US Seniors Outpace Younger Adults in Spending Growth: Report

Real spending by older generations in the US is expected to rise by roughly 4 per cent in the coming years, compared to roughly 2 per cent by other adults.

This shifting dynamic challenges the traditional economic viewpoint that ageing populations universally depress consumer demand and slow down economic growth.

According to an HSBC Global Investment Research report, older consumers are set to play a crucial role in determining the mix and pace of developed market consumption. The report noted that wealth accumulation and longer employment tenures are actively supporting the purchasing power of this cohort.

"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," the report stated.

However, the report highlighted that historical spending gaps are closing. In 2024, individuals aged 65 and older accounted for 22 per cent of total US consumer spending, up from 18 per cent in 2014.

Why is older Americans’ consumer spending growth outpacing the rest of the population?

Nominal spending within this group grew by 6.3 per cent annually since 2014, outperforming the 4.2 per cent annual growth recorded by the remainder of the population.

"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," the report stated.

Increased workforce participation among older demographics remains a foundational driver of this elevated income level.

Effective retirement ages across OECD (Organisation for Economic Co-operation and Development) nations show an upward trajectory compared to two decades ago.

The report noted that, "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 significant wealth advantage over younger generations due to prolonged asset accumulation and rising stock prices.

In the US, the multiple of financial assets held by those aged 65 to 74 compared to the 35 to 44 age bracket increased from 2.4 times in 1989 to approximately 4 times by 2022.

(With inputs from ANI)