Music icons Patti Smith, Carlos Santana, and Steven Tyler all share one thing in common—and it’s not just rock and roll. They’re baby boomers, the longest-living generation in the history of the United States. According to records from the U.S. Census Bureau, baby boomers—those born, more or less, in the two decades following the end of World War II, or between 1946 and 1964—number 73 million. Also notable: 2031 marks the year that the youngest boomers, those born in 1964, will turn 67, making them eligible to receive Social Security benefits.
In addition to concerns about the general aging of the U.S. population—over-65s are projected to make up 20% of the U.S. population by 2029—economists have expressed concern about the trickle-down economic effects as boomers reach their later years. In this article, we take a look at the impact on the economy and the labor force baby boomers are expected to have as they reach retirement age.
- The baby boomer generation encompasses those individuals born in the two decades following World War II, roughly between 1946 and 1964.
- Baby boomers lived through economically stable decades that have seen the country experience—with relatively few exceptions—high growth and economic prosperity.
- The Great Recession of 2008, however, has caused many baby boomers to work extra years to make up for the losses they experienced in their retirement portfolios.
- As more baby boomers retire from the workforce, economic growth could be impacted as retirees not only produce less but also consume and spend less.
The Lucky Ones
Boomers have proven to be an astoundingly productive cohort. Part of their success comes down to luck: Economically speaking, they were born at the right time. After enjoying childhoods during the high-growth and economically stable decades following World War II, they rode the crest of relative prosperity into middle age with just a handful of economic blips, like the 1979 energy crisis and the early 1980s recession.
Consider the height of the Clinton era: During the 1990s, labor force participation soared to an all-time high. That kid who worked two paper routes in 1965 would have been well-positioned to cash in on the dotcom boom of the 1990s at the peak of their earning years.
What will happen as more than 250,000 Americans celebrate their 65th birthdays each month? As these boomers head toward retirement, the impact on the labor force and consumer spending are already showing profound effects.
But There Were Bad Times
The devastating Great Recession that struck in 2008 has been widely blamed for a low workforce participation rate in the ensuing years. Another cause of lower labor numbers can be chalked up to boomers who, though many were forced to work extra years to compensate for retirement investments lost in the 2008–09 market crash, are now retiring in significant numbers.
As boomers retire, expect wide-ranging effects: Not only do retirees produce and contribute less in an economic sense, they tend to spend less as well—not a recipe for economic growth.
One area where this generation is spending more? On their adult children. A substantial percentage of parents are providing some financial support for their adult children, with student loan assistance being a significant area of financial burden.
And for many boomers, that financial assistance goes beyond helping out with student loans to assist in providing housing. Prior to the COVID-19 pandemic, 47% of young adults aged 18 to 29 resided with one or both of their parents. As of July 2020, that number had surged to 52%—surpassing the previous peak last seen during the Great Depression.
Between bleak economic predictions, widespread post-recession losses of retirement savings, and the subprime mortgage debacle, no wonder some members of this generation are reluctant to retire. Even now, the generation that coined the phrase “live to work” is living up to its reputation.
According to the Bureau of Labor Statistics, nearly 40% of Americans age 55 and older remain active in the workforce.
This workplace longevity may prove a problem for younger workers who have struggled to find well-paid, stable work during levels of high unemployment. The upside? Retirement for this cohort is as inevitable as the boomerang effect that will eventually create job availability.
Ultimately, some boomers take the live-to-work ethos to an extreme. A 2013 Gallup poll, which investigated the consumer and workplace behaviors of baby boomers, posed this question: “At what age do you plan to retire?” For 10% of respondents, the answer was a succinct “Never.”
The Bottom Line
While baby boomers are working longer, their inevitable retirement will have widespread effects on the American economy. Expect high impacts on consumer spending, as retirees not only produce less but also consume and spend less. While the workforce participation rate already sits at historically low levels, the mass retirements of boomers could have a positive boomerang effect—essentially freeing up jobs for younger employees who are struggling to find work.