Baby Boomers in Their Golden Years

“Baby Boomers,” those born between 1946 and 1964, have played a significant role in shaping the economy. So much so, in fact, that economists from Wells Fargo recently released a report analyzing the impact that the retirement of this generation will have on the economy in the near-future and beyond. Ultimately, the effects will be far-reaching, impacting younger generations (who may have to support their parents), retirement policies (i.e. Social Security and Medicare), and the housing market. Below, we highlight some of the key takeaways from the report.

More Debt Than Previous Generations

 Although Baby Boomers have less debt than younger generations, the typical Boomer has more debt at this point in life than previous generations. As of 2013, 66 percent of those aged 65-74 had some sort of debt, as seen below. Moreover, the typical value of real dollars has increased, pushing their debt holdings even higher.

Delayed Retirement

To improve their retirement finances, more Boomers are delaying retirement. In a 2016 Wells Fargo survey, half of the workers reported that they would need to work until age 70 to comfortably retire. In fact, employment among workers above 65 has steadily increased since the mid-1980s. Although there is this present need to work past 65, only 31 percent of Baby Boomers at or above 65 years old are currently employed, as compared to the 50 percent who indicated it was necessary to stay employed until they were 70.

A contributing factor for the delayed age of retirement is that some are still trying to regain lost finances from the recession. Labor force participation for this generation has fallen since the recession and has not been able to turn back around, meaning that retirement before 70 isn’t always a viable option.

Typically, those who choose to work after the age of 65 are those with higher earnings and degrees, as opposed to those who have to work in order to make ends meet. This distinction in earnings and ability to work longer further drives a wedge between those who are sufficiently prepared for retirement and those who aren’t.

Decreased Spending

Most Boomers are now at an age where their household spending generally begins to decline. More than 75 percent of Baby Boomers are over 55 years old, which is the approximate age in which household spending begins to decrease.  With the majority of Boomers now entering retirement, consumer spending will be significantly impacted. Spending could be decreased even further as Boomers decide to save more for their retirement in years to come. While many businesses will need to prepare for this spending slowdown, the impact will vary by industry. Businesses in apparel, dining, and transportation will most likely see the largest drop-off, while the healthcare industry will generally rise.

The entire economy should brace for the impact of the retirement of Boomers. We suggest that both Boomers and younger generations evaluate their finances and prepare for their future. If you’re nearing the age of retirement and would like our advice on selling your business or other ways to prepare for retirement, contact the Symmetrical team for help.