Almost half of Millennials want to retire early. Will that hurt economic growth? There were similar concerns in the 1920s that early retirement would wreck the economy. In fact, there was significant pushback against retiring at all due to fears retirements would destroy the economy. Yet, the Great Depression still came. In this episode, we consider what ended the Roaring Twenties, caused the Great Depression, and how early retirements impact the economy.
Topics covered include:
- What is the paradox of thrift and how does it apply to early retirement.
- Why the 1920s were called the Roaring Twenties.
- Why the work culture in the 1920s was for workers to not retire, but “die in the harness.”
- What caused the Great Depression.
- How economies and job markets adapt over time.
- How waves of early retirements could change the economy.
Show Notes
US Real GDP Per Capita by Year—multpl
2018 Standard Occupational Classification System—U.S. Bureau of Labor Statistics
“Things Are in the Saddle” by Samuel Strauss—The Atlantic Monthly, republished by Unz Review
The Twenties in Contemporary Commentary: Consumerism—National Humanities Center
Defeated Chess Champ Garry Kasparov Has Made Peace With AI by Will Knight—WIRED
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Transcript
Welcome to Money for the Rest of Us. This is a personal finance show on money, how it works, how to invest it, and how to live without worrying about it. I’m your host David Stein. Today is episode 288. It’s titled “Will Early Retirements Crash the Economy?”
More millennials want to retire early
I recently saw a poll that was sponsored by T. Rowe Price. It showed 43% of Millennial workers expect to retire before the age of 65. That compares to 35% of those from Generation X which is ages 40-55.
Would mass early retirement be chaos?
This survey was referenced in an article by Jeanna Smialek of the New York Times. The article was titled, “How Millennials Could Make the Fed’s Job Harder,” subtitled, “They love the idea of retiring early that could diminish the Federal Reserve’s firepower.” The article referenced how Millennials, in order to leave the workforce early would need to build up massive retirement funds and buy fewer things. And that lack of demand could hit consumption which would slow economic growth, leading to ever-lower interest rates.
The author mentioned the paradox of thrift, which is if everyone tries to save in mass, that could lead to lower economic growth, lower inflation, and trip up the economy. She writes, “When consumers save a big portion of their income, they are not spending as much on dinners out, movie nights, and cars. Businesses respond by investing less in equipment and technology, and productivity stalls. Bosses are unwilling to pay their workers more for the same output and weak pay gains further restrain spending.”
Would a wave of early retirements cause such economic turmoil? That’s what we’re going to explore in this episode.
The fear that early retirements would cause economic turmoil is not new. It was prevalent in the 1920s which are sometimes called the “Roaring Twenties” because it was a period where economic growth was very, very strong in the U.S. It was following World War I.
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