More than half of 30.4 million peak boomers
will rely primarily on Social Security for income; women have 30%
less in savings than men; 10% of workers exiting the workforce will
depress U.S. GDP and consumer spending, causing double digit
turnover in key economic sectors and increasing business
costs.
WASHINGTON, April 18,
2024 /PRNewswire/ -- In a definitive study
commissioned by the ALI Retirement Income Institute examining the
economic impact of the greatest surge of retirement age Americans
in U.S. history, the former Under Secretary of Commerce for
Economic Affairs, Robert J. Shapiro, finds that a majority of
Americans who will turn age 65 between 2024 and 2030 are not
financially prepared for retirement.
Between 2024 and 2030, 30.4 million Americans will turn age 65.
These Peak Boomers represent the youngest, largest, and final
cohort of the Baby Boomer generation.
Based on their assets and their likelihood of living up to 20 or
more years in retirement, two-thirds of Peak Boomers will be
challenged to maintain their lifestyles in retirement. More than
half (52.5%) have assets of $250,000
or less, making it likely that they will run through their savings
and have to rely mainly on Social Security for income. Another
14.6% have assets of $500,000 or
less, so nearly two-thirds will strain to meet their needs in
retirement. On average, Social Security is intended to replace
about 40% of a person's annual pre-retirement income,
according to the Social Security Administration.
"America has never seen so many people reaching retirement age
over a short period, and well over half of them will find it
challenging to meet their needs through their retirements, let
alone maintain their current standard of living," said Shapiro.
"They lack the protected income that many older Boomers have from
solid pensions or higher savings."
There are stark differences in retirement savings and security
based on gender, race and ethnicity, and education. While the
median retirement savings for all Peak Boomers is $225,000, it is $269,000 for men versus $185,000 for women… $299,000 for whites versus $123,000 for Hispanics and $49,000 for Blacks… and $591,000 for college graduates versus
$75,000 for high school graduates and
$7,000 for those without high school
diplomas.
24% of Peak Boomers have defined benefit pensions; and among
them, the demographic disparities are modest. Private employers
provide about half of those pensions and state and local government
provide just under half. Based on 2022 data, however, the
median annual benefit for the public defined benefit pensions is
$25,450 or 44% greater than the
median benefit of $17,640 for the
private ones.
"The saving grace for some Peak Boomers is that they can count
on the added protected income that a pension provides in
retirement," said Jason Fichtner,
Executive Director of the ALI Retirement Income Institute, and
Chief Economist at the Bipartisan Policy Center. "However, since
only 4% of all private sectors workers had protected income from a
pension as recently as 2020, this economic study of Peak Boomers
should be a cautionary tale to all Americans planning for
retirement."
IMPACT OF PEAK BOOMERS ON THE U.S. ECONOMY
Between
2024 and 2030, the retirement of Peak Boomers, who currently fill
10% of U.S. jobs, will have a range of effects on our economy, from
the many millions of job vacancies and slower productivity gains to
added burdens on entitlement programs such as Social Security.
- Productivity: Employers will have to replace between
10.8 million and 14.8 million Peak Boomer employees, including 1 to
2 million each in manufacturing, construction, health care,
education, and professional services. This unprecedented drain of
experienced workers will directly dampen productivity by 0.9% to
1.3%.
- GDP: While other factors, notably younger generations
filling the positions vacated by Peak Boomers, will partially
offset these effects, the direct impact of their retirements will
reduce GDP growth by 7.3% percent by 2030.
- Consumer Spending: In retirement, Peak Boomer consumer
spending will decline 15.3% and hit the transportation sector the
hardest. Other sectors facing significant downdrafts from those
retirements include utilities, wholesale trade, and real
estate.
- Entitlement Programs: As Peak Boomers draw on Social
Security and Medicare, their benefits will add $347 billion to entitlement spending by 2030,
although the projected mortality of Boomers will offset 61% of
Social Security's additional costs and 58% of the additional costs
for Medicare.
ABOUT THE ALLIANCE FOR LIFETIME INCOME
The Alliance
for Lifetime Income (ALI) is a non-profit 501(c)(6) consumer
education organization based in Washington, D.C., that creates
awareness and educates Americans about the value and importance of
having protected income in retirement. Our vision is for a country
where no American has to face the prospect of running out of money
in retirement. The Alliance provides consumers and financial
professionals with unique educational resources and interactive
tools to use in building retirement income strategies and plans. We
believe annuities – one of only three sources of protected lifetime
income – can be an important part of the solution for retirement
security in America. The Alliance's Retirement Income Institute
houses the leading retirement scholars and experts who create
evidence-based research and analysis, with practical ideas and
actions to help protect retirees.
CONTACT: Suzy Wagner
(703) 899-3427
Suzy@alincome.org
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SOURCE Alliance for Lifetime Income