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Demographic Hell: Another Threat to Economy - Boomers Cutting Back

08-18-2010 • finance.yahoo.com/

America's baby boomers—those born between 1946 and 1964—face a problem that could weigh on the economy for years to come: The longer it takes for the economy to recover, the less money they'll have to spend in retirement. More from WSJ.com: • Big Investors Fear Deflation • Quarterbacks Get Out 'Hail Mary' Economy Passes • Weak Economy Feeds Impulse to Turn Inward Policy makers have long worried that Americans aren't saving enough for old age. And lately, current and prospective retirees have been hit on many fronts at once: They have less money, they earn less on what they have, their houses aren't rising in value and the prospect of working longer to make up the shortfall has dimmed significantly in a lousy job market. "We will have to learn to make do with a lot less in material things," says Gary Snodgrass, a 63-year-old health-care consultant in Placerville, Calif. The financial crisis, he says, slashed his retirement savings 40% and the value of his house by about half. Banks, home buyers and bond issuers are all benefiting as the U.S. Federal Reserve holds short-term interest rates near zero to support a recovery. But for many of the 36 million Americans who will turn 65 over the next decade—and even for the 45 million who have another decade to go— the resulting low bond yields, combined with a volatile stock market, are making a dire retirement picture look even worse. Low yields present retirees with a difficult choice: Accept the lower income offered by safer bonds, or take the risk of staying in the stock market. Either way, their predicament could put a long-term damper on the consumer spending that typically drives U.S. growth. "If these rates stay as low as they are, then a lot more people are going to be hurting," says Jack Van Derhei, research director at the Employee Benefit Research Institute. The non-partisan outfit estimates that if current conditions persist, nearly three in five baby boomers will be at risk of running short of money in retirement. "There are going to be many luxury items that will simply have to be eliminated," for retirees to make ends meet.

1 Comments in Response to Demographic Hell: Another Threat to Economy - Boomers Cutting Back

Comment by Lola Flores (20562)

Entered on: 8/18/2010 7:54:03 PM

The boomers cutting back is not the threat here. The real threat is the warmongering and the unfettered gambling going on at the Wall Street and Washington DC's casinos.

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