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What Baby Boomers’ Retirement Means For the U.S. Economy

For decades, the retirement of the baby boom generation has been a looming economic threat. Now, it's no longer looming - it's here.

The labor force participation rate for older Americans - the share of those 55 and older who are working or actively looking for work - has fallen over the past year after rising through the recession and early years of the recovery. Roughly 17 percent of baby boomers now report that they are retired, up from 10 percent in 2010.

The boomers were an unprecedented economic force, pushing up rates of homeownership, consumer spending and, most important of all, employment. It's no coincidence that the U.S. labor force participation rate - the share of the adult population that has a job or is trying to find one - hit a record high in the late 1990s, when the boomers were at the peak of their working lives.

By 2020, the Census Bureau estimates, the U.S. dependency ratio will be back to 65; in 2030, it will be 75, the worst since the 1960s and 1970s, when the baby boomers were children.

The U.S. has fewer residents over 65, as a share of its population, than most developed countries, and the disparity will only grow in coming decades. In 2050, about 21 percent of the U.S. population will be 65 or older compared to more than 30 percent in much of Western Europe and an incredible 40 percent in Japan.

The U.S. also has another trend working in its favor: Baby boomers are retiring just as their children - sometimes known as the "echo boomers" - are entering their prime working years. Boomers are no longer even the largest age cohort; more of today's Americans were born in the 1980s and 1990s than in the postwar years. As today's teens and 20-somethings enter the workforce, they will partly offset their parents' exit.

Not that long thereafter, the oldest of the echo boomers will begin entering their own retirement years, and the cycle will begin anew.

Read more: http://fivethirtyeight.com/features/what-baby-boomers-retirement-means-for-the-u-s-economy/

 

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