The Baby Boomers, as a generation, are a hard act to follow. They are known for bucking tradition, leading social change and getting paid pretty darn well. And they’ve been so successful that their kids are reaping the benefits.
But it’s exactly this success that could pose a problem for the country at large. Boomers make up about a quarter of the U.S. population, and the oldest of them are on the verge of retirement, if they haven’t started already. And when the Boomers start exiting the workforce en masse, their financial contributions—what they earn and what they spend—will go with them.
This doesn’t bode well for the economy, according to statistics news blog FiveThirtyEight. The Boomers’ economic power is undisputed; over the years, they have boosted home ownership rates, consumer spending and labor force participation rates—particularly in the 1990s, when they were at their peak working age.
As they retire, though, they will have a negative impact on an economic measure known as the “dependency ratio,” which is the number of people outside of working age (younger than 18 and older than 64) per 100 adults that fall in the 18-to-64 age range. The higher the ratio, the worse it is for the economy, because fewer working-age people are keeping the economy afloat.
The U.S. dependency ratio had been improving for decades, but is now set to rise because of the retiring Boomer population: That number was 59 in 2010 but is projected to grow to 65 by 2020 and 75 by 2030. There are also other trickle-down effects of a large aging population, such as strains on Social Security and Medicare and higher demand for health care.
While you can’t control the economy, you can prepare now to help cover your own costs in retirement. Here’s how you can get started saving for retirement and the top retirement savings mistakes to avoid.