Is the “Baby Boomer Bubble” About to Burst?

Is the “Baby Boomer Bubble” About to Burst?

As the largest generation prior to 2020, baby boomers have been a tremendous force in building up the U.S. economy over the past several decades, and in helping it recover after economic downturns like we saw in 2001, 2008, and 2020. Their spending and investment activities allowed stocks and real estate to break records, but as baby boomers move into their retirement years, some economists are sounding the alarm.

At Crash Proof Retirement, we believe that the unprecedented economic activity fostered by the baby boomer generation may have created a bubble, and that bubble is poised to burst as they pass the reins on to Generation X and millennials. Will subsequent generations, with their lower population count and decreased spending power, be able to keep the economy moving along? Or will the baby boomer bubble burst and erase untold amounts of American wealth? Crash Proof Retirement will present our analysis and solutions on how you can protect your retirement accounts from a potential bubble burst.

Predicting Economic Bubbles

Esteemed Economist and Bestselling Author Harry Dent is a frequent guest of The Crash Proof Retirement Show and has given us many exclusive interviews. Dent has forecasted many economic crashes during his career, such as Japan’s market crash in 1988, the late 90’s boom in the U.S., and the market crash in 2001 that followed. Dent utilizes a strategy called scientific demographics, in which he analyzes consumer spending data to determine the ebbs and flows of the economy. Using scientific demographics, Dent was one of the few experts able to identify the adverse economic conditions in Japan back in the ‘80s and predict the coming economic collapse in his bestselling book “Our Power to Predict.”

“… Everyone back then was saying that Japan was going to take over the world, the United States was going to collapse. I said no, Japan is going to crash, and we and Europe are going to have the greatest boom in history,” he told us during our 2017 interview. 

According to Dent’s research, demographic conditions are a good indicator of a bubble being created. People tend to spend the most money – and therefore have the most impact on the economy – from the time they enter the workforce until they reach the age of 46. Once a generation reaches an average age of 46, with slight variation between generations, their spending declines significantly and deflates the bubble they created earlier in their lives. 

Japan’s Economic Bubble and Collapse

One of the clearest examples of an economic bubble occurred in Japan in the 1980s. A strong automotive industry, electronics exports, and real estate speculation quickly grew Japan into an economic powerhouse. Unfortunately, those gains were short-lived. By the early 90s, economic conditions began to stagnate, kicking off an asset decline that lasted more than 10 years, a period known as the “Lost Decade,” and an even longer recession that Japan is still combating.

Some of the main factors that contributed to Japan’s economic bubble were an uncontrolled money supply, easy access to credit, and excessive monetary easing policies. These factors combined to spur rampant speculation and high inflation. Although Japan’s central bank identified these issues in the late 80s, their tightening monetary policies proved to be too little, too late.

The Baby Boomer Bubble

Based on Harry Dent’s research, the team at Crash Proof Retirement believes that the unprecedented economic activity created by the baby boomer generation has created a bubble that is now primed to pop. In 2017, shortly after our conversation with Dent on the Crash Proof Retirement Show, the median age of the baby boomers reached 47. If their spending had declined as predicted, Generation X and millennials would have been left with a spending void that they would not have been able to fill, which would have led to another stock market bubble burst. 

A baby boomer spending decline did not occur. In this regard, they are bucking the trend established by previous generations, continuing to spend well after reaching the average age of 46. In fact, Bank of America’s 2023 “Consumer Checkpoint” report showed that spending by baby boomers rose 2% from the previous year.

Generation X and millennials, on the other hand, have been hit hard by the economic crises of 2008 and 2020, leaving many unable to afford large purchases like homes and new cars. Their annual spending actually decreased over the same period from 2022-23. As more and more baby boomers retire, reduce their spending, and pass away, millennials and Generation X are unlikely to be in a position to fill that spending gap.

Parallels to Japan’s Lost Decade:

In addition to the spending gap created by baby boomers’ reduced economic participation, many of the same conditions exist in the United States today as did in Japan in the late 80s. The high inflation we have seen in recent years, inflated real estate markets, and the Federal Reserve’s Quantitative Easing program are all eerily similar to the conditions that preceded Japan’s crash in the 90s. Although Quantitative Easing has been credited with pulling the U.S. economy out of the post-2008 recession and the 2020 COVID crash, many economists believe such measures continued unchecked for too long, as they disrupted the natural cycle of boom and bust that is present in a healthy economy. Harry Dent agreed with that assertion in another interview on the Crash Proof Retirement Show in 2022.

“…If we didn’t have all this massive stimulus… we would be crashing into late 2022 and the economy would come out of this in late 2023. That would be the natural cycle,” said Dent, “Central banks have decided we’re not going to have recessions anymore; first of all, recessions make you healthy… [They] get rid of stuff… I’m saying if we don’t crash this year, it’s really going to be strange.”

Indeed, sharp increases in government stimulus spending have been an issue for nearly two decades now, and as baby boomers begin collecting benefits from Social Security, Medicare, and Medicaid, those programs could become stretched to their limits. Taken together, all of these factors could combine to create the perfect conditions for a bubble burst unlike any other in history.

Protecting Your Retirement Savings from Economic Bubbles

When an economic bubble bursts, it tends to bring the economy down with it. While the stock market has reached record highs in 2024, a bubble burst could quickly bring those numbers back down to earth, erasing billions in wealth from retirement accounts based in the risky securities industry. Investment vehicles like stocks, bonds, and mutual funds have the potential to shed tremendous value in a short period of time.

If you are already retired, or you are planning to retire in the next few years, losing your savings to an economic bubble burst is a risk you can’t afford to take! The best way to protect yourself is to take your investments out of securities and put them into your own, custom-tailored Crash Proof Retirement System. The investment vehicles used in the Crash Proof Retirement System are based in the financial life insurance industry, rather than in securities. Because of this fact, Crash Proof Retirement clients are guaranteed they will never lose a penny of their principal, even during market crashes. Crash Proof Vehicles are also capable of crediting interest at levels similar to securities-based vehicles, potentially even crediting double digit interest returns. Once any amount of interest is credited to your Crash Proof Retirement System, that money becomes part of your principal and can’t be lost during a market downturn.

Crash Proof Retirement is willing to make all of their promises, including the promises made above, in a recorded financial meeting. Doing so makes all promises, statements and commitments legally binding between Crash Proof Retirement and you, the investing client. With the baby boomer bubble set to burst, now is the time to protect yourself. Get in touch with Crash Proof Retirement by calling 1-800-722-9728 to schedule your complimentary financial checkup today!