Baby Boomers Are Sitting on Their Cash

Boomer Paradox

Baby boomers have amassed trillions in savings in preparation for a long retirement. But now that many members of that generation, aged from their late 50s to mid 70s, are entering into their third act, they keep stashing away money rather than spending it.

The issue here is, as so often, that the U.S. needs its citizens to spend to keep growing.

Frugal Fortunes

Baby boomer household wealth amounted to more than $80 trillion at the end of last year, according to data from the Federal Reserve , more than any other generation.

But as this generation moves into and through retirement, it isn’t liquidating its portfolios to reap the fruit of its investing labor. The silent generation that preceded boomers did just that: They saved, and began spending their savings after they retired. But boomers aren’t having it. They’re more likely to save in comparison, per the Fed.

As both lifespans and the cost of living grow, retirees are becoming more cautious when it comes to spending, and savings.

Changing Times

So what does this mean?

There are a couple of things to keep in mind. For one, more frugal spending can be complicated for the U.S. economy, which relies on consumer spending to grow. With the high inflation of the past years, and a higher cost of living across the board, many Americans have had to cut back, so boomers aren’t alone in their frugality.

And then there’s the inflation component, and that’s really a story of demographic change. As more workers retire, there are fewer workers to supply the goods and services in demand, and that drives up costs, fuelling inflation. Demographic trends are hard to escape, and many nations are already reckoning with them. The U.S. is no different, and lawmakers and economists will need to work on the puzzle of an aging population for years to come. One solution to spurring productivity and therefore keeping inflation in check is immigration. Technological advance can also help productivity in a shrinking population, but it’s commonly thought to raise prices, rather than keep them down.

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