Baby Boomers are approaching 'peak burden' on the economy

• The Baby Boomer "time bomb" is finally upon us, experts say.
• A wave of retiring Boomers means the generation will soon be at "peak burden" to the economy.
• The silver lining? There isn't another Boomer-sized generation in the making.

A time bomb has been ticking in the US.

It's the Baby Boomers, who are aging fast and 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 for supposedly "ruining" the economy for Millennials and Gen Zers. Most Boomers - defined by the Census as people born between 1946 and 1964 - are turning sixty or older this year.

With many rapidly approaching retirement, that means the generation is about to exert more of a drag on the US economy, a burden that's likely to stretch on for the next 20 years, according to Barclays senior economist Jonathan Millar.

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

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

A population time bomb

It isn't the Boomers' fault they were born. They didn't choose to be a mammoth-sized generation that's left the US with a big and probably expensive elderly 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 baby boomers. "It was really just craziness."

Still, the consequences of an aging population are real - and it's one of the things that's expected to weigh on the US over the coming decades. Old people are just one of the many factors that are weighing on Japan's economy, for instance, with senior citizens 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 to previous generations. That's been a pain for other home buyers, as lower housing inventory has helped pushed up home prices.

The housing market saw its worst year of sales ever in 2023, according to the National Association of Realtors. Existing homeowners have has little incentive to downsize their homes, many of which are fully paid off or financed at ultra-low 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 will widen as more Boomers leave the workforce.

As of January, the economy was still down around 1.7 million workers compared to before the pandemic, according to an estimate from the Chamber of Commerce. The labor market, meanwhile, is staring at 9.5 million job openings.

The ongoing 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 people 55 and older account for 80% of stock-market ownership in the US, according to Rosenberg Research.

"Retirees don't have the luxury to buy and hold through a market downturn," top 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 said, and they won't let payments lapse. Instead, they'll 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 economic drag of Boomers should fade as the generation gets smaller, Millar and Baker both note.

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 were 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."