Older generation spending expected to outpace other adults in US: Report

Contrary to traditional economic assumptions, older generations in the United States are poised to drive significant consumer spending growth in the coming years. Real spending by those aged 65 and older is expected to rise by approximately 4%, nearly double the 2% growth anticipated from other adult demographics, according to an HSBC Global Investment Research report.

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There is a common understanding in economics that ageing populations are bad for growth: investment slows, public finances become more strained and consumption cools, too. This is largely due to reduced incomes of households once people retire, with spending falling as a result.

This shifting dynamic challenges the long-held economic viewpoint that aging populations universally depress consumer demand and slow economic growth. Historically, retirement was seen as leading to reduced incomes and subsequent spending declines. However, the report highlights that this convention may need revision.

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But that convention may need to change a bit. Firstly, in recent years the gap in terms of per capita consumer spending (only including out-of-pocket healthcare spending) by US over-65s has closed relative to the rest of the population and secondly, once we remove mortgage and rent payments, as well as pension and insurance contributions - non financial spending by over-65s is just shy of 90% of average spending, and higher than spending by 25-34 year olds.

In 2024, individuals aged 65 and older represented 22% of total U.S. consumer spending, an increase from 18% in 2014. Their nominal spending has grown by 6.3% annually since 2014, surpassing the 4.2% growth rate of the younger population. This surge is supported by increased wealth accumulation, longer employment tenures, and greater workforce participation among older demographics.

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Compared to 20 years ago, many more older workers are staying in the workforce - a good thing from a fiscal perspective, but also in terms of keeping incomes elevated and supporting consumer spending from this demographic.

Financially, the over-65 demographic holds a substantial wealth advantage. The report indicates that in the U.S., the financial assets held by those aged 65 to 74 were approximately four times greater than those held by the 35 to 44 age bracket by 2022, compared to 2.4 times in 1989. This financial strength, combined with continued engagement in the workforce, underpins their robust purchasing power and their growing role in shaping market consumption.

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Older generations today are richer than ever - both in absolute terms and compared to the average in society.