According to a new study from the McKinsey Global Institute, the only realistic way to prevent aging boomers from experiencing a significant decline in their living standards and becoming a multidecade drag on U.S. and world economic growth is for boomers to continue working beyond the traditional retirement age. This, in turn, will require important changes in public policy, business practices, and personal behavior.
The authors--Eric D. Beinhocker, Diana Farrell, and Ezra Greenberg--found that two-thirds of the oldest boomers are financially unprepared for retirement, and many are not even aware of their predicament, and that US labor force participation rates are declining: "Without an unexpected burst of productivity growth or a significant upsurge in investment per worker, the aging boomers’ reduced levels of working and spending will slow the real growth of the US GDP from an average of 3.2 percent a year since 1965 to about 2.4 percent over the next three decades."
While many boomers do want to continue working, a number of institutional and legal barriers-—health care costs, labor laws, pension regulations, and corporate attitudes toward older workers—-could prevent them from prolonging their careers. Thus, the government must reallocate health insurance costs for older workers, businesses and boomers must agree on more flexible work arrangements, policy makers must reform private pensions, and Social Security must remove disincentives to remaining in the workforce.
Source: McKinsey Quarterly "Why baby boomers will need to work longer " (November 2008)