As Americans brace for a possible recession, some baby boomers, those born between 1945 and 1964, are putting off actions such as buying a new home in favor of increasing personal savings toward retirement. That’s according to Northwestern Mutual’s newly released 2023 Planning & Progress Study, which explores Americans’ attitudes and behaviors toward their finances.
The numbers involving changed plans for baby boomers are small, however, with 6% of boomers saying they’ve put off buying a house, 3% saying they’ve delayed a job search, 2% not looking to start a business and 1% putting off marriage due to economic uncertainty.
According to the study, two-thirds (67%) of US adults overall expect that the economy will enter into recession later this year. Economic uncertainty is leading the majority of Americans (60%) to postpone plans and purchases of one kind or another, the report states.
“Periods of uncertainty provide opportunities to stress test financial strategy,” Chief Customer Officer at Northwestern Mutual Christian Mitchell said in a statement. “Consumers want to know if their wealth building plans and their lifestyles will remain on track if the economy pulls back, and many are taking positive steps to prepare for whatever economic season may come.”
Across the generations, Americans are trying to cut costs (64%) to build up savings (50%). They are cutting back on non-necessities such as dining out. They also are postponing large expenses until they believe the economy is on more stable footing (41%). Even high-net-worth individuals — those with total household investable assets of more than $1 million — are building up savings (50%) and postponing large expenses (38%).
“The impact of inflation continues, and Americans are reminded about elevated prices every time they fill up their gas tanks,” Mitchell said.
According to the report, personal savings have increased by almost 5% over the previous year. In spite of best efforts, savings are increasing at a slower rate than the 6.5% inflation rate the US economy saw in 2022.
“Meanwhile, despite the Federal Reserve’s campaign to fight inflation by raising interest rates, more than half (54%) of Americans say they expect inflation to increase further this year versus 19% who say it will decrease and 27% who say it will stay the same,” the report noted.
As the McKnight’s Business Daily previously reported, the Federal Reserve again raised interest rates this month by an additional 0.25 percentage. This is the highest rate in 16 years, and the most recent in a series of quarterly rate hikes since March 2022 with the goal of reducing inflation to 2% over time.
It is uncertain whether future rate hikes are coming down the pike, Federal Reserve Chair Jerome Powell said at the May 3 press conference announcing the rate increase. He indicated that a pause is at least a possibility.
