With a growing number of workers retiring each day as more turn 65, employers could struggle to replace roles, finds new research on the economic impact of Peak Baby Boomer retirees from the Alliance for Lifetime Income’s Retirement Income Institute (RII).
The analysis examines the impact of the “Peak 65” phenomenon—when 30.4 million Boomers born between 1959 and 1964 will turn 65 years old this year through 2029. Even though 55% of Peak Boomers surveyed said they would retire within the next five years, the RII predicts their retirement will come sooner, as many do not factor unexpected illnesses, changes in the job market including layoffs, or even changes in attitudes.
In all, the research predicts that 14.8 million Americans will retire from their jobs, leaving a gap for employers to fill.
“A historic surge in retirement age Americans coincides with a historic turnover in workers who serve older Americans, thereby creating a labor gap with far-reaching societal and economic implications,” said Jason Fichtner, who commissioned the study as executive director of the Alliance for Lifetime Income’s RII.
The RII names 18 economic sectors who it says are likely to experience an average loss of 10.1% of their current workforce over the next five years, including utility sectors (16.7% in anticipated workforce retirements), manufacturing (11.8%), construction (10.5%), transportation and warehousing (9.6%), and healthcare and social assistance (9.6%).
The healthcare sector is expected to feel a harder loss of up to 2.135 million workers, the largest number of employees out of any sector, the RII predicts. Other industries that are anticipated to lose over one million workers include manufacturing (1.841 million), construction (1.249 million), education (1.236 million), scientific and technical services (1.220 million), and retail trade (1.002 million).
These retirements are also expected to lead to a 1.3% decline in productivity, finds the RII. One solution the research proposes is for the U.S. to ease the process for immigrants to apply and be approved for work permits.
“Never before has our nation had to deal with so many workplace retirements at the same time,” said Fichtner. “This is a big challenge for businesses and will put added pressure on recruitment and training of younger workers and the expanded application of automated intelligence in the workplace. The U.S. would also benefit from a more thoughtful immigration process than we currently have in place to help fill many of these jobs.”
‘Peak 65’ Boomers want annuities
As the first generation to retire without a pension or additional income support, Boomers are turning to solutions that could protect and extend their retirement income.
According to the study, middle-class families are incorporating annuities to create their own form of a pension. The solutions are especially popular among the middle-class, with the median household income of those owning annuities being $79,000 in 2022, including 25% with incomes below $50,0000 and 70% with incomes less than $100,000.
“Private sector pension plans were once prevalent in our economy but are now rare and Boomers are the first generation of U.S. workers to retire without a pension plan as a base of retirement income,” Fichtner added. “As a result, many middle-income retirees are using annuities to generate protected and predictable income in retirement.”
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.