The Boomers’ Last Hurrah

About 10,000 Baby Boomers (those born between 1945 and 1964) retire each and every day in the United States. And now a large number are reaching age 70 each and every day. Our last hurrah is about to unfold.

The aging of my generation will produce a couple of indisputable consequences. First, outside of health care, the massive wave of retirements will depress consumption — that is, spending — in a very significant way, which will limit growth and exert deflationary pressures.

Second, this retirement wave will exacerbate our pension mess by increasing pension and Social Security costs dramatically. This comes against a backdrop of underfunded plans.

Despite what the right-wing propaganda machine persistently spews forth, Social Security is a relatively easy fix. But the state and private pension fix isn’t.

State and corporate pension plans are grossly underfunded. Some have already failed. More failures are to come. In short, some will renege on their obligations and retirees will not be receiving the monthly checks they’re expecting. (The only “bright”spot for the pension plans is that Americans are now dying earlier, thereby reducing the plans’ payouts.)

Saving some of the public systems will require tax increases, which will further suppress consumption.

Third, equity prices and, therefore, investment portfolios, will take a hit. Take General Electric for example. GE’s underfunded pension hole is $31 billion. Yet the market has yet to fully price into the stock this huge deficit.

Many other companies have large unfunded pension commitments. This will not be good for asset values and, by extension, individuals’ and endowments’ portfolios. Less spending. Deflationary pressures.

There are 72 million Boomers in the U.S. My generation had a major impact on our economy and society as we moved through adulthood. Don’t expect the impact to be any less as we move through retirement. It’s just that the impact will be very, very different.