Some say that the baby boomers are letting us down.
Baby Boomer Spending
Through their numbers, personality, and jobs, the baby boomers have been an economic powerhouse. Numbering 270 million in richer nations, they were fortunate enough to have entered the U.S. labor force during the mid-1970s and early 1980s, destined for incomes that would peak between 60 and 70 percent above their starting point. At the same time they’ve enjoyed extra low interest rates and an extended peacetime. At just 20% of the U.S. population, they accumulated 52% of the country’s net wealth.
Baby boomer wealth (in red) far exceeds the other generational cohorts:
So we could say that they have an economic obligation. As older Americans, like previous generations, they should be spending their savings. But The Economist tells us they are not. Instead, many continue to save and accumulate. In the U.S., U.K., Canada, Australia, and Japan, boomers’ savings rates are up. In the United States, retaining empty bedrooms, boomers even aren’t downsizing.
Some studies indicate boomers have a “bequest motive.” They just want to leave it all to their kids. They also worry about the long-term care they will need if they live to 100.
But not everyone agrees with The Economist. Both Bank of America and Business Insider cite different statistics that say baby boomers are spending more:
What we do know though is that the economy needs boomer spending. As almost 70% of the GDP, consumer spending. is a crucial component of economic growth.
Our Bottom Line: Life Cycle Economics
As we age, our spending is supposed to follow a pattern. Scholars tell us that “…the very young have little wealth, middle aged people have more, and peak wealth is reached just before people retire.” Consequently, we wind up with a “humped” curve where we save the most in mid-life and less when we are young and old.
Below, you can see lower levels of wealth at the beginning and end of life from CEPR in “The Wealth of Generations”:
So, where are we? The one constant is baby boomers’ aggregate wealth and their economic significance.
My sources and more: This Economist article is a good place to start. From there, The Washington Post conveyed the downside of the baby boomer economy. And then Business Insider, here and here, the Bank of America had more on how young adults spend money. And finally, the Richmond Fed and this Angus Deaton paper and CEPR told us more about life cycle spending.
