Economics Report: Impact of Retirement Savings on the Economy

This report examines the crucial role of savings in shaping the economic well-being of individuals and the nation, focusing on the impact of retirement outlooks on the economy. It highlights the importance of early retirement savings to mitigate uncertainties such as family dependencies, inflation, job loss, and investments. The report explores the increasing number of workers not saving for retirement, leading to reduced consumption, increased dependency ratios, and potential budget deficits. It analyzes how low savings contribute to lower capital accumulation, impacting the economy's ability to meet its obligations and hindering long-term investments. The report further discusses how an aging population affects national savings as retirees liquidate assets, leading to decreased national savings and reduced economic growth. It concludes by emphasizing the necessity of early retirement savings to boost national output and reduce the burden on the government in terms of social security and dependency ratios.

Running head: ECONOMICS 1
Principles of Healthcare Microeconomics
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ECONOMICS 2
Introduction
Saving is an essential factor in shaping economic well-being of individuals and the nation
as a whole. Accumulation of wealth in order to prepare one for future retirement is one major
element that helps in economic savings in terms of future economic preparedness in terms of
dependency ratio. Many employees retire with insignificant savings that cannot help them in
future macroeconomic needs (Dugas, 2011). This paper will explore trends in gloomy retirement
outlooks and its effect on economy.
Retirement outlooks and its effect on Economy
Workers need savings to help mitigate uncertainties that includes family dependencies,
expected increase in prices of goods and services, job loss, and increase in investments. Shortfall
in savings is a greater economic predicament to both the retirees and the households since it
leads to increased dependency ration. According to Dugas (2011), the number of workers who
are not saving for future retirement increased from 22 percent in 2010 to 27 percent in 2011. This
shows a greater percentage in terms of non-saving population in an economy. Increase in non-
saving ratio in an economy leads to future reduction in consumption in order to accommodate the
financial needs of the retirees in the economy. As a result, there will be increased dependency
ratio on the government to increase its expenditure on the social security provision thus leading
to an increased budget deficit.
Economy that promotes investment through saving is a stabilized economy. However,
with increased non retirement financial plan, households will be forced to service their basic
needs while it will be impossible to finance long term investments that lead to economic growth.
As a result, with no earlier savings, retirees will therefore be regarded as old-age dependency

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class. A higher dependency ratio leads to low capital accumulation thus the economy will not be
able to service its essential duties than to cater for the expenses of the retirees. According to
Schmeiser et al. (2014), approximately 31 percent of Americans have zero benefit savings thus
leading to low capital accumulation in the economy in future.
As society ages, the savings of the households and their spending pattern is expected to
change in order to accommodate the vulnerability stage of the older population. However, this
has exerted extra pressure on nation saving since with increased retirement population; people
will start to liquidate their retirement assets to help generate income for their living expenses and
health care needs (Schmeiser et al., 2014). With increased asset liquidation by retirees, the
national saving rate will decline thus leading to low income that hinders economic growth and
development.
Conclusion
Retirement should be a macroeconomic variable that measures the country’s ability to
employ its citizens. At the same time, aging population in the work-force should be able to start
early retirement savings in order to accumulate wealth for future investment. Retirees should
therefore save in their early years before retirements in order to increase national output in terms
of capital accumulation. However, without saving, workers who have retired will be a burden to
national government in terms of social securing care, and increased dependency ratio of younger
family members.

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References
Dugas, Christine. (2011). More Workers Have a Gloomy Retirement Outlook. USA Today
Schmeiser, M. D., Buchholz, D. E., Brown, A. M., Gross, M. B., Larrimore, J. H., Merry, E. A.,
& Thomas, L. M. (2014). Report on the economic well-being of US Households in
2013. Washington, DC: Board of Governors of the Federal Reserve System. Retrieved from
https://www.federalreserve.gov/econresdata/2013-report-economic-well-being-us-
households-201407.pdf