Baby Boomers and the Economy: What Comes Next?
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America is getting older. Thousands of baby boomers reach retirement age every day and, by 2031, the country will include 75 million seniors. That’s more than twice as many as there were back in 2008 when the first boomers turned 62.
Such a huge demographic shift promises to transform the economy. While millennials used to attract the majority of intergenerational criticism, aging boomers have recently taken their place. Millennials may have ruined certain industries, but some experts charge boomers with going even further. This massive generation, they suggest, has ruined the entire economy. As more and more begin retiring and collecting social security, this outsized impact will only grow.
More Americans over 62 means more Americans taking advantage of Social Security. With staggering numbers like the ones listed above, it’s hard not to predict a worst case scenario. Members of younger generations are forced to wonder if Social Security will even be around once they’re old enough to receive it.
SmartAsset’s Hunter Kuffel discourages such pessimism. This isn’t the first time Social Security’s future has looked uncertain. In the mid-1980s, Congress raised the full retirement age to 67 and introduced new taxes on Social Security benefits. While new taxes aren’t everyone’s idea of a silver lining, they’re certainly preferable to the end of a beloved social program.
A growing number of retirees means more companies will soon need to fill open positions. While they’re now outnumbered by Generation Xers and millennials, boomers still account for more than a quarter of the workforce. They won’t make up such a large chunk forever. Employers have to meet the demands of many gen-xers who are now providing financial assistance to boomer parents, as well as millennials who’ve grown accustomed to workplace flexibility. Over the next several years, intergenerational collaboration will help mitigate the loss of valuable information.
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That being said, boomers are generally staying in the workforce longer than past generations. This suggests that expectations about retirement are changing and Pew Research believes it could benefit both boomers and the economy as a whole. Social Security beneficiaries get more generous payouts for each year they forgo payments. “For the economy as a whole,” Pew’s Richard Fry wrote, “economic growth in part depends on labor force growth.”
The Stock Market
Per IRS laws, anyone over 70-and-a-half is required to withdraw at least 5% from their retirement plan every year. As more boomers enter their 70s, their forced selling will flood the market with billions of dollars in equities and bonds. All this extra cash will drive prices down and, according to Stephen McBride of Mauldin Economics, should inspire investors to devise “exit strategies.”
Writing for Reuters, a representative from Fisher Investments encourages a more bullish outlook. Retirees and near-retirees, they remind readers, are just one of the many investor groups. What’s more, boomers are hardly a monolith. Stereotypes make it tempting to paint with a broad brush, but boomers are individuals with unique financial needs and plans. They conclude, “Capitalism is global, intergenerational, and resilient.”
Moving Ahead Together
There’s nothing productive about blaming one generation for the world’s economic woes. Millennial stereotypes quickly went out of fashion and boomer-focused ones should soon follow.
Both remaining candidates for the 2020 Democratic nomination have acknowledged that it’s difficult for boomers, gen-xers, and millennials alike to save. Biden and Sanders have built vastly different bases of support. They have, however, both emphasized the need for economic reforms that will make it easier for boomers to retire and younger generations to save and eventually do the same.