 2021, making this demographic group a rich target for companies catering to its wants and needs. The term "boomernomics" originates from the title of a 1999 book by William Sterling and Steven Waite.

Understanding Boomernomics

Boomernomics is a buzzword originating from the title of a 1998 book by investment advisors William Sterling and Steven Waite, Boomernomics: The Future of Your Money in the Upcoming Generational Warfare. The concept of boomernomics is simple: The economic impact of the large demographic age cohort known as the baby boomers can form the basis of a successful investment strategy into industries and services that will benefit from the changing consumption patterns of this generation as they age and enter retirement.

This is essentially the same idea that has been widely described and discussed by other authors and investment gurus, including Ken Dychtwald's Age Wave Theory and the demographic investment strategies advocated by investor Harry Dent. Boomernomics in particular predicts that the retirement of the Baby Boomers will involve a period of intergenerational conflict (as well as conflict between the more and less successful members of this generation) over economic resources, rising taxation, and lower historical returns on major asset classes.

A baby boomer economy is not difficult to imagine. In 2022, 57-through-75-year-olds bracket the generational group. If you are in this demographic, you have a clear understanding of what you need to spend money on and how you use your savings or discretionary income for enjoyment. If you are in your 20s, 30s, or 40s, you might have a parent or parents, uncles, aunts, and other relatives who are baby boomers.

Per The 2022 Investopedia Financial Literacy Survey, most baby boomers' knowledge about managing money varies across all finance areas, though it was generally on the higher end for the majority of categories. At the top, 82% of those surveyed said they are at an intermediate or advanced level of managing a budget, with only 18% seeing themselves as beginners in this area. Conversely, a scant 23% of surveyed boomers admitted they have an intermediate or higher level of knowledge about digital currency.

Examples of Boomernomics

An investor can put together a basket of stocks based on the consumption power and behavior of baby boomers. Whatever your age, you can easily put together a list of things and services that are often consumed by this outsized group as measured by household wealth. A list could be first divided into non-discretionary and discretionary items, but the latter will be much longer.

Non-discretionary items would include pharmaceuticals to relieve aching joints, high blood pressure, and skin conditions; healthy food and drinks; and perhaps housing in an active adult community. Healthcare spending is a significant non-discretionary category for baby boomers, affecting boomers at all levels of the economy. Overall, baby boomers are in a weaker position than earlier generations of retirees, according to research from Stanford University, but they still will need to spend on non-discretionary categories.

Discretionary spending covers goods and services that cater to the retirement lifestyle and applies mostly to the more affluent section of the boomer market. Travel is a major theme for this demographic group, so companies that offer goods and services to this market are an important part of boomernomics. Other discretionary spending categories could include home improvement, recreation, automobiles and recreational vehicles, wealth management services, and education.