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Forget the Fiscal Cliff, the deeper canyon is demographic

April 1, 2013

Let’s do the math: 2+1.9-2=less than 2.

The U.S. has been trending toward smaller families for generations, but the problem is becoming more acute. Population growth is a significant driver of economic growth, so when families have less children, it creates a negative cycle. Developed countries generally have lower birth rates than developing countries, but other factors are pushing Americans toward smaller families.

Not unsurprisingly, the economy is a major driver for falling birthrates. With the Great Recession hitting recent immigrants particularly hard, some of the traditional forces supporting a replacement birthrate are under the same pressure as the rest of the population.

A declining birthrate and an aging population both point to a weak U.S. economy over the long haul. This may be a situation, unfortunately, where we can look to Europe and Japan as examples of where the U.S. may be in 10, 15 or 20 years. It’s not a pretty picture.

As the financial burden on workers increases, it becomes more and more difficult to meet the growing health care costs of the country’s seniors, further weighing down the economy and discouraging larger families.

What does this mean for the average investor? It’s time to throw away our assumptions about U.S. economy, social security and the stock market as the lynchpin of our retirement savings. We all must look at a wider variety of choices to ensure income and stability in our golden years.

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This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation.

Andrew Wood, Dan Simon and Alison Slezak are Investment Advisor Representatives. Advisory services are offered through CoreCap Advisors, LLC., a Registered Investment Advisor. CoreCap Advisors, LLC and Daniel A. White & Associates, LLC are separate & unaffiliated entities. 

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