I guess the Generation of Conspicuous Consumption is coming the realization that they may not have saved enough for retirement. The bad part is if they pull in the horns on spending that will take the last legs out of any recovery.
Low yields present retirees with a difficult choice: Accept the lower income offered by safer bonds, or take the risk of staying in the stock market. Either way, their predicament could put a long-term damper on the consumer spending that typically drives U.S. growth.
Plus many of their houses are underwater so they will feel even less rich than they did before. So that is even less of an incentive to spend money during retirement. You add that to the fact that young people are spending less as well because they can't find a job right out of college and you see slow consumer spending for years to come.
However, I would be willing to bet that there will be some sort of rise in Social Security based on borrowed money. You can see the Dems using it as a political tactic to get more seniors to support them. Then they could use it as scare tactics by saying the GOP "will slash Social Security to the bone" if you don't keep the Dems in power.
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