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People usually save more as they near retirement, and they’re saving extra now that Americans’ wealth has been depleted by the financial crisis.
From 2007 to 2010, median U.S. household net worth fell by 38.8 percent to $77,300, the lowest level since 1992, the Fed said in June. The savings rate has averaged 4.3 percent in the 39 months since the recession ended, compared with an average of 2.3 percent in the same period before the recession. Retirees and older workers also will likely cut spending as they anticipate tax hikes and cuts in Medicare and Social Security. Six out of every 10 baby boomers between the ages of 50 and 61 say they may have to defer retirement.
Federal Reserve officials say they are concerned that retirees are making it harder for the central bank to create more jobs for those still working. Older people are more likely to avoid purchases of houses, cars, and other pricey items that the Fed is trying to encourage with record-low interest rates. Their growing numbers are making the Fed’s job even harder.
“Spending decisions of the older age cohorts are less likely to be easily stimulated by monetary policy,” said William Dudley, president of the Federal Reserve Bank of New York, in a speech on Oct. 15. Each day, some 10,000 of the 78 million American boomers, born between 1946 and 1964, turn 65. The share of the population that’s made it to that age will swell to 18 percent by 2030 from 13 percent last year, according to the Pew Research Center in Washington.