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Boomers' 401(k) Plans Holding Economy Together

The Baby Boomer generation is once again taking credit for saving the economy, according to Reuters.

The enormous spending power of the 77 million citizens born between 1946 and 1964 has helped keep the last two consumer-led recessions short and shallow. A large portion of Boomers' savings is tied up in home equity and stock market investments through 401(k) plans, but as many Boomers approach retirement, they are less likely to make any drastic investment changes during a recession that is expected to last a year or two.

"In the early 1980s, early 1990s and the last recession in 2001, as rough as it was for the economy, the Boomer could still be relied upon to put a floor under the consumer," said David Rosenberg, a Merrill Lynch economist.

A Reuters/Zogby poll in mid-January found that Americans between the ages of 50 and 64 feel pretty good about their own financial situation, while nearly half expected a recession in the next year.

Dean Baker, an economist and co-director of the Center for Economic and Policy Research in Washington, said worries about job security and how to pay for retirement could cause Boomers to save rather than spend any rebates they receive as part of Congress' economic stimulus plan, defeating its purpose.

"If people do end up saving it, obviously it doesn't provide very much stimulus," Baker said.

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