Happy Friday!
Are you aware that the median age in the U.S. is creeping toward 40 years? You read that right, 38.9 to be exact. This points to one thing – we’re aging fast! While the birth rate is declining, the median age will continue to climb if it remains so.
In 1980, the median age was only 30, while in 2000, it was 35. This has profound implications for a variety of overlapping areas such as economic development, national security, and crucial social programs like Social Security, Medicare, and Medicaid.
As Paul Brandus rightly pointed out in his column, this wave of aging has been dubbed “the baby boomer effect.” Okay, folks, let’s get real – most of the 76 million people born between 1946 and 1964 are now solidly in retirement age. Meanwhile, their kids (echo boomers) will only push the median age higher in future. It will be interesting to see how this demographic bulge echoes through our economy over the coming years.
For sure, one thing that seems quite certain is that as boomers retire, many of them seem jittery about entering retirement during a recession. The fact that home prices have been soaring has pushed them to sell their houses to shore up some cash and reduce expenses in case the economy tanks. Brett Arends wrote about this and noted that this strategy makes sense given that these home prices surely can’t last forever.
Something for us all to mull over during this weekend.
The State of Retirement Savings in America
According to recent reports, retirement savings in America remains a concern for most people. The estimates for healthcare costs alone are staggeringly high. Fidelity Investments has released its closely watched estimate of retiree healthcare costs, revealing that a couple retiring in 2023 can expect to spend $315,000. This is flat with last year’s estimate, and the unchanged predictions are due to provisions targeting Medicare under the Inflation Reduction Act. Despite this, it’s still a lot of money, and Fidelity warns that most people drastically underestimate their retirement health spending.
Anxiety regarding retirement savings is not limited to healthcare costs. Americans think they’ll need $1.27 million to retire comfortably, according to a report from Northwestern Mutual. This is up from $1.25 million last year, and they plan to work longer to save more money. What’s even more alarming is the gap between what they have saved now and what they believe they’ll need. Northwestern Mutual found that the average amount saved for retirement is only $89,300, up 3% from last year. This gloomy outlook is prevalent among Boomers, Gen Xers, and Millennials.
Surprisingly, the younger generation known as Gen Z is feeling more optimistic. They plan to retire at age 60 and expect to live to 100. While their outlook may be refreshing, it remains essential for people at all ages to plan and save for their retirement.
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