VZ - Are Boomers Crashing The Economy Or Saving It? Why Investors Are Perplexed And What You Can Do To Prepare | Benzinga
The mass retirement of the boomer generation has been anticipated as one of the most impactful economic events of the 21st century.
Economists are still trying to understand the consequences of the wealthiest generation in human history going into retirement by the millions each year.
Expectations so far have been varied. While having massive amounts of people leave their productive jobs in exchange for government pensions has been deemed an existential risk for modern civilization, the situation also entails the largest wealth transfer in history, as baby boomers pass away and leave their wealth to their Gen-X and Millennial offspring.
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The short term consequences of this transition on the U.S. economy are still being defined. Some experts anticipate that retiring baby boomers will boost the economy through increased spending in their golden years.
That has been the dominant narrative for economists looking at spending patterns across age gaps. The average behavior for citizens of advanced economies has been commonly explained by using the "life-cycle hypothesis."
This hypothesis argues that people try to maintain roughly the same level of consumption throughout their lifetimes. They do this by taking debt when their income is low in their youth, saving when their income is high during middle-age, and diving into their savings (or liquidating investments) in retirement.
This hypothesis has led economists to believe that the transition of baby boomers into retirement could revitalize the economy. As retirees begin to liquidate billions of dollars in previously stored assets, such as stocks, properties, and other investments, this influx of active capital will be fed into the market to finance their later-life lifestyles.
The argument is valid when considering that the baby boomer generation makes up 20% of the U.S. population, but owns 52% of its wealth, according to Fed data.
Wall Street veteran Edward Yardeni recently wrote in the Financial Times that the boomer generation and its spending habits are ...