- More than 30 million “boomers” are entering retirement without financial preparation.
- The economy could take a hit, with sectors like manufacturing and education having to replace baby boomer workers.
- These new retirees will likely rely disproportionately on Social Security to stay afloat.
The youngest baby boomers are on the verge of retirement – and most of them are not financially prepared for this next stage of their lives.
Starting this year, more than 30 million baby boomers born between 1959 and 1964 will begin to turn 65, marking the “largest and final cohort” of this generation entering retirement, according to a new report from the Alliance for Lifetime Income’s Retirement Income Institute.
This cohort is known as “peak boomers” and, according to the report, most of them are poised to face significant economic headwinds. It’s what some have called the baby boomer retirement bomb — and it could be costly for the rest of the economy’s workers.
Through an analysis of data from the Federal Reserve and the University of Michigan Health and Retirement Study, the report found that 52.5% of baby boomers have $250,000 or less in assets , meaning they will likely deplete their savings and rely primarily on Social Security income in retirement. Additionally, an additional 14.6% of this cohort have $500,000 or less in assets, meaning “nearly two-thirds will struggle to meet their retirement needs,” the report says.
“America has never seen so many people reach retirement age in a short period of time, and well over half of them will struggle to meet their needs during retirement, let alone maintain their current standard of living,” Robert Shapiro, author of the report and the former undersecretary of Commerce for Economic Affairs, said in a statement. “They don’t have the protected income that many older baby boomers have with a strong pension or higher savings.”
The wave of baby boomer retirements could also have an impact on the U.S. economy as a whole. The report projects that employers will need to replace up to 14.8 million baby boomers – primarily in manufacturing, healthcare and education – which could decrease economic productivity.
Additionally, the retirement of this generation is expected to have an impact on consumer spending. Using data from the Consumer Spending Survey, the report finds that baby boomers will spend $204 billion less in 2032 than in 2022, with the transportation sector being hit the hardest.
Still, as the report points out, younger employees will likely fill some of the jobs that baby boomers leave, and productivity will increase as technology advances.
The crisis is partly due to changes in the way Americans save for retirement
Peak boomers entered the workforce just as pension plans were moving away from defined benefit plans like pensions – which typically guarantee a stable income and are subsidized by the employer – in favor of defined contribution plans like 401(k)s, which rely on workers to contribute.
According to the report, among different types of retirement savings, defined benefit pensions have the fewest disparities by race, gender and ethnicity (although annual payments have large disparities) – but only 24 % of baby boomers hold them, and even those. plans face potential underfunding.
Many Americans of retirement age already live on paltry incomes. Just over half of Americans over 65 live on an income of $30,000 or less a year, according to the Census Bureau’s Current Population Survey, with the largest share living on $10,000 to $19,000. . And, according to Business Insider’s calculations using CPS ASEC data, 79.2% of retirees receive some type of Social Security income.
Retirement-age Americans, many of whom fall into the baby boomer category, have already told Business Insider that they might just have to keep working until they die — or until ‘they become crippled – to stay afloat.
“Only the very rich will have some dignity in their old age,” said Pam, who is almost 58. “And the rest of us are just going to pray that they can die while they still have a job because no one wants to die in the streets.”
Are you a baby boomer and not prepared for retirement? Contact these journalists at asheffey@businessinsider.com And jkaplan@businessinsider.com.
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