A wave of retirees are about to blow their savings and cling to Social Security to stay afloat

• More than 30 million ‘peak boomers’ are retiring financially unprepared.

• The economy could take a hit, with sectors like manufacturing and education having to replace boomer workers.

• These new retirees will likely rely disproportionately on Social Security to stay afloat.

The youngest baby boomers do is about to retire – and most don’t financially prepared for this next phase of their lives.

Starting this year, more than 30 million boomers born between 1959 and 1964 will turn 65, making them the “largest and last cohort” of that generation to retire, according to one study. new report from the Retirement Income Institute of the Alliance for Lifetime Income.

Many in this cohort, known as “peak boomers,” are facing significant economic headwinds, the report said. It’s what some have mentioned the boomer’s retirement bomb – and it can be costly for the rest of the economy’s workers.

Analyzing data from the Federal Reserve and the University of Michigan Health and Retirement Study, the report found that 52.5% of peak boomers have $250,000 or less in assets, meaning they are likely to deplete their savings and, most importantly, will depend on Social Security income upon retirement. Another 14.6% of that cohort have $500,000 or less in assets, meaning that “nearly two-thirds will make an effort to meet their needs in retirement,” the report said.

“America has never seen so many people reach retirement age in a short time, and well over half of them will find it challenging to meet their needs through retirement, let alone maintain their current standard of living” Robert Shapiro, an author of the report and the former Undersecretary of Commerce for Economic Affairs, said in a statement. “They lack the protected income that many older boomers have through solid pensions or higher savings.”

The peak boomers’ retirement wave could also impact the overall U.S. economy. The report predicts that employers will have to replace as many as 14.8 million peak boomers – mainly in the manufacturing, healthcare and education sectors – which could lower economic productivity.

In addition, generational retirement will likely have an impact on consumer spending. Based on data from the Consumer Expenditure Survey, the report shows that peak boomers will spend $204 billion less in 2032 than in 2022, with the transportation sector taking the biggest hit.

Still, as the report notes, younger workers are likely to fill some of the jobs that peak growth workers will leave, and productivity will rise as technology advances.

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The crisis is partly due to changes in the way Americans save for retirement

Peak boomers entered the workforce just as retirement plans shifted from defined benefit plans (which generally guarantee stable income and are subsidized by the employer) to defined contribution plans such as 401(k)s, which rely on employee contributions.

Of the different types of retirement savings plans the report looked at, defined benefit pensions show the least disparity across race, gender and ethnicity (although there are significant differences in annual payments) – but only 24% of peak boomers are affected. and even those plans are encountering opposition possible underfunding.

Many Americans at retirement age already live on meager incomes. Just over half of Americans are over 65 living on an income of $30,000 or less per yearAccording to the Census Bureau’s Current Population Survey, most live on $10,000 to $19,000. And per Business Insider’s calculations from CPS ASEC data79.2% of retirees receive some form of social security income.

Retirement-age Americans, many of whom fall into that peak boomer category, previously told Business Insider that they may just have to keep working until they die or get sick to stay afloat.

“Only the very rich will have any dignity in their old age,” said Pam, who is almost 58. “And the rest of us are just going to pray that they can die while they still have a job, because nobody wants to die on the street.”

Are you a boomer and not prepared for retirement? Contact these reporters at asheffey@businessinsider.com And jkaplan@businessinsider.com.

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