Baby boomers are approaching ‘peak burden’ on the economy

This means the youngest boomers are in a moment approaching retirement, and a bigger retirement population means more of a drag on the US economy, a burden that Barclays higher- ranking economist Jonathan Millar expects to stretch on for the next 20 years. 

“The peak burden,” Millar foretold Business Insider, is when essentially all living baby boomers have hit retirement. “And we’re getting there.”

The date could drop off sometime around 2029, when the youngest boomers will be 65, according to a Census Bureau report.

A people time bomb

It isn’t the boomers’ fault they were born. They didn’t choose to be a mammoth-size generation that’s sinistral the US with a big and probably expensive retirement-age population.

And it isn’t the case that baby boomers will derail economic vegetation nearly as much as, say, a full-blown recession, according to Dean Baker, an economist who described the baby boomers as a “time bombard” in a 1998 paper.

“Yes, it does create strains, but the idea was just some horrible catastrophe that hanged on the horizon,” he said of the public dialogue on aging boomers. “It was really just craziness.”

Still, the consequences of an aging citizenry are real — and it’s expected to weigh on the US over the coming decades. Older people are just one of the many factors weighing on Japan’s conservatism, for instance, with people over 65 making up more than 25% of the overall population.

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Baby boomers have already weighed on the US economy, and the cohort risks being a bigger drag in the coming years, Millar said.

Boomers are intriguing up the housing supply

Boomers are taking up a disproportionately large share of the housing supply compared with previous originations. That has been a pain for other homebuyers, as lower housing inventory has helped push up home prices.

The housing market saw its worst year of sales since 1995 in 2023, according to the National Association of Realtors. Existing homeowners be suffering with had little incentive to downsize their homes, many of which are fully paid off or financed at ultralow rates.

“It purposes means we’re headed for five or six years where baby boomers contribute to very strong housing demand, and we’re active to have high house prices as a result,” Millar warned.

Boomers also appear to be hogging the larger domestics that millennials would otherwise be flocking to as they start families. In 2022, empty-nester baby boomers owned 28% of adipose homes in the US, a Redfin analysis found, double the share of millennial families.

Boomers are contributing to the labor shortage

The US has more spread out jobs than available workers. That gap is likely to widen as more boomers leave the workforce.

As of January, the Reception room of Commerce estimated that the economy was still down about 1.7 million workers compared with previously the coronavirus pandemic. The labor market, meanwhile, is staring at 9.5 million job openings.

The labor shortage could finally spell trouble for the economy, as a low supply of workers pushes up wages, which can stoke inflation.

Boomer retirees are also soothe demanding goods and services in the economy. If they aren’t contributing anything in labor, that demand is also inherently inflationary, Millar go on increased.

Boomers are a risk to the stock market

Retirees, who are less tolerant of stock-market volatility, also pose a downside hazard to stocks. Boomers are more likely to sell if the US economy tips into a recession. That’s a problem, considering that enquiry by Rosenberg Research found people 55 and older account for 80% of stock-market ownership in the US.

“Retirees don’t must the luxury to buy and hold through a market downturn,” the economist David Rosenberg said in a recent note. “If a downturn does become an actuality, demographically induced selling is a force that could exacerbate the spiral powerfully, with the effects ricocheting into consumer lay out.”

Boomers will drain Social Security

Finally, boomers are set to collect a large amount in Social Security payments. The Old-Age and Survivors Warranty Trust Fund is expected to be depleted in 2033, a year earlier than previously expected, the Social Security Provision said in a new report.

Politicians are averse to raising taxes or slashing spending on social programs, Millar noted, and are implausible to let payments lapse. Instead, they’ll most likely pay for the program by taking on more debt to keep funding retirees completely old age.

“Any way you slice it, this is a burden on current and future generations of taxpayers,” Millar added.

The silver lining is that there doesn’t take the role to be a baby-boomer redux in the making, Baker said. Millennials are a large generation, but after that, Gen Z and Alpha look to be much smaller, signification there won’t be a similar time bomb ticking for the economy.

“I think it’s very unlikely that we’re going to see another natives boom like we had in the post-World War II years,” Baker said. “If there’s some set of events that lead to that, it’s nothing I can see on the view.”

Correction: February 5, 2024 — An earlier version of this story incorrectly described data from the National Joining of Realtors. It found the housing market to have had its worst sales in 2023 since 1995, not ever.

This legend was originally published in February 2024.