2008Apr Delayed Retirements
2008Apr Delayed Retirements
We regularly read of optimistic “solutions” to the demographic problems facing the country in the coming years. The Dent forecast for an extended economic downturn is based first and foremost on the fact that people, on average, spend less money on themselves and their families as they approach the end of their 40s. The retort we hear most often is that “Boomers are different.” Boomers will delay retirement longer than previous generations and will continue to maintain their lavish consumer lifestyles along the way.
This argument has so many flaws that it’s hard to know where to start in picking it apart. Some Boomers are indeed delaying retirement, but this is not good news for the consumer economy. In fact, it’s a symptom of some serious ills plaguing it: insufficient savings and falling asset prices. As the Journal explains,
As the falling real-estate and stock markets erode their savings, many aging Americans are delaying retirement, electing labor over leisure in uncertain times…. Millions of retirement-age Americans, stung by the recent economic pall, suddenly are having to reassess their plans -- with many forced to quickly change course. In February, the proportion of people ages 55 to 64 in the work force rose to 64.8%, up 1.5 percentage points from last April…. Another big motivation for older workers to stay on the job: scarce health benefits for retirees.
Boomers are not working longer because they are “different” or because they love their careers too much to quit. Most that work longer are doing so out of economic necessity. With their retirement ambitions dependent on rising prices in their homes and stock portfolios, they can’t afford to lose their paycheck and their company-sponsored health plan.
These people are saving, not spending. They are not buying new washers and dryers, and they are not remodeling their kitchens with new floors and granite countertops. They are not buying new suits for work, and chances are good that they are downsizing to cheaper cars.
Make no mistake, their continued employment is beneficial in that it provides payroll taxes to the federal government and most state governments. But our fundamental point still stands: Baby Boomers, no matter how “different” they believe themselves to be, will not maintain their consumer spending in the coming years, and their continued participation in the workforce will not avert the long economic winter from setting in.
