Lesser Spending Power from Retirees: Another Huge Threat to the Economy

For decades, the United States of America has been a major economic player and the only remaining superpower in the world. Despite of this highly respected status, the US economy has slowly but steadily declined with the recent economic recession creating havoc among financial institutions and business entities. Another troubling fact is the continuous rise in unemployment levels all throughout the nation. Massive layoffs implemented by big and small companies have contributed to lesser consumer income and spending. Lesser revenue collection while overspending on various government programs that resulted in a huge budget deficit have only made matters worse.

Despite the recent failure of the government to stimulate economic recovery, there is another looming problem which will eventually pose a bigger threat to the already suffering economy. In the years to come, a whole lot of people will eventually retire without having enough savings. With the devastating effects of the global recession that has continued to plague businesses, workers born in between the years 1946 to 1964 will have less money during retirement. The problem here is that these retirees will eventually spend less because of their lack in savings.

The financial crisis has affected not only the cash savings of individuals but also the value of their house as well. Close to zero interest rates on house mortgages benefited house buyers while leaving retirees to suffer from not having enough financial resources. It is expected that about 36 million Americans will be turning 65 in the next decade. With lower bond yields and a falling stock market, these retirees are facing a bleak and struggling future. Lower asset values will easily translate in lesser money for retirees to spend during their time of retirement.

Research showed that as of the year 2008, people aging from 65 to 74 were already spending 12.3% lesser than they did 10 years earlier. There was a 46% drop in car spending, 35% drop in home and household furnishings and 27% drop from eating in restaurants or food chains. Despite of this, they eventually spent 75% more on health care and 131% more on health insurance. This clearly showed how older people are now faced with the serious task of retiring without having enough money to buy basic commodities and enjoy life.

These implications are not only limited to people who will be retiring during the next decade. Younger people of today will now have to save more money by reducing consumption in order to ensure a brighter future. Without appropriate jobs for everyone, more people will eventually suffer poverty as they grow older. Also, the economy will be at a standstill if consumer spending is reduced. Economic recovery will only be achieved if the consumers are given back the capability to spend and buy goods and services. Job creation should really be the primary focus of the government if they want to save America and avoid double-dip recession.