Baby Boomers (those born from roughly 1946 to 1964), have been responsible for a number of important technological and scientific advancements. Personal computers, mobile phones, MRIs, and the Internet, just to name a few.
They’re also about to be responsible for the largest transfer of wealth in history.
And while there are no guarantees in investing, I strongly believe that investment opportunities which capitalize on the transfer of Boomer wealth will be one of the “fat pitches” of the next decade.
Why? There’s a saying that “demographics are destiny” — the demographic makeup of a population influences and predicts future outcomes. And two charts give us a clear picture of our not-so-distant future.
First, the Baby Boomers are the second-largest population cohort at 71.6M people, just barely getting edged out by Millennials:
Second, Baby Boomers are very wealthy, especially as compared to the other cohorts. Although they make up ~20% of the US population, they own half the country’s assets:
So the basic idea is quite simple:
There are a lot of Boomers
They own a lot of assets
They’re getting old
All that wealth is going to go somewhere
It then becomes a matter of figuring out where that wealth will go. One of my favorite investing and business mantras is to “put yourself in the path of dollars.” Whether that’s government spending or a demographic trend, inserting yourself into the flow of money usually means some of it ends up sticking to you.
So knowing that Boomers have a lot of money, the key question is “where will they spend it?”
I think there are several answers, including travel and services, but the most obvious is healthcare.
Boomer Wealth Transfer Investment Thesis
Maybe this is overly simplistic, but here’s my high-level thesis:
Our current healthcare system/facilities/infrastructure is built to support the needs of the Silent Generation (the gray bars at the far right of the first chart above).
Baby Boomers outnumber the Silent Generation nearly 3-to-1.
We’re not building healthcare and healthcare-adjacent facilities at a pace anywhere near enough to support the coming Silver Tsunami. (In fact, the rate of new construction has continually trended down since 2019.)
Demand will overwhelm supply, creating a drastic shortage of physical space to support the healthcare needs of the Boomers. Healthcare providers and facilities will have significant pricing power.
Boomers, having grown accustomed to a high standard of living, will use their wealth to maintain that standard, even in the face of high prices created by shortages.
I’m always looking for a real estate angle in an investment thesis, and there are several related to healthcare. The two that catch my attention the most are:
Medical office buildings (MOBs)
Assisted living facilities, specifically residential assisted living (RALs)
What’s particularly interesting to me is the ability to separate the operating business (the medical practice or the assisted living operations) from the real estate, allowing the real estate to appreciate and produce cash flow without the operational overhead of the business. I could dedicate an entire email to how this works with both MOBs and RALs, and probably will.
And while we’re not actively working on projects related to this right now, it’s something I want to explore more in the near future. As I’ve written recently regarding apartments, it’s those who own real estate prior to shortages who benefit the most.
What do you think? Does this thesis make sense? Is there something major that I’m missing? Would you be interested in investing in projects that are based on this thesis? Reply and let me know, I’d love to hear your thoughts!