It’s Their Fault

Perhaps it is only natural that the wealthiest generation ever is also the worst American generation at saving. According to a just-released McKinsey survey (see graph),

the Boomers’ missing savings…accounts for most of the collapse in the U.S. household saving rate from its peak of over 10 percent in the mid-1980s to around 2 percent today…

The conclusion is that the retirement age will need to rise for the first time in the Boomer’s lives.

This is troubling news: how is it that a generation that had more wealth than any other wouldn’t think of socking any away for future generations? Unfortunately, the natural answer involves collective boomer self-centeredness and shortsightedness: if the money keeps coming, why save?

Today, David Brooks also tries to get to the root of the situation…summary and some amazing stats after the jump.

Brooks makes a very true point that pre-boomer generations throughout American history have, in fact, put a priority on saving. Why the change? Brooks suggests credit card companies and, surprisingly, state lotto programs, bear much of the blame:

A household with income under $13,000 spends, on average, $645 a year on lottery tickets, about 9 percent of all income.

He also mentions a more important point: the boomer value of getting rich off of nothing. Soaring stocks, lotto and sweepstakes ads, etc. have made getting rich off of nothing a cultural value. Behaving frugally and saving wisely is “uncool,” while being in debt and scoring huge windfalls in the way to go. Unfortunately, especially thanks to this late dot-com startup boom, this value is in danger of being passed on.

So, while, according to USA Today,

Nearly all additional wealth created in the USA since 1989 has gone to people 55 and older, according to Federal Reserve data. Wealth has doubled since 1989 in households headed by older Americans.

…the Boomers have almost nothing left, and generations the follow them will have to pay off their debt, provide their social security, and deal with an unprecedented rising retirement age.