McKinsey Global Institute

Talkin' 'bout my generation: The economic impact of aging US baby boomers

A vast majority of US baby boomers are unprepared for retirement. Enabling them to work longer would benefit both individuals and the economy, but policymakers and business leaders will need to take action.

America's Baby Boomers have dominated the US economy for more than a quarter-century. MGI research shows that the nearly 79 million Baby Boomers have earned record levels of income, generated great wealth, and spurred economic growth. But they have also spent at record levels, failed to save, and accumulated unprecedented levels of debt.

Now, as the oldest Boomers near retirement, MGI estimates that almost two-thirds of early Boomer households, who are aged 50 to 63, are financially unprepared for retirement—that is, they have not accumulated enough savings to maintain their lifestyle as they age.

The Boomers' aging also will be felt throughout the economy. As the Boomers grow older, they will work and spend less, slowing real US GDP growth to a more modest pace than in recent decades: from the 3.2 percent average annual rate enjoyed since 1965 to 2.4 percent over the coming three decades.

MGI research also shows that these challenges can be met. Enabling the Boomers to work later in life would significantly benefit both individual households and the broader economy. By increasing the median retirement age by about two years—from 62.6 today to 64.1 by 2015—the share of unprepared boomer households could be halved from 62 percent to 31 percent. And the additional workers would boost real GDP growth.

Serving aging baby boomers

MGI's survey of Boomers' attitudes on retirement shows that 85 percent expect to work later in life. However, there are significant legal and institutional barriers that need to be overcome. They include a variety of disincentives for both employers and older workers, including the costs of America's health care system, the unintended consequences of labor laws and pension regulations, and corporate attitudes toward older workers. The research highlights several areas for action for policymakers and businesses to prevent the Boomers' retirement from becoming a multidecade-long drag on US growth.

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