Baby boomers are approaching 'peak burden' on the economy

A wave of retiring baby boomers means the generation will soon reach "peak burden" on the US economy, economists say.

• The baby-boomer "time bomb" is finally upon us, economists say.
• All boomers will be at least 65 soon, the generation's point of "peak burden" on the economy.
• Future generations can take solace in the fact that no boomer-size generations are in the making.

A time bomb has been ticking in the US.

It's the baby boomers, who as they age are approaching their "peak burden" years in regard to their drag on the economy and the resources of younger generations.

Boomers have already gotten tons of flak from younger people over the economy they've left Gen Zers, millennials, and Generation X to inherit. By the end of this year, all boomers — defined by the US Census Bureau as being born from 1946 to 1964 — will be 60 or older.

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

"The peak burden," Millar told Business Insider, is when essentially all living baby boomers have hit retirement. "And we're getting there."

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

A population time bomb

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

And it isn't the case that baby boomers will derail economic growth nearly as much as, say, a full-blown recession, according to Dean Baker, an economist who described the baby boomers as a "time bomb" in a 1998 paper.

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

Still, the consequences of an aging population 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 economy, for instance, with people over 65 making up more than 25% of the overall population.

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 taking up the housing supply

Boomers are taking up a disproportionately large share of the housing supply compared with previous generations. 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 have had little incentive to downsize their homes, many of which are fully paid off or financed at ultralow rates.

"It probably means we're headed for five or six years where baby boomers contribute to very strong housing demand, and we're going to have high house prices as a result," Millar warned.

Boomers also appear to be hogging the larger homes that millennials would otherwise be flocking to as they start families. In 2022, empty-nester baby boomers owned 28% of large 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 open jobs than available workers. That gap is likely to widen as more boomers leave the workforce.

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

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

Boomer retirees are also still demanding goods and services in the economy. If they aren't contributing anything in labor, that demand is also inherently inflationary, Millar added.

Boomers are a risk to the stock market

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

"Retirees don't have the luxury to buy and hold through a market downturn," the economist David Rosenberg said in a recent note. "If a downturn does materialize, demographically induced selling is a force that could exacerbate the spiral powerfully, with the effects ricocheting into consumer spending."

Boomers will drain Social Security

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

Politicians are averse to raising taxes or slashing spending on social programs, Millar noted, and are unlikely to let payments lapse. Instead, they'll most likely pay for the program by taking on more debt to keep funding retirees through 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 appear 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, meaning 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 population 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 horizon."

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

This story was originally published in February 2024.