AARP | THOUGHT LEADERSHIP OVERVIEW
Mapping the Longevity Economy Jody Holtzman SVP Thought Leadership, AARP @jholtzman #LongevityEcon #boomersummit Prepared for the 2012 What’s Next Boomer Business Summit 1 March 28th, 2012

AARP | THOUGHT LEADERSHIP
Context

Why AARP is interested in
the Longevity Economy  Because achievement of AARP’s Vision, Mission and social change goals is dependent, in part, on the greatly expanded effort and success of the business community to meet the needs and wants of people 50+ 3

Our Goal  Begin a
dialogue that helps establish a common language and understanding about the Longevity Economy, so as to stimulate innovation in the market that contributes to our mission and benefits the 50+ 4

Orientation is Key  In
Washington, addressing the needs of 100 million people is called an unaffordable cost  For Entrepreneurs, addressing the needs of 100 million people is called an opportunity 5

Why? Because: Demographic Wave +
Over Half of all Consumer Spending = Big Markets and Big Investment Opportunities 6

So What is the Definition
of the Longevity Economy? • …. We’ll get to that… 7

AARP | THOUGHT LEADERSHIP The
Longevity Wave

An additional 35+ million people
over 50, in just twenty years US population over 50 140 120 A large number of 100 people living longer 80 60 40 20 0 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 Source: US Census

Nearly 20% of the US
Population will be over 65 by 2030 This growth will largely be driven by the aging of the Baby Boomers 70.0% Projected US Population by Age 20 - 64 59.9% Years 60.0% 57.4% 65+ Years 54.5% 54.2% 54.1% 50.0% 40.0% 72 Million people 65+ in 2030 30.0% 20.0% 20.2% 19.3% 20.0% 16.1% 13.0% 8.7 Million people 10.0% 85+ in 2030 3.5% 4.3% 1.9% 1.9% 2.3% 0.0% 2010 2020 2030 2040 2050 Source: US Census Bureau 10,000 people will turn 65 every day for the next 18 years!!

AARP | THOUGHT LEADERSHIP The
50+ and Longevity

The Challenges of Longevity 
Financial insecurity: 30+% of Social Security recipients are totally dependent on SS check. 65% mostly dependent on SS check  Doubling of the cost of health care by 2020 – Driven by health care inflation combined with growing older population (CBO)  Rise in number of Americans with chronic diseases  The cost of caring for chronic illness in the United States -- $1.5 trillion yearly, fully three-fourths of annual healthcare spending (Inst of Medicine)  Nine chronic health conditions "dominate: arthritis, cancer, chronic pain, dementia, depression, type 2 diabetes, post-traumatic disability, schizophrenia, and the loss of hearing and vision  Growing number of people with Alzheimer’s  Impending financial insecurity of the Baby Boomers with average retirement savings of $50K  Unpaid value of caregiving = over $400 billion and rising (PPI) 13

The Upside of Longevity –
Economic Growth, Productivity Growth, and Prosperity  New industries (eg aging in place technology, brain fitness)  New markets (eg Wii in nursing homes)  Productivity growth (BMW)  Entrepreneurship/small business growth (2X that of 20-somethings)  Market maximization (Design for All, eg iPad, BMW)  Greater economic value from retaining older workers and new businesses  Slower draw-down and extending the life of the Social Security Trust Fund Leveraging  Greater opportunity for mentoring young older workers and institutional knowledge transfer workers and entrepreneurs  Strengthening economic security of older people  Minimize coming labor shortage 15

How Boomers See It 
It’s about Living Not Aging  This is the Opportunity Generation. They see and seek it everywhere  This generation has the desire to grow, learn, and discover. They have a positive view about these extra years of life  For a great future, they see the need to be open-minded, learn new things, and embrace change  They see life as a “Progression” and “Continuation” – not Reinvention  It’s about planning for What’s Next  Don’t categorize. Don’t label. In other words, don’t box them in

AARP | THOUGHT LEADERSHIP The
50+ as Consumers

Baby Boomers (45-64) spent $2.5
Trillion in 2010 Total consumer spending and share of total by age group Rank Age Range Consumer Spending Share 1. 45 – 54 Years $1,456BN 25.0% 2. 35 – 44 Years $1,217BN 20.9% 43.7% 3. 55 – 64 Years $1,089BN 18.7% 59.2% 4. 25 – 34 Years $938BN 16.1% 5. 65 + Years $903BN 15.5% 6. Under 25 Years $221BN 3.8% 2X the consumption of under 25-34 segment Source: BLS 2010 Consumer Expenditure Survey Boomers+ account for almost 60% of all spending

Average consumer spend peaks at
45-54, but aging baby boomers are likely to continue spending past 65 Average Yearly Income and Consumer Spend (2010) $80,000.00 Average Baby Boomers Income After Taxes $ Per Consumer Unit $60,000.00 Average Consumer Expenditures $40,000.00 $20,000.00 $- Under 25 Years- 34 Years - 44 Years - 54 Years - 64 Years -74 Years 75 Years 25 35 45 55 65 Over Income 5-yr -0.3% 1.9% 1.3% 1.3% 1.8% 2.0% 2.5% CAGR Exp. 5-yr CAGR -0.2% 0.7% 0.3% 0.7% 0.5% 1.4% 3.1% Source: BLS 2010 Consumer Expenditure Survey Income and Consumer expenditures are growing fastest among 65+ demographic

The dominance of traditional companies
serving these product markets makes them ripe for innovation – now, for the 50+ Percent of Total Category Spend Baby Boomers (45- Under 25 Years 64 Years): 25 - 34 Years Housing, Housekeeping, Furnishing 41.4% 35 - 44 Years Transporation 43.6% 45 - 54 Years 55 - 64 Years Food 42.3% 65+ Years Personal Insurance and Pensions 50.4% Healthcare 43.0% Healthcare spending Entertainement 44.5% increases significantly after 65 Apparel 44.5% Personal Care 42.4% 0% 20% 40% 60% 80% 100% Source: BLS 2010 Consumer Expenditure Survey Baby Boomers spend the most across all product categories

AARP | THOUGHT LEADERSHIP Innovation
& Strategy in the Longevity Economy

Innovation is occurring across verticals
and company types Established Institutional/ Industry Start-ups Companies Non-Profits Care Innovations ,GloCaps, Independa, Mayo Clinic HALE Center/ Healthcare (JV of Intel & GE Virtual Health, Extend Health Kaiser Permanente Health), Philips KB Homes Housing CBS RLTV, Entertainment BMW, Transportation Google Autonomous Car Silver Ride, Tesla, MIT Age Lab Live Well Collaborative CPG / Food Live Well Collaborative, Revolution Foods (Univ of Cincinatti) General Mills Prudential, Ameriprise, Financial Services Schwab, Fidelity Prosper, Kiva MIT Age Lab Road Scholar, Air BnB, Tripedia, Tripping Travel Viking River Cruises The Hartford, See Change Health Insurance Genworth KEY: Significant Growing Focus Some Focus / Limited Focus Activity Scattered

Companies Are Using Two Over-Arching
Strategies to Address the Longevity Economy  Target the 50+ market explicitly, with products and services specifically designed for a segment or segments in that market  Maximize market opportunity by expanding into the 50+ market 23

5 Additional Strategies  Universally
designed products & services with universal messaging  Age-targeted design with age-targeted messaging  Age-targeted design with universal messaging  Universal design with age-targeted messaging  Existing products modified for older consumers 24

Applying Alternative Strategies Approach Example
Impact Applicability • Nintendo Wii was • Sales to 65+ consumers designed to appeal to a & nursing homes were wide range of consumers significantly higher rather than those with than expected due to console gaming universal accessibility experience • Over half of purchases Universally • Apple’s iPad targeted by Boomers and older designed products & services with GenX and GenY universal • Fastest growth among • Entertainment messaging • Facebook was designed women 55+ • Consumer Electronics for college students • Housewares Or • Over 50% of business • Consumer Goods & e- incorporations by commerce sites • Legalzoom has just 1/3 of Boomers • Social Networking Finding the sales to Boomers • Travel Longevity • Discovered growing Economy by accident intergenerational play • Wizard 101, a top 200 web by parents and site designed for 7-12 year grandparents olds • Learned that largest • Zulily was designed for buyer segment are young mothers grandmothers

Applying Alternative Strategies continued… Approach
Example Impact Applicability • Cover Girl Advanced • Drove incremental sales Radiance was designed to for the Cover Girl brand meet needs of older without damaging women Age-targeted success with younger • Healthcare design with age- consumers • Housing & Caregiving targeted • Glocaps designed as • Niche Consumer Goods messaging • Value proposition was wireless medication recognized by caregivers management system for and pharmacists seniors • OXO Good Grips were • Performed well with all designed for people with consumers and become arthritic hands a standard design • Better driving • BMW cars are designed for experience for young • CPG Age-targeted Boomer driver ergonomics drivers and maintained • Transportation design with brand equity with GenX • Consumer electronics universal • Entertainment messaging • CBS targeted older viewers • Ended up with the most • Healthcare and was attacked as the watched TV show (NCIS) • Housing & Caregiving “old fogie” network with cross-generational appeal (#1 in every demographic segment), and standout financial results

Applying Alternative Strategies continued… Approach
Example Impact Applicability • Drove sales with older • General Mills increased consumers who already marketing spend for had strong existing cereals to older consumers connection to the brand • Financial Services Universal design • Our Time online dating • CPG Brands with age-targeted service for Boomers • New entrant has faster • Online platforms and e- messaging growth than commerce • Ameriprise launched with incumbents eHarmony Boomer-focused and Match.com positioning and evolved to “what’s next” • Successfully grew its Boomer client base • Improved customer • Ferrari modified interior satisfaction with core • Consumer Goods design of cars to improve consumer base without • Transportation accessibility for 50+ alienating other age • Financial Services Existing products consumers without cohorts • Housing modified for older focusing marketing • CPG consumers • Retained older riders • Every Web site, online • Harley-Davidson designed and created a path to platform, and e- the Trike for older Harley continued revenue commerce site riders from loyal customer • Travel segment

Although Healthcare is the largest
area of innovation, unmet needs, and therefore areas for growth and investment, exist in all industries Industry Growth Areas and Potential Investment Themes • Cures for age-related illness and chronic diseases, especially 65+ • Products improving physical and mental vitality among consumers 50+ — E.g., fitness and nutrition, new pharmaceuticals, brain health, vision and hearing Healthcare • Long-term care and connected living • Non-FDA-approved consumer needs (eg, Aging in Place technology and services) • Innovations that facilitate ‘Aging in Place’ • Homebuilding based on ‘Better Living Design’ principles Housing • Reimagined retirement communities that facilitate both independent living and social connections • Innovations that improve ease of use and accessibility and optimize the driving-experience for 50+ consumers Transportation • Transportation alternatives for individuals with limited mobility and for those who are no longer able to drive • Innovations creating the appearance of physical vitality — E.g., Clothing, anti-aging personal care products, etc. CPG / Food • Nutritionally advantaged foods for physical and mental vitality • Ease-of-use and accessibility improvements for existing products

Areas of Expected Growth (continued)
Industry Growth Areas and Potential Investment Themes • Universally designed consumer electronics that appeal across age groups • Online platforms and social networks that appeal across age groups • New programming for boomers and the 50+, both broadcast and online Entertainment • Products that allow individuals to create new experiences rather than acquire new possessions – E.g., live entertainment, adult classes, outdoor excursions • Non-traditional travel packages for 50+ consumers that recognize Baby Boomer preference for independent travel and more luxurious amenities Travel • New online competitors to Expedia/Kayak that serve the 50+ who account for 80% of leisure travel – multigenerational opportunities included • Flexible financial planning for individuals who either want to or have to keep working after the traditional retirement age Financial • Financial planning for individuals who plan to make big life changes (e.g., Services starting a business) after traditional retirement age • Alternative savings vehicles • Greater focus on products that allow aging parents to help ameliorate the Insurance emotional and financial burden of old age care — E.g., long-term care insurance

Areas of Expected Growth (continued)
Industry Growth Areas and Potential Investment Themes • Alternatives to traditional work arrangements, eg, Mechanical Turk Work & • Products, services, platforms that reduce barriers to 50+ Entrepreneurship entrepreneurship

So What is the Longevity
Economy? Working definition - The Longevity Economy encompasses:  Every dollar spent by consumers, companies, and governments, on products, services and activities that enhance the quality of life as people age  The employment, personal income, corporate revenue and profit, personal and corporate paid taxes, and other macro-economic multiplier benefits associated with the value-chain and supply-chain of development, launch, sale/delivery of products and services benefiting the 50+  The productivity increases that result from production and service delivery changes that integrate the physical capabilities and behaviors of workers 50+  The value creation by new 50+ entrepreneurs  The value creation enabled by new and modified products based on design for all principles  The tangible and intangible benefits of older skilled workers 31

What else? A Work in
Progress… • Help us define what should be included in the Longevity Economy – What about ‘happiness’ expenditures (e.g. financing education for grandchildren?) – What should be excluded (e.g. xyz) 32

Contribute to the definition… •
What do we have right? What do we have wrong? Weigh in: – Twitter: #LongevityEcon – Wikipedia: Longevity Economy (coming soon to a screen near you) 33