By Brad Thomas, Editor, Intelligent Income Daily
We’ve just hit “Peak 65.”
2024 marks the beginning of a period when 11,200 Americans will hit the retirement age of 65 every day.
That’s over 4 million new retirees each year. And it’s expected to continue through 2027 as the Boomer generation ages.
The aging of our society puts new demands on our economy. A smaller number of working-age people will be expected to support a larger group of older folks who have left the labor force.
We can already see signs of the strain in projections for Social Security.
Since the program is funded by payroll taxes, a smaller number of workers and a larger number of beneficiaries means there’s less money go to around.
In fact, the program is expected to deplete its trust fund by 2034. After that, the government would either have to reduce Social Security’s payouts or increase taxes.
That’s a scary thought for anyone hoping to rely on the government in retirement.
Here at Intelligent Income Daily, my team and I look for the best income-producing investments that can help retirees secure their future. If you can’t be sure the government will support you, it’s time to take matters into your own hands and build an investment portfolio that will.
Today, I’ll show you how to use our country’s aging trends to your advantage and add a reliable income producer to your portfolio.
An Aging Population Means More Aches and Pains
My body just doesn’t work the way it used to. I have more aches and pains that won’t go away. I started getting a cortisone shot in my toe every few months.
It’s no secret that as people get older, they tend to require more support from the healthcare system. Aging bodies are more prone to injuries and chronic diseases.
According to the United States Census Bureau, there were about 56 million Americans aged 65 or older in 2021. By the numbers, retirees make up 17% of our total population.
But as I mentioned above, this group is expected to grow rapidly this decade as the Baby Boomer generation hits retirement age. Based on the Census Bureau’s latest projections, there will be more than 73 million people aged 65 or older by 2030. That’s a 30% increase in retirees over the next six years.
And those retirees will need to be taken care of. That means spending on healthcare is likely to keep increasing as our country’s population gets older.
The Centers for Medicare & Medicaid Services projects that America’s spending on healthcare will rise from about $4.9 billion this year to $6.8 billion by 2030. That’s a 39% increase over the next six years.
The same trends that are casting doubt on Social Security are also creating an attractive investment opportunity – in healthcare.
One Company That’s Set to Benefit From This Trend
An aging population isn’t the only reason to invest in healthcare.
Since health services are essential, they’re insulated from the ups and downs of the economy. That makes the best stocks in this sector strong, stable, defensive picks in times of recession and market volatility.
One way to benefit from the trend of growing healthcare spending is by investing in a health insurance company like Elevance (ELV).
Elevance offers health insurance plans under the Wellpoint and Anthem Blue Cross Blue Shield brands. It’s one of the largest health insurers in the country, with nearly 48 million members.
Elevance earns a small percentage of the insurance premiums it collects from businesses and the government, after it pays for the health benefits its members receive.
So as healthcare spending increases, the amount of money Elevance collects will rise as well.
Elevance is a reliable dividend payer and has increased its dividend 14 years in a row. Right now, it yields 1.3%. That may seem small, but its dividend is growing at a fast double-digit pace. So within a few years, your yield on cost will be much higher. Elevance just announced a 10% increase in its payout a few weeks ago.
Elevance shares trade for less than 14x earnings. That’s right in line with its historical average. But even though they’re not discounted, Elevance shares are still a great deal. That’s because the company is growing its earnings at a 12-13% rate.
For comparison, Apple is one of the most loved stocks on the market. It trades for 29x earnings, but is expected to grow less than 10%. Compared to that, Elevance is a steal.
And for subscribers of Intelligent Income Investor, we recently recommended another health insurance company that is even cheaper than Elevance and has a higher yield. Paid-up subscribers can read that issue here.
As America ages, you can benefit from rising healthcare spending to collect a reliable, recession-resistant income.
Happy SWAN (sleep well at night) investing,
Brad Thomas
Editor, Intelligent Income Daily