TEN YEARS HENCE
Ten Points About Baby Boomers and Retirement
JANUARY 21, 2005
On Jan. 21, 2005, Dr. Robert Willis, economics professor at the University of Michigan and director of the multidisciplinary Health and Retirement Study, presented "The Boomers Approach Retirement: Policies to Prepare for Growing Old in an Aging America." The speech included the following excerpts.
- The baby boom temporarily reversed a fertility decline in the United States that began in the 1930s, but the downward trend in fertility then continued. The decline is a worldwide phenomenon and is unlikely to reverse itself.
- Life expectancy has increased to about 72 years for men and about 80 years for women. This trend, combined with the lower fertility rate, is reversing the shape of the traditional age pyramid, with many young people near the bottom supporting fewer elders on top.
- The feasibility of intergenerational transfers of resources, either through families or the public sector, depends heavily on age structure. As an older age structure develops, transfers from older to younger generations become easier. In contrast then, resource transfers from younger to older generations become more difficult, with public programs like Social Security suffering as fewer workers contribute to the system.
- More education, linked to higher earnings and better health, helps public programs by making people more productive in their working years. This results in more taxes paid into the system, but may mean people live longer and draw more income from Social Security and their families.
- Boomers will move from being payrolled taxpayers to benefit recipients beginning around 2010. Though the United States previously showed a trend from 1850 to 1990 toward increasingly earlier retirement, boomers now expect to work longer, regardless of their economic status or education. This is good news for Medicare and Social Security, but a challenge for private pensions and employer-provided health insurance.
- A spike in the occurrence of diabetes means more golden years will be spent in poor health. Boomers display anxiety about their health that may be caused by issues related to access to health care or insurance.
- As more people live into their 80s, the rate of dementia skyrockets, which will cause significant emotional and financial issues as families struggle to care for family members.
- Income and wealth inequality is highly correlated with health inequality. Therefore, couples where both spouses are in excellent health will tend to have higher net worth than if one or both of the spouses are in ill health.
- Divorce rates more than doubled in a decade, reaching 22 percent by 1980. Divorce is a wealth dissipating activity and is related to women's health conditions that persist later in life.
- Divorce, blended family structures, out-of-wedlock childbearing and female careers have complicated implications for intergenerational resource transfers, as well as for individual families. Fractured family structures may mean uncertainties in caring for estranged elderly parents or a shortage of retirement funds for single parents putting their children through college.