Baby boomers are going to save the economy as they spend down their $75 trillion nest egg while millennials struggle with student debt

Residents of the John Knox Village Continuing Care Retirement Community participate in a water aerobics class on October 15, 2021 in Pompano Beach, Florida.

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• Baby boomers are set to save the US economy as they begin to spend down their $75 trillion nest egg, according to Ed Yardeni.
• The spending by boomers can help prevent a recession at a time when excess savings from the pandemic are depleted.
• "What these seniors don't pass on to their heirs, they'll be spending in their golden years," Yardeni said.

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Fears of an imminent recession are overblown as a large chunk of baby boomers retire and begin to spend down their massive $75 trillion nest egg, according to market veteran Ed Yardeni.

Baby boomers' ability to prop up the economy comes at a time when economists worry about the depletion of excess consumer savings, which peaked at about $3 trillion during the COVID-19 pandemic, and as millennials prepare for the restart of their student loan payments.

"There's a $75 trillion-wide hole in the theory that consumers' running out of pandemic savings will sink the economy; that's the size of baby boomers' collective nest egg," Yardeni said in a Monday note. "What these seniors don't pass on to their heirs, they'll be spending in their Golden Years."

Yardeni estimates that baby boomers, which include 58 million people over the age of 65, have $20 trillion in stocks, $18 trillion in real estate, $15 trillion in pensions, $8 trillion in noncorporate business stakes, and $9 trillion in cash.

And as these baby boomers approach retirement and their early 70's, they'll be subject to required minimum distributions from their 401(k) and IRA accounts, which should nudge them to spend. With baby boomers currently aged between 59 and 77 years old, they will all be seniors by 2029. 

Baby boomers' massive pile of wealth, combined with the $40 trillion and $8 trillion of wealth held by Generation X and millennials, respectively, should help power consumer spending going forward, even amid headwinds of student loan payments and depleted savings since the pandemic. 

"Consumers may run out of their excess pandemic savings by the end of this year, but they have lots of other sources of purchasing power," Yardeni said. "These include not only fast-rising wages and salaries but also a record $7.6 trillion in unearned income including interest income, dividend income, proprietors income, rental income, and Social Security."

The financial strength of baby boomers has been on full display in recent months after the generation edged out millennials as the top homebuyers, with them making up 39% of all home purchases from between July 2021 and June 2022. 

While millennials and baby boomers are often pitted against each other in various media narratives, it turns out the older generation could be doing everyone a favor by spending their nest egg and helping the economy avoid a recession. 

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