The Economic Impact of Aging Baby Boomers
Talkin’ 'Bout My Generation is a year long study on how baby boomers will shape the U.S. economy in decades to come. The study completed by the McKinsey Global Institute (MGI) in partnership with McKinsey's Consumer Insight Practice, focuses on the economic impact of aging boomers on the overall economy, and what actions policy makers and business leaders can take to minimize the economic risks posed by the demographic transition.
According to the report, the baby boom generation has had a significant impact on American culture and society for more than a quarter-century. Nearly “79 million have earned record levels of income, generated great wealth, and spurred economic growth…but they have also spent at record levels, failed to save, and accumulated unprecedented levels of debt.”
Talkin' 'Bout My Generation: The Economic Impact of Aging U.S. Baby Boomers projects approximately two-thirds of early boomer households, aged 54 to 63, are financially unprepared for retirement. The report also notes many boomers do not realize they are ill-prepared, and as the economy struggles with shrinking home values, risky stock market prices and loss of retirement accounts, aging comfortably into the Golden Years may be a greater challenge than previous times. Additionally, the report looks at the economy itself. “As boomers grow older, they will work and spend less, slowing real Gross Domestic Product (GDP) growth to a more modest pace: from the 3.2 percent average annual rate enjoyed since 1965 to 2.4 percent over the next coming three decades.” With this age wave new burdens will be placed on benefit programs in an already slumping economy, such as Medicare, Medicaid, and Social Security.
Talkin' 'Bout My Generation optimistically suggests boomers can meet retirement goals by working later in life, and delaying retirement by two years from 62.6 today to 64.1 by 2015. Delaying retirement would cut the number of unprepared households and boost real GDP growth.beginning to redefine aging and retirement. Most expect to work later in life but will face obstacles competing with younger generations, be challenged in maintaining or finding new employment, and undoubtedly will face hardships caring for aging parents and young children, some at the same time. Their age will present health care demands while labor laws, pension regulations and discrimination may present barriers to healthy aging and sustainable retirement.
“It is essential that policy makers and business leaders work together to remove these barriers and prevent the boomers' retirement from becoming a multi-decade drag on U.S. growth.”
Report Report Findings
Boomers have enjoyed record earnings, but 80 percent of their gains are from one time factors:
Boomers have accounted for the greatest share of earnings and consumption since 1980. Their economic dominance will last until 2019.