Cost-Cutting Baby Boomers Blunt Stimulus Effects of Fed Easing

[marmar]

(Bloomberg) John Rodwick cuts corners so he has money to spend on his seven grandchildren and cruise around the Rocky Mountains with his wife, Jean, in their blue-trimmed Roadtrek motor home.

“My wife and I love to travel, so that is our one big expense, but we are very, very conservative,” cooking and sleeping in their 19-foot vehicle, said the 72-year-old former business professor. With the value of their three-bedroom home plunging 30 percent in the past six years, the Rodwicks have become “very cost conscious,” he said.

Federal Reserve officials say they’re concerned that retirees like the Rodwicks are blunting the impact of record easing aimed at creating jobs. The reason: Older people are more likely to forgo purchases of houses, cars and other big-ticket items that the Fed is trying to encourage with near-zero interest rates. And their numbers are growing, making the Fed’s task ever harder.

“Spending decisions of the older age cohorts are less likely to be easily stimulated by monetary policy,” William C. Dudley, president of the Federal Reserve Bank of New York, said in a speech on Oct. 15, helping to explain why the economic recovery has been weaker than expected. ................(more)

The complete piece is at: http://www.bloomberg.com/news/2012-11-12/baby-boomers-blunt-fed-easing-while-saving-for-retirement.html

[msrizzo]

1. I call BS

I'm not retired yet but getting closer and I think this couple is being smart. Not only did they see the value of their house go down, but probably also their pensions. I know I did and I'm not sure if I'll get that value back ever so I'm not spending either. In fact, if I can sell my house for close to what I paid for it in the near future, I'm planning to become a renter!

[marmar]

2. Why are you calling BS? The article backs up everything you just said.

[DCKit]

4. If the federal government followed their example of self-imposed austerity...

I think we'd be just fine in the end.

Wonder how much they're spending on stinger missiles and aircraft carriers in his household.

[no_hypocrisy]

3. Part of the problem is the national economy is not diversified.

It's too dependent upon consumerism to maintain itself. More investment in manufacturing and agriculture is needed.

[RebelOne]

5. I have been retired for about 3 years now.

I am surviving on social security. I cannot afford to buy any big ticket items. I could if I wanted to dig into my savings account, but that money has to last me for emergencies the rest of my life, so I have become very frugal. It is hard because before I retired, I was collecting my social security along with a salary and had plenty of money to buy whatever I wanted. So I have been learning to control myself when I go shopping.

[tsuki]

6. If someone is 72 years old, they are not a Baby Boomer.

Second, it is not only the Baby Boomers cutting costs. It is all those people that lost their jobs, or are afraid of losing their jobs. DUH.

[calico1]

8. True.

The oldest Boomers would be 66. And you are right, everyone is cutting costs.

[badhair77]

7. When I retired, reality hit home.

I would no longer get a pay check. I have a pension but with discussions about our state's financial problems I'm worried they'll cut into that. I've been retired 2 years and our bills have escalated a lot in that short time, especially health insurance. I knew costs would go up but had not planned for that much. I used to annually re-evaluate the budget and check where I could cut. I'm doing that almost monthly now. We really watch what we spend. We're frugal but not cheap, and I check the Frugal and Energy Efficient Living DU group regularly. I wish there would be more activity there.

[daa]

9. How is that zero percent interest on retiree savings working out? Nt

[blogslut]

10. There was a somewhat similar article a bit back, shaming

Gen Y-ers for not buying big ticket items like cars and houses.

Personally, I think it's time we find a new way of measuring the health of our economy.

[sinkingfeeling]

11. If you're 72, you are not a baby boomer. You were born in 1940.