· Retirement study supports slower growth…..The Federal Reserve recently issued its highly
regarded triennial Survey of Consumer Finances (SCF). With respect to
retirement preparedness, the picture is troubling due to widening income gap,
declining home ownership, and drawdowns or liquidations of retirement accounts
among lower and mid-income categories.
What’s
the point? The survey results are
further confirmation of what we have been hearing for several years now: retirement
savings is under pressure and general preparedness of the baby boomers for
retirement is looking terrible. The economic implications of this would support
the slower secular growth thesis due primarily to significantly lower
discretionary income available to the boomers. While certain segments of the
economy are doing OK, a large segment of society (the baby boomers) will have
far less resources for discretionary spending and will likely need to rely more
on government programs for support during retirement. On a macro basis, this places
more pressure on the tax base to fund significant increases in entitlement
spending, and reduces resources available for investment and savings and
discretionary spending, which represents a significant portion of U.S. GDP. We
believe these factors most likely would contribute to lower secular real growth
in the range of 2-3%, compared with 1950-2000 average of about 3.5%.
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