Will Aging Baby Boomers Start to Save for Future? : Retirement: Some analysts are predicting a boom in investment. But others are more doubtful.

The much maligned generation of baby boomers is entering a new stage of financial life: that time when thoughts turn from consumption and the present to savings and the future.

And the experts are as divided as ever about what it all means for financial markets and the economy.

Depending upon whom you ask, the baby boom generation is either about to start the biggest investment boom ever or will drain the economy with a continuation of the “buy now and pay later” lifestyle for which it has become famous.

Professionals in the investment community, perhaps partly out of wishful thinking, have been putting forth the view that the boomers are about to embark on a huge savings spree.

Jack McCarthy, president of the New York investment firm Lord Abbett, is a chief proponent of this view.

“I call it the shift from yuppie to nerd,” he said in a recent interview. As McCarthy has watched his own children move into their 30s, he’s seen them give up BMWs for four-wheel drive vehicles, get married, have children and worry about their futures. “It’s the time when people tend to save the most,” he said.

Magnified by a generation of postwar babies whose average age will be 42 next year, that trend toward savings will boost financial markets, the national savings rate and the economy in general, McCarthy said. Already the savings rate has bounced back from its 1987 low of 3% to about 5.8% currently.

Unprecedented inheritances from the parents of baby boomers will accentuate the trend, swelling stock market averages as boomers inherit bonds and bank certificates from their income-oriented parents and shift them to growth-oriented stocks and mutual funds, McCarthy says.

Not everyone agrees with McCarthy’s vision of the big boomer bull to come. Sandra Shaber, vice president and economist of the Futures Group in Washington, has examined the postwar generation and its habits, and she does not see a broad move to increased savings.

Boomers will not save money at the age when their parents did, Shaber said, because they are doing everything later than their parents.

Many in the older generation were living in empty nests by the time they were in their 50s, Shaber points out. Their kids were finished with college, their homes were nearly paid for and they started saving big amounts fast.

Baby boomers, in contrast, married later, bought homes later and had children later. When they hit their 50s, they will still be struggling with sizable mortgage payments and tuition bills.

Shaber also thinks the next generation will be less inclined to save because American society discourages savings with other safeguards: readily available mortgage money, Social Security and the recession protection that comes when there are two jobs to a family instead of just one.

Shaber sees the generation continuing on its current course of buying time and fun by spending money on services and luxuries. She does think more dollars will be saved as the postwar babies move into their high-earning years, but does not expect a dramatic increase.

Robert Hewitt is the president of the International Assn. of Financial Planners. Unlike McCarthy, who sees a vast expansion of wealth, and Shaber, who sees lower-than-average savings, Hewitt believes baby boomers will track their parents fairly closely in savings and spending habits in their 40s and 50s, with a few key exceptions:

As the first broadly college-educated generation, boomers will save more than their parents did for their children’s tuition, Hewitt believes. And they will do more of their savings and investing in mutual funds, rather than in individual stocks, bonds or bank accounts.

But Hewitt thinks the big shock to the current generation will not be the bills associated with their children, but those associated with their parents. Instead of the inheritances McCarthy envisages, Hewitt points to the long-term health care costs that could erase those inheritances.

With life expectancies rising, boomers will receive their inheritances later and later, Hewitt says. In many cases, unless they are willing to see those inheritances wiped out overnight by nursing home bills, boomers will have to take on more responsibility for the care of their parents. It may not be a generous way to put it, but essentially, Hewitt sees baby boomers opting to care for their parents as a way to protect their inheritances.

Whatever the motivation, Hewitt believes America is slated for a return to the expanded family that could ultimately be a positive social phenomenon. It is just one of the many changes that could come as the postwar generation hits that notorious mid-life mark.