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Report Sees Mixed Outlook for Baby Boomers in Retirement

  • February 26th, 2004

There is much speculation on how the baby boom generation '“ those born between 1946 and 1964 '“ will fare in retirement. The answer is of particular concern because not only is this group the largest birth cohort in U.S. history (some 76 million people), but the first baby boomers will be eligible for early retirement in five years, and, without program changes, the Social Security Trust Fund is projected to be exhausted by 2042.

According to a new report by the Center for Retirement Research at Boston College, the outlook for boomers in retirement is mixed. By some measures, they will be better off than current retirees, but they will be worse off by other measures.

On the bright side, baby boomers can expect higher incomes and lower poverty rates in retirement than current retirees, the researchers found. For example, real per capita family income at age 67 will increase from $29,000 among current retirees to $44,000 among early baby boomers. Among late baby boomers, it is projected to increase slightly further to $48,000. These increases will reduce projected poverty rates at age 67 from 8 percent among current retirees to 4 percent among baby boomers.

However, this is an absolute measure of well-being. Relative measures of well-being tell a different story. For example, one key measure of well-being in retirement is the replacement rate, which expresses retirement income as a share of pre-retirement income. Median replacement rates at age 67 for future retirees are projected to be about thirteen percentage points lower than they are for current retirees.

Regardless of the measure of well-being, certain baby boomer subgroups will remain economically vulnerable, including divorced women, never married men, Hispanics, high school dropouts, Social Security nonbeneficiaries and auxiliary beneficiaries, those with weak labor force attachments, and those with the lowest lifetime earnings.

For more on the report (called a "working paper"), "It's All Relative: Understanding the Retirement Prospects of Baby Boomers," go to: http://www.bc.edu/centers/crr/wp_2003-21.shtml

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Last Modified: 02/26/2004

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