(Editor’s Note: The following article is by Samantha Taylor, a Community Mentor with experience writing about the mortgage industry. Today, she explains the effect baby boomers will have on the US economy. As one, I can tell you we are going to be a major financial force to be reckoned with.)
How baby boomers will affect US economy in the forthcoming years
Baby boomers, who’re US citizens born between1946 and 1964 are expected to have a great impact on the economy. Here’s how the baby boomers will affect the US economy as a whole.
How inequality among boomers may affect the economy
Most of the baby boomers are affluent and educated thus controlling about $7 trillion of the overall household wealth of the nation. However, there is significant inequality in the group; most of them don’t have the required education. Moreover, the boomers in general are less educated than the present generation. So, a considerable portion of the boomers have been hard hit by the economic recession with most of them not being educated enough to sustain their job. Among the relatively old boomers, only one in four has the graduated degree. So, those without the required college degree have already experienced involuntary unemployment. The division between the educated and uneducated is quite imminent and more so with the immigration during 20th Century.
The women and disadvantaged minorities in the Boomer generation are however at higher risk of not receiving pensions at retirement. This, in turn, is likely to increase the demand for public assistance programs, such as, subsidized housing and Medicaid, in order to help the boomers sustain themselves in the forthcoming years. The experts believe that it’ll affect the state budgets, Social Security benefits and social safety net for the younger generation as well.
How consumer spending may affect the economy
As per the US Blue Chip Consensus forecast, the real consumer spending will grow by only 2% in the decade ending in 2015 as compared to 3.7% growth annually in the10-year period that ended in 2010. According to experts, it is the slowest long-term growth rate since 1940. Real after-tax personal income is also expected to get reduced from 3.3% (in the period that ended in 2000) to 2.4% in the decade ending in 2015.
However, experts are of the view that the baby boomers will try to increase savings, which in turn, is expected to benefit financial services. Due to the recession and the collapse of asset values, the boomers have tried to cut back expenses and increased savings as much as they can. Most of them have been able to save for retirement though many of them have experienced a big dent in their 401(k) and other retirement plans.
This boomer psychology is expected to affect different sectors of the economy in the forthcoming years. Read on to know how it’ll affect the health care and housing sector.
· Home renovation – Home improvements and renovations may also be the key focus of spending among the baby boomers. Hence, we may find an increasing number of baby boomers applying for reverse mortgage loans.
· Health care – Boomers are likely to spend more on health care. The spending on health care is expected to jump from 4.6% in 2010 to about 7.2% in 2018.
The industry experts are of the view that the baby boomers are likely to spend on daily necessities rather than using their saved amount to purchase luxury items, such as, jewelry, clothing, watches, fashion accessories, etc. According to the Bureau of Labor Statistics Consumer Expenditures Survey, there will be about 27% overall drop in the spending on luxury and decorative items for the house.
How migration of boomers can affect the economy
As per industry reports, boomers more than 55 years of age are migrating to different places within US. Due to immigration, the senior population of Georgia is expected to increase by 40% by the year 2020. Whereas, out-migration have reduced dramatically in several northern cities like Chicago, Boston, Philadelphia and New York.
The growing number of boomers in a specific geographical location may increase the demand for transportation, health and senior oriented services that in turn will affect the economy as a whole. Federal aid is distributed on the basis of population. So, if the migration trends continue, then certain regions and states are likely to experience serious economic consequences in the forthcoming years.
Samantha Taylor is the Community Mentor of MortgageFit and has been contributing her suggestions to the Community since 2005. Not just that, she has also made notable contributions through the various articles written on different subjects related to the mortgage industry. This article takes an economic view of reverse mortgages. Few of her popular articles would include names like ‘Mortgage that you can afford’, ‘Mobile Home Loan with Bad Credit’, and ‘How much mortgage can I borrow?’
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