Baby Boomers Are Socking It Away For Retirement

Are consumers out on a limb? Federal Reserve Governor Lawrence B. Lindsey recently warned that with spending growing faster than incomes, the household savings rate is at a record low. And what savings families do accumulate are going into such illiquid assets as pensions and life insurance, increasing households' vulnerability to swings in income, Lindsey fretted.

Two analyses have taken Lindsey to task for his remarks. WEFA Group, an economic consulting firm in Bala Cynwyd, Pa., points out that while household savings are low, so are debt levels. Consumers spent the recession paying off their loans, and debt as a share of income grew by only 5% during 1993.

And, anyway, what's wrong with owning less-liquid assets, such as pensions, asks Sally Kleinman, an economist at Chemical Bank. With baby boomers moving through their 40s, "they had better start planning for retirement," she says. Faster growth in pensions, trusts, and life insurance reserves is "a healthy result" of growing financial wealth.

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