A report in today’s Wall Street Journal reminds us how unlikely it is that the baby boomer-led U.S. economy as we once knew it will ever be restored. Incomes, savings, investments, and consumption are now entering a new and very different era where all four seem to be going in the same direction – down. The decline in spending by retirees is clear to see in the chart below and baby boomers will probably have to cut back even more.
The diminishing work prospects will require many older folks to make do with less - a discouraging outlook for firms hoping to sell them everything from dinners to cars.
As of 2008, the latest data available, people aged 65 to 74 were spending 12.3% less than they did ten years earlier, in inflation-adjusted terms. They cut spending on cars and trucks by 46%, household furnishings by 35% and dining out by 27%. At the same time, they spent 75% more on health care and 131% more on health insurance.
That’s a pretty remarkable shift in spending – from cars, clothes, and dinners out to monthly meds. Sadly, the health care industry is likely to be about the only “engine” for economic growth in the U.S. for some time to come.
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The sad fact is that the health care industry will be feed by the retirement “savings” of Baby Boomers and the borrowing/deficit spending of the federal government. Not much of an engine for positive growth in my mind.
The shift is even more remarkable, considering that the increase in spending, where it occurred, is forced, rather than voluntary .
The cut backs are already happening as baby boomers are laid off in their early 50s to discover they will never work again. They’re husbanding their savings, hoping to reach age 62. Imagine an economy where 50 percent of consumers are trying to live on Social Security checks.
[...] easy answer is yes,” what are all the extra words for?; turns out everybody is cutting back, Boomers and retirees more so; the things you can dig up; we can hope; Thanks to E.B. Misfit for pointing out that the [...]