Joan Harris, a 64-year-old retired engineer from Albuquerque, New Mexico, is living her best life since leaving the workforce two years ago. With more disposable income at her disposal, Harris has been indulging in her passion for travel, visiting her adult children in different states and planning exciting trips to destinations like Scotland, a Disney cruise, and neolithic sites in Great Britain.
“I really have more money to spend now than when I was working,” Harris said. “I suddenly realized, with my dad getting old and my mom dying, it’s like, ‘No, you can’t take it with you.’ I could become incapacitated to the point where I couldn’t enjoy something like going to Scotland or going on a cruise. So I better do it, right?”
Harris is not alone in her spending habits. Older Americans, benefiting from gains in the stock and housing markets, are fueling a sustained boost to the US economy. Their increased spending on higher-priced services like travel, health care, and entertainment is contributing to stickier inflation and putting pressure on the Federal Reserve to maintain higher borrowing rates.
Despite concerns about inflation, the economy has defied expectations of a sharp slowdown, thanks in part to the so-called wealth effect, where rising home and stock values boost consumer confidence and spending. This trend has led to a shift in the Fed’s plans, with Chair Jerome Powell indicating that the central bank is not yet confident enough to cut rates.
As older Americans continue to drive consumer spending and economic growth, the divide between wealthier retirees and younger generations facing financial challenges becomes more apparent. While Harris enjoys her retirement travels, her daughter Ruby, a 25-year-old materials engineer, grapples with the high cost of living in areas like Boston, where homeownership seems increasingly out of reach.
The contrast between the spending habits of older and younger Americans underscores the complex dynamics at play in the economy, where wealth disparities and generational differences shape individual financial experiences.