The Great Recession combined with the onslaught of aging baby boomers is causing a lot of people to delay retirement, and ultimately, that is likely to have a huge impact on our economy, points out a study released this morning by the nonprofit economic research firm, The Conference Board.
Researcher and lead author Gad Levanon says the boomers who are most likely to keep working are those who were hit by a triple whammy -- they lost jobs or took pay cuts, watched their savings decline and watched the value of their homes fall. The states where the largest percentages of people are delaying retirement are the same states where the housing meltdown was the worst, including California, Nevada, Arizona, Florida, Michigan, Colorado and Illinois.
At the same time, the savings rate has risen from 2 percent in the decade before the economic slowdown to 6 percent in 2009. It has slid a little since then, but remains close to that point. Because boomers -- who make up about 25 percent of the population -- are frantically saving, they have less money to spend and are buying less. Consider the following:
- Car sales have declined from nearly 16 million per year to about 11 million.
- They aren't moving, and traditional retirement states like Florida and Arizona are feeling the revenue pain.
- Housing prices remain low, in part because fewer are buying.
- Businesses that sell "fun" -- boats, RVs and golf clubs -- have been especially hard hit.
What's next? Levanon says companies are having to figure out what to do about boomers who want to keep working. Some employers are happy, especially those that rely on boomer technical expertise. But companies that want fresh ideas and would like to pay lower salaries to less-experienced people are being forced to rethink their plans as older workers cling to their jobs. At the same time, younger workers are having a harder time finding jobs, getting promotions and earning raises.
Down the road, Levanon believes that boomers won't be able to work as long as some of them would like. Health and other factors will catch up with them. Because of that, they won't be able to replace the savings and home values that they lost during the recession. So, ultimately, they will retire with less money and that, too, will reverberate throughout the economy.
The study's predictions aren't dire, but they do have long-term implications for retirement planning. One lesson is inescapable: The economic future is uncertain; so the more money you can put aside, the more likely it is that you won't have to worry. Our parents and grandparents believed that and they were right.