The U.S. Baby Boom & Its Effect on the U.S. Economy

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Ten thousand baby boomers retire every day.
Ten thousand baby boomers retire every day. (Image: Comstock Images/Comstock/Getty Images)

The baby-boom generation, born between 1946 and 1954, represent 79 million people between the ages of 57 and 65, at time of publication. As 10,000 boomers reach the age of 65 every day through 2030, they continue to have a profound impact on the U.S. economy.

Impact on Gross Domestic Product

As boomers retire, 62 percent will not have enough savings to maintain their lifestyles. Due to reduced working hours and spending by baby boomers, the McKinsey Global Institute (mckinsey.com) anticipates the Gross Domestic Product will fall .8 percent between 2008 and 2038, to 2.4 percent. MGI suggests that by increasing the median retirement age to 64.1 by 2015, only 31 percent of boomers will have insufficient financial resources for retirement.

Many baby boomers will work longer to stretch their resources.
Many baby boomers will work longer to stretch their resources. (Image: Hans Hansen/Lifesize/Getty Images)

Migration to Rural Areas

The U.S. Department of Agriculture (ers.usda.gov) predicts that by 2020, some nonmetropolitan areas will see 30 percent increases in the population of adults 55 to 75 years of age. In all, USDA projects that 5.6 million baby boomers will relocate to rural and “non-metro” areas and small towns by 2020, with the largest numbers moving to the South, Midwest and West. Targeted areas can expect to see increased housing sales and greater pressure on infrastructure, services and demand for health care.

Boomers seek a quieter lifestyle during retirement.
Boomers seek a quieter lifestyle during retirement. (Image: BananaStock/BananaStock/Getty Images)

Pressure on Social Security

As of 2011, it takes five employed people to pay for one Social Security recipient. In a PBS interview, economist and demographer Nicholas Eberstadt of the American Enterprise Institute estimated that by 2031, only three working people will support each Social Security recipient. Eberstadt stated that many boomers who plan to work longer will reduce some of the pressure on Social Security.

Boomers will increase pressure on Social Security resources.
Boomers will increase pressure on Social Security resources. (Image: Comstock Images/Comstock/Getty Images)

Medicare and Health Care

The Congressional Budget Office (cbo.gov) projects that spending for Medicare will rise to 8 percent of Gross Domestic Product by 2035, and 15 percent by 2080. Although increasing numbers of baby boomers account for part of this increase, other factors include rising medical costs per beneficiary and rising costs of technology-based treatments. The CBO also projects that Medicaid spending will increase to 5 percent of GDP by 2035 and 8 percent by 2080, with part of the increase attributable to boomers’ reliance on nursing home care.

Medicare and Medicaid spending for boomers will increase.
Medicare and Medicaid spending for boomers will increase. (Image: Jupiterimages/Goodshoot/Getty Images)

Impact on Investing

A 2009 CBO study concluded that boomer retirements would not result in drastic reductions in asset prices or rates of return. Instead, the CBO predicts temporary reductions in asset prices and rates as boomers adopt a cautious approach when tapping assets and savings after retirement. The CBO also notes that baby boomers choosing to delay retirement will also delay the time frame in which they draw down their resources.

Boomers will tap investments gradually.
Boomers will tap investments gradually. (Image: Creatas/Creatas/Getty Images)

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