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Boomers are retiring. Here’s what this means for the economy

Boomers are retiring. Here’s what this means for the economy

Estimated reading time: 3 minutes

Retirement Is Here

The world over, nations are grappling with aging populations and their impact on the economy. The U.S. is no exception to demographic change.

Here’s where we’re at: The entirety of the baby boomer generation could retire within the decade, according to estimates from the U.S. Census Bureau. And as boomers exit the workforce but continue to demand economic resources, they may soon go from fueling the economy, as they have in decades past, to doing the opposite.

Under Pressure

This retirement rush is expected to put pressure on the economy across several sectors.

Housing: Baby boomers own more homes than younger generations. With no desire to sell in a high interest rate environment, this contributes to the ongoing inventory shortage and drives up home prices. Thanks to the tight housing market, older Americans aren’t as likely to downsize anymore either.

Jobs: The U.S. has far more job openings than workers to fill them. As more boomers retire, even fewer workers will be available, potentially creating additional imbalances in the labor market. This could push up wages, making services more expensive, or necessitate more migration.

Stock market: Baby boomers are very investing in the stock market – literally. Members of this generation own about 80% of U.S. stocks. But if these investments are intended to fund retirements, investors are likely more risk averse. In a downturn, this could mean older investors might be more eager to sell their stocks in order to hold onto their existing gains, possibly exacerbating stock market swings in return.

Looming Time Bomb

Economists are calling the looming retirement rush a “time bomb”. But it likely won’t be as explosive as that sounds, not least because not all members of the baby boomer generation will retire at the same time.

And even though the retirement cliff will have an impact on businesses, and sectors such as health care and insurance, it’s worth noting that a certain changing of the guards has already taken place: Millennials are now the most populous generation in the U.S., and make up the largest portion of the workforce.

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