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John Manganaro

Retirement Planning > Saving for Retirement

Why Retirement Trends Matter to the Fed's Call on Interest Rates

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What You Need to Know

  • Federal Reserve leaders, including Atlanta Fed President Raphael Bostic, will meet soon to weigh a potential rate cut.
  • Retirement trends provide one useful lens for measuring the strength of the economy, according to the noted economist.
  • Beyond being an important macroeconomic force, retirement is a deeply personal issue for every working American, Bostic says.
This is the latest in a series of columns about Social Security and retirement income planning.

Retirement is both an important macroeconomic concept and a deeply personal issue for every working American, according to Atlanta Fed President Raphael Bostic, who is preparing to attend a pivotal meeting of the Federal Open Markets Committee later this month. 

Retirement dynamics will be one of the factors Bostic has in mind as he and fellow FOMC members weigh the pros and cons of a potential rate cut during their meeting set for Sept. 17 and 18. 

Tighter conditions can help in the fight against inflation while providing higher income for investors in government bonds, but overly restrictive policies can lead to recessionary pressures and higher unemployment. Effectively balancing these factors is no small feat. 

“Retirement is an important stage of a person’s life,” Bostic told me during a recent interview conducted on the sidelines of the American College of Financial Services’ annual Conference of African American Financial Advisors in Atlanta. “It’s also a big transition by which Americans move from being in the labor market to not being in the labor market.”

To the extent that this transition happens in a regular and predictable flow, Bostic said, that helps economists and policymakers project what the U.S. economy is going to look like in the future — both near- and long-term. 

In addition to retirement affecting the pace of hiring and the supply of labor for employers to draw upon, the rate at which retirees liquidate their investment portfolios and spend down their accumulated assets is also one of many factors that shapes the economy. 

Workers today have trillions of dollars socked away in retirement accounts, Bostic noted. This wealth, in turn, provides both a source of future spending power to fuel economic growth and a potential driver of inflation. 

“In that sense, it was super interesting to see how retirement dynamics evolved during the COVID-19 pandemic period,” Bostic observed. “As you probably know, retirement dynamics changed very significantly during the acute period of the pandemic. A lot of people opted for retirement earlier than they might have otherwise.”

This retirement surge was “fairly disruptive” in terms of economists’ views about the true size and health of the U.S. labor force, Bostic said. It also sparked big questions about whether any of those people who left the workforce earlier than expected would want to (or need to) rejoin the labor force in the future.

“We have been very closely watching the situation and wondering whether labor supply will rebound to its pre-pandemic levels,” Bostic said. “Fortunately, it appears that retirement rates are slowly reverting closer back to their normal dynamics, which is good to see.”

A Word to the Wise

With respect to the professional financial advisor community, Bostic said, “retirement” is all about ensuring clients have enough wealth saved to have a dignified life once the regular paychecks stop coming in.

“There’s a huge variation in preparedness across the U.S. population,” Bostic said, noting that even high-earning Americans can struggle to stay on track without consistent advice and support. “Advisors can do a lot to get people on the right path.”

They can do so by helping to build sustainable portfolios and encouraging people to live within their means, Bostic said, but perhaps the most important thing advisors can do is help encourage the general public to get started on saving for retirement as early as possible. This is something Bostic does himself with the employees of the Atlanta Fed.

“I actually meet with the new staff [at the Atlanta Fed] on their very first day, and I encourage them to not wait to start saving,” Bostic said. “It’s basic economics. The earliest money you put away for retirement is the most important money with respect to growth and compounding.” 

This is also why Bostic takes to unconventional or unexpected venues to share his knowledge, whether that’s appearing on SiriusXM urban radio channels or going out into communities to meet with small-business owners and their employees.

“I was lucky to be taught a lot of this stuff a long time ago, but there are lots of folks who don’t have that kind of understanding or access to the information they need,” Bostic said.

In this way, Bostic said, such advocacy on retirement planning reflects his identity as the first Black president of the Atlanta Fed. He sees it as a personal responsibility to confront systemic economic inequality through community empowerment and engagement, especially with respect to wage inequality and the wealth gaps that follow many communities into retirement.

“It’s very inspiring when I meet with people out in the community in the Sixth Federal Reserve District,” Bostic said. “They tell me that they never expected to see someone who looks like me, or like them, in this position. So it’s a wonderful thing and a big responsibility.”

What Retirement Looks Like Personally

After acknowledging that Bostic still has a long runway left in his own career, I asked him whether and how he envisions his own eventual retirement for the labor force. Would he be the kind of guy to kick his feet up, or perhaps he is more likely to stay engaged and write more academic papers?

With a laugh, Bostic said he doesn’t see either of those outcomes as being very likely.

“I won’t do either of those,” he said. “To begin with, I’m not a good kick-your-feet-up person. Even today, when I go on vacations, I need to be activating my brain and sort of doing things that keep me engaged. That said, I don’t see myself co-authoring any papers, either, as those are longer-arc experiences that I will likely set aside.”

Bostic said he is open to future policy leadership opportunities, emphasizing the importance of flexibility and keeping an open mind with respect to one’s career and work. But, what he most looks forward to in his eventual retirement is discretion.

“The one thing I am very much looking forward to in retirement though is that extra freedom,” Bostic said. “So, if it’s a Wednesday and I don’t feel like going into a meeting, I won’t have to. I’ll get the work done if I’ve promised to do it, but having a greater ability to just sort of manage the ebb and flow of a week or a month seems very appealing. I don’t exactly have that today.”

Bostic said he believes the keys to a happy retirement really apply to a happy life in general.

“I tell the young people at my bank that they should strive to work with intention and to find ways to spend time doing the things they like,” Bostic said. “If you work in your passion spaces and if you spend time in your passion spaces, the time goes easy. You’re more productive, and you’re happier.”

Pictured: John Manganaro


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