In 2022, you may have read J2T’s article “The Impact of Baby Boomers Retiring.” We shared statistics on how many Boomers were on track to retire in 2022, how to avoid the workforce gap predicted from the mass retirement, gave reasons as to why some Boomers have not yet retired, and what changes for the economy were expected as well as industries that may be most affected.
Now halfway through 2023, J2T provides you with an update on what happened in the last year concerning Boomer’s retirement and even better predictions on what this means for the future.
As a recap, Boomers make up nearly ⅓ of the total United States population, and in 1964 they made up 40% of the population, making them one of the largest living adult generations, second to millennials. 10,000 Baby Boomers reach retirement age every day, meaning radical changes to the job market have already begun and will continue to change as time goes on.
This mass retirement has and will continue to affect many industries, particularly the IT and technology industries. This demographic has become less interested and obligated to work long hours, partially due to their high corporate rankings and because they are less defined by their career than younger generations who are newer to the workforce.
The following information describes Boomer retirement trends, updated for 2023.
Baby Boomer Statistics
- The number of Boomers has fallen by close to seven million since 2010. However, they are still the second-largest generation, and aging members of this generation consistently contribute to steady increases in the United States median population age.
- In 2008, the oldest Boomers turned 62, which is the earliest age one can apply for Social Security retirement benefits. The youngest Boomers will reach full retirement age in 2031, and at that point, there will be around 75 million people living in the United States over the age of 65, drawing on Social Security Benefits.
How Will the Mass Retirement Affect the Job Market in 2023?
There are several key areas thought of when considering Boomers retiring, one being the effects on the job market. This prediction is no small task, as each day, thousands of boomers reach the age of retirement. There are both pros and cons to this, as retirement means available jobs for younger generations to fill, thus leading to a more skilled, youthful workforce. However, there is a catch as many Boomers are not retiring at 65; many transition to part-time employment, with some working into their 70s.
Why aren't Boomers Retiring?
You may be familiar with the following explanation if you read our previous article on Boomers. One of the main culprits of Boomers' anti-retirement is that they have not saved enough money to afford to maintain their current lifestyle into retirement. The way to avoid this issue is to simply not retire. In addition, because of advances in healthcare and physical wellness, life expectancy continues to increase, meaning more money needs to be saved and Boomers’ hustle culture mentality drives them to work as long as they are able.
These factors make it tricky to predict how many Boomers will retire and when. It is helpful to note that Social Security benefits max out at 70 years of age, which Boomers are beginning to reach. This tips the scale to less incentive to work and more incentive to retire, leaving the workforce.
How Will Lack of Retirement Savings Affect Consumer Spending?
A general rule of thumb, is that retirees should have saved around 80% of their pre-retirement income to avoid any major lifestyle changes. Unfortunately, Social Security benefits generally only amount to half of that for average earners. Since Boomers collectively have saved less for retirement, as more and more of the generation exits the workforce, there will likely be a decrease in consumer spending, affecting the US gross domestic product (GDP). This can hit the economy and hinder growth and overall economic health.
How can Future Generations Avoid this Issue?
- Save more than Social Security alone: Know that Social Security benefits are not sufficient to replace retirement savings entirely, but rather they act as additional income that should be piled on top of already stored away savings.
- Work with a professional: Financial advisors can help you understand the intricate details of your personal finances. Seek advice early and often from professionals capable of helping you work toward financial freedom.
- Know your cost of living: There is not a specific dollar amount that everyone should save for retirement. Your personal dollar amount that you should begin saving each month depends on:
- Where you are located
- Your current age
- Your pre-tax income
- Current savings amount
- When you plan to retire
Other factors to consider include inflation rates, salary increases, and the return on investment (ROI) of your portfolio should also be considered.
The predictions above account for the mass retiring of our nation's second largest generation, the Baby Boomers. Expectations have not greatly changed since 2022 however, keeping up to date on this shift is important as it reaches a variety of industries, impacts consumer spending, and will ultimately impact the economy.