McKinsey Global Institute
Talkin’ ’Bout My Generation:The Economic Impact of Aging US Baby Boomers
June 2008
Executive Summary
2
McKinsey Global Institute
Th� �cKins��� �l�bal Ins��i������ (��I), f��nd�d in 1990, is �cKins��� &
C�mpan��’s �c�n�mics ��s�a�ch a�m. ��I’s missi�n is ��� h�lp b�sin�ss and
g�v��nm�n�� l�ad��s d�v�l�p a d��p�� �nd��s��anding �f ��h� �v�l���i�n �f ��h�
gl�bal �c�n�m�� and p��vid� a fac�� bas� ��ha�� c�n���ib����s ��� d�cisi�n making
�n c�i��ical manag�m�n�� and p�lic�� iss��s.
��I’s ��s�a�ch is a �niq�� c�mbina��i�n �f ��w� disciplin�s� �c�n�mics and
manag�m�n��. ��� in���g�a��ing ��h�s� ��w� p��sp�c��iv�s, ��I is abl� ��� gain
insigh��s in��� ��h� mic���c�n�mic �nd��pinnings �f ��h� b��ad ����nds shaping
��h� gl�bal �c�n�m��. ��I has ���iliz�d ��his “mic��-���-mac��” app��ach in
��s�a�ch c�v��ing �v�� 15 c��n���i�s and 28 ind�s����� s�c����s, �n ���pics ��ha��
incl�d� �c�n�mic p��d�c��ivi����, gl�bal �c�n�mic in���g�a��i�n, �ffsh��ing, capi��al
ma�k���s, h�al��h ca��, �n��g��, d�m�g�aphics, and c�ns�m�� d�mand.
��I’s ��s�a�ch is c�nd�c���d b�� a g���p �f f�ll-��im� ��I f�ll�ws bas�d in
�ffic�s in San F�ancisc�; Washing���n, DC; L�nd�n; and Shanghai and l�d
b�� ��I’s di��c���� Diana Fa���ll. ��I p��j�c�� ���ams als� incl�d� c�ns�l��an��s
d�awn f��m �cKins���’s �ffic�s a���nd ��h� w��ld and a�� s�pp�����d b��
�cKins���’s n���w��k �f ind�s����� and manag�m�n�� �xp����s and w��ldwid�
pa���n��s. In addi��i�n, ��I ���ams w��k wi��h l�ading �c�n�mis��s, incl�ding
N�b�l la���a���s and p�lic�� �xp����s, wh� ac�� as advis��s ��� ��I p��j�c��s.
��I’s ��s�a�ch is f�nd�d b�� ��h� pa���n��s �f �cKins��� & C�mpan�� and is
n��� c�mmissi�n�d b�� an�� b�sin�ss, g�v��nm�n��, �� ���h�� ins��i�����i�n. F����h��
inf��ma��i�n ab���� ��I and c�pi�s �f ��I’s p�blish�d ��p����s can b� f��nd
a�� www.mckins���.c�m/mgi.
�
Talkin’ ’Bout My Generation: The Economic Impact of Aging Baby Boomers is ��h�
��s�l�� �f a ���a�l�ng s���d�� b�� ��h� �cKins��� �l�bal Ins��i������ (��I) in pa���n��ship
wi��h �cKins���’s C�ns�m�� Insigh�� P�ac��ic�. Th� w��k b�ilds �n p��vi��s ��I
w��k �n ��h� impac�� �f d�m�g�aphics �n na��i�nal �c�n�mi�s, as w�ll as ��I’s
w��k �n shif��ing pa������ns �f c�ns�m�� d�mand in ��h� w��ld.1 This s���d�� p��s�n��s
n�w da��a and anal��sis �n h�w ��h� �ab�� ���m��s, �n� �f ��h� la�g�s�� US bi���h
c�h����s ��la��iv� ��� p�p�la��i�n in ��h� las�� c�n������, will shap� ��h� US �c�n�m�� �v��
��h� c�ming d�cad�s as ��h��� ag� and ����i��.
In N�v�mb�� 2007, w�, al�ng wi��h ��� c�ll�ag��s David C����� and J�hn E. F��s����h,
p�blish�d an a���icl� “S��ving Aging �ab�� ���m��s” in The McKinsey Quarterly,
highligh��ing ��s�l��s �f ��his ��s�a�ch f��m ��h� p��sp�c��iv� �f b�sin�ss�s s��k-
ing ��� s��v� an aging p�p�la��i�n �f c�ns�m��s.2 In ��ha�� pi�c� w� f�c�s�d �n
��h� significan�� �pp�����ni��i�s as w�ll as ��h� chall�ng�s ��his d�m�g�aphic shif��
p��s�n��s f�� c�mpani�s s��ving aging c�ns�m��s. In ��his ��p����, w� ��ak� a dif-
f���n�� p��sp�c��iv�. H���, w� f�c�s �n ��h� q��s��i�n �f wha�� impac�� ��h� aging
�f ��h� ���m��s will hav� �n ��h� �v��all US �c�n�m��, and wha�� ac��i�ns p�lic��
mak��s and b�sin�ss l�ad��s m�s�� b�gin ��� ��ak� n�w ��� minimiz� ��h� �isks ���
��h� �c�n�m�� p�s�d b�� ��his d�m�g�aphic ���ansi��i�n.
David C�����, a �cKins��� di��c���� in Dallas and gl�bal kn�wl�dg� l�ad�� f�� ��h�
C�ns�m�� Insigh�� P�ac��ic�; E�ic ��inh�ck��, a s�ni�� f�ll�w wi��h ��I in L�nd�n;
and J�hn F��s����h, an �xp���� p�incipal wi��h ��h� C�ns�m�� Insigh�� P�ac��ic� in
1 S�� �cKins��� �l�bal Ins��i������ R�p����s� Th� C�ming D�m�g�aphic D�fici��� H�w Aging P�p�la-��i�ns Will R�d�c� �l�bal Savings, D�c�mb�� 2004; From ‘�ad� in China’ ��� ‘S�ld in China’� Th� Ris� �f ��h� Chin�s� U�ban C�ns�m��, N�v�mb�� 2006; The ‘�i�d �f ��ld’� Th� Ris� �f India’s C�ns�m�� �a�k���, �a�� 2007. Th��� can b� f��nd a�� h����p�//www.mckins���.c�m/mgi/
2 David C�����, Diana Fa���ll, and J�hn E. F��s����h, “S��ving Aging �ab�� ���m��s,” The McKinsey Quarterly, N�v�mb�� 2007.
P��fac�
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4
C�nn�c��ic���, w��k�d cl�s�l�� wi��h m� ��� p��vid� �v��all l�ad��ship �n b���h s��ag�s
�f ��his p��j�c��. Th� p��j�c�� ���am f�� ��his ��p���� was manag�d b�� Ez�a ����nb��g,
an �xp���� wi��h ��I in Washing���n, DC, wh� als� l�d ��h� �c�n�mic anal��sis and
m�d�ling �ff����s, and i�� incl�d�d J�na��han Abl����� �f ��h� N����h Am��ican Kn�wl�dg�
C�n����; S���chi Sh�kla, a �cKins��� c�ns�l��an�� f��m ��h� Asia H��s� �ffic� in
F�ankf����; ���ff���� ����n�, an �x����nal advis�� ��� ��I �n �c�n�m����ic m�d�ling;
and N�ll H�nd��s�n, an ��I s�ni�� �di���� in Washing���n, DC.
This ��p���� b�il�� �p�n ��� �a�li�� w��k. Tha�� p��j�c�� ���am was manag�d fi�s�� b��
Van�ssa F���man, a c�ns�l��an�� in �cKins���’s L�nd�n �ffic� and ��h�n b�� J�hn
Cha�, a c�ns�l��an�� f��m �cKins���’s H��s���n �ffic�. Th� ma�k��� ��s�a�ch was
l�d b�� L��a Chajka-Cadin, an �xp���� wi��h �cKins���’s C�ns�m�� Insigh�� P�ac��ic�
in ��s���n. W� w��� s�pp�����d b�� a s�p��b ���am ��ha�� incl�d�d Viv�k �an��ji,
�a����h�w Kl�sas, ������� L��kk�, J��ng����n Shim, and N�d W�lch.
W� als� ��c�iv�d val�abl� inp��� and g�idanc� f��m a n�mb�� �f s�ni�� �cKins���
pa���n��s wh� c�mmi�����d ��h�i� ��im� ��� s��v� �n a s�����ing c�mmi������ ��� ��vi�w ��h�
w��k. Th��� incl�d� �lai� C�awf��d, �a���in Elling, Dav� Elzinga, ����s�� H�ld�n, David
H�n��, J�hn �cPh��s�n, �icha�l Pa��sal�s-F�x, Tim W�lsh, and �icha�l Z�a.
O�� ���am b�n�fi���d s�bs��an��iall�� f��m in����vi�ws and disc�ssi�ns wi��h a n�mb��
�f �xp����s, incl�ding Alicia ��nn�ll and An��h�n�� W�bb �f ��h� C�n���� f�� R���i��m�n��
R�s�a�ch a�� ��s���n C�ll�g�, and �a���in N�il �ail�� �f ��h� ����kings Ins��i�����i�n.
Finall��, w� w��ld lik� ��� ��hank s�v��al m�mb��s �f ��I’s p��f�ssi�nal s��aff wh�
c�n���ib����d ��h�i� �ff����s ��� ��his p��j�c��� Tim ��ac�m, f�� his ��s�a�ch assis��anc�;
R�b�ca R�bb���, ��I’s �x����nal ��la��i�ns manag��; and D�ad�a H�nd��s�n,
��� p�ac��ic� adminis���a����. W� als� ��hank An��h�n�� L�� �f ��h� N����h Am��ica
Financial S��vic�s P�ac��ic�, and ��h� s�p��b s��affs �f �cKins���’s N����h Am��ican
Kn�wl�dg� C�n����, ��h� �cKins��� Kn�wl�dg� C�n���� in India, and ��h� p��d�c��i�n
and ���chnical s��vic�s �f ��h� Fi�m.
O�� g�al wi��h ��his and ���h�� ��I ��p����s is ��� p��vid� b�sin�ss l�ad��s, p�lic��
mak��s, and ���h�� d�cisi�n mak��s wi��h fac��s and insigh��s ��ha�� l�ad ��� b�������
�nd��s��anding �f k��� ����nds in ��h� gl�bal �c�n�m��. As wi��h all ��I p��j�c��s, ��his
��s�a�ch is ind�p�nd�n�� and was n��� c�mmissi�n�d �� sp�ns���d in an�� wa�� b��
an�� b�sin�ss, g�v��nm�n��, �� ���h�� ins��i�����i�n.
Diana Fa���ll
Di��c����, �cKins��� �l�bal Ins��i������
J�n� 2008
San F�ancisc�
Talkin’ ’����� ��� ��n��a��i�n�Th� Ec�n�mic Impac�� �f Aging US �ab�� ���m��s
Diana Fa���llE�ic ��inh�ck��Ez�a ����nb��gS���chi Sh�klaJ�na��han Abl��������ff���� ����n�
�cKins��� �l�bal Ins��i������
J�n� 2008
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Ex�c���iv� S�mma���
Am��ica’s “�ab�� ���m” g�n��a��i�n has d�mina���d ��h� US �c�n�m�� f�� m���
��han a q�a�����-c�n������. O�� ��s�a�ch sh�ws ��ha�� ��h� n�a�l�� 79 milli�n �ab�� ���m-
��s hav� �a�n�d ��c��d l�v�ls �f inc�m�, g�n��a���d g��a�� w�al��h, and sp����d
�c�n�mic g��w��h. ���� ��h��� hav� als� sp�n�� a�� ��c��d l�v�ls, fail�d ��� sav�, and
acc�m�la���d �np��c�d�n���d l�v�ls �f d�b��. N�w, as ��h� �ld�s�� ���m��s n�a� ��-
��i��m�n��, w� �s��ima��� ��ha�� app��xima���l�� ��w�-��hi�ds �f Ea�l�� ���m�� h��s�h�lds,
wh� a�� ag�d 54 ��� 6�, a�� financiall�� �np��pa��d f�� ����i��m�n��—��ha�� is, ��h���
hav� n��� acc�m�la���d �n��gh savings ��� main��ain ��h�i� lif�s����l� as ��h��� ag�. And
man�� �f ��h�m d� n��� ��aliz� ��h��� a�� ill-p��pa��d. ��anwhil�, ��h�i� p��dicam�n��
is w��s�ning wi��h ��h� fall in h�m� val��s and s���ck p�ic�s ��ha�� b�gan in 2007.
Th� ���m��s’ aging als� will b� f�l�� ��h���gh���� ��h� �c�n�m��. As ��h� ���m��s
g��w �ld��, ��h��� will w��k and sp�nd l�ss, sl�wing ��al �DP g��w��h ��� a m���
m�d�s�� pac� ��han in ��c�n�� d�cad�s� f��m ��h� �.2 p��c�n�� av��ag� ann�al �a���
�nj����d sinc� 1965 ��� 2.4 p��c�n�� �v�� ��h� c�ming ��h��� d�cad�s. Whil� ��h�
b��s��ing �f ��h� h��sing b�bbl� and ��s�l��ing c��di�� c�isis hav� �ais�d c�nc��ns
ab���� �c�n�mic p��f��manc� in ��h� sh���� ����m, ��h� c�ming ����i��m�n�� �f ��h�
�ab�� ���m��s will p�s� chall�ng�s ��� ��h� US �c�n�m�� f�� m��� ��han ��h���
d�cad�s.
���� ��� ��s�a�ch als� sh�ws ��ha�� ��h�s� chall�ng�s can b� m���. O�� anal��sis
sh�ws ��ha�� �nabling ��h� ���m��s ��� w��k la���� in lif� w��ld significan��l�� b�n�fi��
b���h individ�al h��s�h�lds and ��h� b��ad�� �c�n�m��. ��� inc��asing ��h� m�dian
����i��m�n�� ag� b�� ab���� ��w� ���a�s—f��m 62.6 ���da�� ��� 64.1 b�� 2015—��h�
sha�� �f �np��pa��d ���m�� h��s�h�lds c��ld b� halv�d f��m 62 p��c�n�� ��� �1
p��c�n��. And ��h� addi��i�nal w��k��s w��ld b��s�� ��al �DP g��w��h.
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Th� ���m��s hav� b��n adap��abl� and inn�va��iv� ��h���gh���� ��h�i� liv�s and a��
al��ad�� s��a���ing ��� ��d�fin� aging and ����i��m�n��. O�� s��v��� �f ���m��s facing
����i��m�n�� sh�ws ��ha�� m�s�� �xp�c�� ��� w��k la���� in lif�. H�w�v��, ��h��� a�� als�
man�� ba��i��s ��� d�ing s�. Th�s� �ang� f��m ��h� c�s��s �f Am��ica’s h�al��h ca��
s��s���m, ��� �nin���nd�d c�ns�q��nc�s �f lab�� laws and p�nsi�n ��g�la��i�ns,
��� c��p��a��� a����i���d�s ���wa�d �ld�� w��k��s. I�� is �ss�n��ial ��ha�� p�lic�� mak��s
and b�sin�ss l�ad��s w��k ���g���h�� ��� ��m�v� ��h�s� ba��i��s and p��v�n�� ��h�
���m��s’ ����i��m�n�� f��m b�c�ming a m�l��i-d�cad� d�ag �n US g��w��h.
Th�s� c�ncl�si�ns a�� s�pp�����d b�� a ���a�l�ng ��s�a�ch p��j�c�� c�nd�c���d b��
��h� �cKins��� �l�bal Ins��i������ (��I) in pa���n��ship wi��h �cKins���’s C�ns�m��
Insigh�� P�ac��ic�. Th� ��s�a�ch incl�d�d c�ns����c��i�n �f a da��abas� �f US h��s�-
h�ld financial da��a c��� b�� ag�, inc�m�, and w�al��h f��m 1962 ��h���gh ��h� ��hi�d
q�a����� �f 2007; ��h� c��a��i�n �f an �c�n�m����ic f���cas��ing m�d�l ��ha�� p��j�c��s
���m�� and ���h�� c�h���� h��s�h�ld financ�s ��� 20�5; a s��v��� �f �v�� 5,100
h��s�h�lds �f ���m��s and ��h� Sil�n��s (��h� g�n��a��i�n ��ha�� p��c�d�d ��h�
���m��s), and �2 in-h�m� ���hn�g�aphic in����vi�ws wi��h ���m�� h��s�h�lds
app��aching �� j�s�� pas�� ����i��m�n��. W� b�i�fl�� ����lin� ��h� findings f��m ��his
��s�a�ch b�l�w. R�ad��s in�����s���d in ��h� f�ll ��s�l��s and anal��s�s a�� di��c���d
��� ��h� main chap����s �f ��h� ��p����, whil� ��h�s� in�����s���d in ��� m���h�d�l�g��,
ass�mp��i�ns, and da��a s���c�s a�� di��c���d ��� ��h� app�ndix�s.
BOOMERS HAVE ENJOYED RECORD EARNINGS—BUT EIGHTY PERCENT OF
THEIR GAINS ARE FROM ONETIME FACTORS
Th� �ab�� ���m��s hav� had an ����siz�d impac�� �n ��h� US �c�n�m�� sinc� ��h�i�
bi���h in ��h� p�s��wa� p��i�d f��m 1945 ��� 1964. A�� 45 milli�n h��s�h�lds s����ng,
��h��� hav� acc��n���d f�� ��h� g��a���s�� sha�� �f �a�nings and c�ns�mp��i�n in ��h�
�c�n�m�� sinc� 1980. W� p��j�c�� ��ha�� ��h�i� ��a �f �c�n�mic d�minanc� will las��
�n��il 2019 (Exhibi�� 1).
Th� ���m��s hav� �a�n�d m��� a�� �v���� ag� in ��al ����ms ��han p��vi��s g�n-
��a��i�ns. Exhibi�� 2 c�mpa��s ���m�� �a�nings b�� ag� wi��h ��h�s� �f ��h� Sil�n��
g�n��a��i�n, ��h� c�h���� ��ha�� p��c�d�d ��h� ���m��s. W� p��j�c�� ��ha�� ��h� ���m��s’
�a�nings will p�ak in 2015 f�� ��h� Ea�l�� ���m��s (b��n f��m 1945 ��� 1954) a��
$90,000 p�� h��s�h�ld, and in 2025 f�� ��h� La��� ���m��s (b��n f��m 1955
��h���gh 1964) a�� $106,000.1
1 All inc�m�, n��� w����h, and sp�nding fig���s a�� �xp��ss�d in 2000 d�lla�s. O�� �c�n�m����ic m�d�l cap�����s 100 p��c�n�� �f h��s�h�ld inc�m� and sp�nding in ��h� �c�n�m��. F�ll�wing na��i�nal acc��n��ing s��anda�ds, w� incl�d� inc�m� and sp�nding p��vid�d in-kind ��� h��s�-h�lds. S�� Chap���� 1 and App�ndix � f�� m��� d���ails.
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Exhibit 1
Boomer Era
THE SIZE OF THE COHORT HAS CREATED A "BOOMER ERA" FROM 1980 TO 2019
Cohort share of households%
Generation X
Boomers
Silents
Source: McKinsey Global Institute US Consumer Model, v7.2
0
10
20
30
40
50
1965 1975 1985 1995 2005 2015 2025 2035
Exhibit 2
BOOMERS HAVE EARNED MORE AT EVERY AGE THAN PRIOR GENERATIONS
0
20
40
60
80
100
120
25 30 35 40 45 50 55 60 65 70 75
Real disposable annual income per household by cohort$ thousand, 2000
Age (cohort midpoint)
Source: McKinsey Global Institute US Consumer Model, v7.2
Late BoomersEarly BoomersLate SilentEarly SilentForecast
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L��k�d a�� in agg��ga���, ��h� ���m��s hav� �a�n�d m��� ��han ��wic� as m�ch as ��h�
Sil�n�� g�n��a��i�n d��ing ��h� sam� ag� span (Exhibi�� �). ���� ��� anal��sis sh�ws
��ha�� 80 p��c�n�� �f ��h� ���m��s’ inc��as�d �a�nings was d�iv�n b�� ��h��� sp�cific
�n���im� fac����s ��ha�� a�� n��� lik�l�� ��� b� ��p�a���d f�� f������ g�n��a��i�ns.
Fi�s�� is ��h� sh��� siz� �f ��h� ���m�� c�h����. Th� ���m��s inc��as�d ��h� siz� �f
��h� US lab�� f��c�, b��s��ing ����p��� and p�ck���ing ��h� inc�m� ass�cia���d wi��h
��ha�� g��w��h. If w� ass�m� ��ha�� �n av��ag� ��h� ���m��s liv�d as did ��h� p��vi��s
Sil�n�� g�n��a��i�n, wi��h ��h� sam� n�mb�� �f ad�l��s and ��h� sam� inc�m� p��
h��s�h�ld, ��h� simpl� fac�� ��ha�� ��h��� w��� m��� �f ��h�m w��ld acc��n�� f�� �8
p��c�n�� �f ��h�i� inc��as�d agg��ga��� inc�m�.
���� ��h� ���m��s als� �a�n�d m��� b�ca�s� ��h��� liv�d v���� diff���n��l�� ��han ��h�
Sil�n��s. On� k��� diff���nc� was ��ha�� ���m�� w�m�n p����d in��� ��h� w��kplac� a��
�ising �a���s, f����h�� b��s��ing ��h� siz� �f ��h� lab�� f��c�. This chang� was cl�s�l��
link�d ��� a s��� �f s�cial ����nds� Th� ���m��s hav� ma��i�d and had child��n la����
in lif�, hav� div��c�d a�� high�� �a���s, �� hav� ch�s�n n��� ��� ma���� a�� all. As a
��s�l��, ��h� ���m��s a�� n�w divid�d in��� a la�g�� n�mb�� �f small�� h��s�h�lds
��han in p��vi��s g�n��a��i�ns, wi��h f�w�� ad�l��s p�� h��s�h�ld. ���� h��s�h�lds
f�� ��his g�n��a��i�n m�an�� m��� �a�n��s. Ass�ming ��ha�� ��h� ���m��s had ��h�
sam� av��ag� inc�m� as ��h� Sil�n��s, ��his shif�� p��vid�s a s�c�nd �xplana��i�n
f�� ��h� ���m��s’ g��a���� c�ll�c��iv� inc�m� and acc��n��s f�� 15 p��c�n�� �f ��h�
diff���nc�.
Exhibit 3
420
1,645
Silentincome1985
791
Largeincrease in population
310
Morehouseholds
575
Higherreturns to work and education
Economyeffect
3,741
Boomerincome2005
EIGHTY PERCENT OF BOOMER INCOME GROWTH DUE TO ONETIME FACTORS SPECIFIC TO BOOMER COHORT
* Decomposition compares 10-year cohorts at the same age: Early Boomers vs. Early Silents at age 55; Late Boomers vs. Late Silents at age 45. Age refers to cohort midpoint.
Source: McKinsey Global Institute US Consumer Model, v7.2
Characteristics specific to Boomer cohort
2038 15Contribution% 27
Drivers of change in total income across cohorts measured at the same age*$ billion, 2000
1�
Thi�d, and finall��, ��h� ���m��s hav� �nj����d g��a���� ������ns ��� b���h �d�ca��i�n and
w��k ��han did ��h� p��vi��s g�n��a��i�n, which b��s���d ��h�i� av��ag� h��s�h�ld
inc�m�. Th��� b�cam� m��� �d�ca���d ��han p��vi��s g�n��a��i�ns, in la�g� pa���
b�ca�s� �f ��h� �d�ca��i�nal gains b�� ���m�� w�m�n. And ��h��� did s� a�� a ��im�
wh�n ��h� lab�� f��c� was shif��ing f��m ind�s���ial w��k ��� s��vic� and kn�wl�dg�
j�bs, inc��asing ��h� ������ns ��� �d�ca��i�n. Th��� w��� als� b������� abl� ��han ���h��
c�h����s ��� capi��aliz� �n chang�s in ��h� �c�n�m�� s���mming f��m p��d�c��ivi����
g��w��h, ���chn�l�gical inn�va��i�n, and gl�baliza��i�n d��ing ��his p��i�d. W� �s��i-
ma��� ��ha�� high�� ������ns b��s���d agg��ga��� inc�m� b�� 27 p��c�n��.
Th� ��maining 20 p��c�n�� �f ��h�i� inc�m� gains is d�� ��� fac����s n��� sp�cific ���
��h� ���m��s—i�� is ��h� gain ��h��� ��c�iv�d b�� b�n�fi��ing f��m �c�n�mic g��w��h a��
l�as�� as m�ch as did �v�����n� �ls� �v�� ��his p��i�d.
N�n� �f ��h� ��h��� fac����s d�iving diff���n��ial g��w��h in ���m��s’ inc�m� is lik�l��
��� b� ��p�a���d. I�� is �nlik�l�� w�’ll s�� an���h�� c�h���� as p��p����i�nall�� la�g�
as ��h� ���m��s f�� s�m� ��im� ��� c�m�. Lik�wis�, ��h� s�cial ����nds ��ha�� hav�
inc��as�d h��s�h�ld n�mb��s s��m ��� hav� la�g�l�� pla���d ���� and s��abiliz�d.
Finall��, f�mal� �d�ca��i�nal a����ainm�n�� and w��kf��c� pa���icipa��i�n als� app�a�
��� hav� p�ak�d.
Th�s, whil� f������ g�n��a��i�ns will lik�l�� s�� ��al inc�m� inc��as�s d�� ���
p��d�c��ivi���� g��w��h and ���h�� f�ndam�n��al �c�n�mic fac����s, ��h�s� gains a��
�nlik�l�� ��� �cc�� a�� ��h� pac� �nj����d b�� ��h� ���m��s.
THE MISSING PEAK—DESPITE HIGH INCOMES, THE BOOMERS HAVE FAILED
TO SAVE
���� j�s�� as ��h� ���m��s hav� b��n ��c��d �a�n��s, ��h��� hav� als� b��n ��c��d
sp�nd��s and b����w��s. Th� ���m��s hav� b��n ��h� maj�� sp�nd��s in ��h�
�c�n�m�� sinc� ��h� mid-1980s, and ��h��� hav� sp�n�� m��� in ��al ����ms a�� �v����
ag� ��han p��vi��s g�n��a��i�ns. Th� ���m��s’ sp�nding sp��� has h�lp�d d�iv�
c�ns�mp��i�n ��� acc��n�� f�� m��� ��han 78 p��c�n�� �f �DP g��w��h in ��h� Uni���d
S��a���s f��m 1995 ��� 2005 v��s�s 64 p��c�n�� ��w� d�cad�s �a�li��.
���� wha�� has ��all�� s�pa�a���d ��h� ���m��s f��m p��vi��s g�n��a��i�ns has b��n
��h�i� fail��� ��� sav�. His����icall��, h��s�h�lds hav� f�ll�w�d a lif�-c��cl� pa������n
wh��� ��h��� hav� m�d�s�� savings in ��h�i� �a�l�� ���a�s wh�n ��h�i� inc�m�s a�� l�w;
��h�n ��h��� acc�m�la��� savings in ��h�i� p�ak �a�ning ���a�s, ����picall�� ��h�i� f����i�s
and fif��i�s; and ��h�n ��h��� d�aw d�wn ��h�s� savings in ����i��m�n�� in ��h�i� six��i�s
and s�v�n��i�s. Exhibi�� 4 sh�ws ��his savings lif� c��cl� f�� ��h� ���m��s v��s�s ��h�
Sil�n��s. ����h ��h� Ea�l�� and La��� Sil�n��s sh�w a dis��inc�� savings p�ak d��ing ��h�i�
14
high-�a�ning ���a�s. ���� ��h� p�ak is missing f�� ��h� Ea�l�� ���m��s, and ��h� La���
���m��s app�a� ��� b� �n an �v�n l�w�� savings ���aj�c������. O�� anal��sis sh�ws
��ha�� ��h� ���m��s’ missing savings p�ak acc��n��s f�� m�s�� �f ��h� c�llaps� in
��h� US h��s�h�ld saving �a��� f��m i��s p�ak �f �v�� 10 p��c�n�� in ��h� mid-1980s
��� a���nd 2 p��c�n�� ���da��. In 2005, ��h� ���m��s had 47 p��c�n�� �f na��i�nal
disp�sabl� inc�m� b��� c�n���ib����d �nl�� 7 p��c�n��ag� p�in��s ��� na��i�nal savings.
A�� ��h� sam� p�in�� in ��h�i� lif� c��cl� in 1985, ��h� Sil�n��s c�n���ib����d ��wic� as
m�ch ��� na��i�nal savings d�spi��� c�n����lling p��p����i�nall�� fa� l�ss inc�m�.
O�� anal��sis highligh��s ��w� c�i��ical ��as�ns f�� ��his missing p�ak in ���m��
saving—��h� “w�al��h �ff�c��” f��m ass��� app��cia��i�n and inc��as�d acc�ss ���
c��di��. Fi�s��, financial ma�k��� inn�va��i�ns in ��h� 1980s and ’90s ����n�d m���
Am��icans in��� b���h inv�s����s and b����w��s. D��ing ��h� ���m��s’ lif���im�s,
m����al f�nd p�n����a��i�n am�ng 50- ��� 59-���a�-�lds has climb�d f��m 14 p��c�n��
�f h��s�h�lds ��� 64 p��c�n��. Wh�n ���m��s saw ��h�i� s���cks and h�m� val��s
s�a� d��ing ��his p��i�d, ��h��� f�l�� �mb�ld�n�d ��� sp�nd m���, and ��h�s sav� l�ss
��han ��h��� w��ld hav� ���h��wis�—��h� s�-call�d w�al��h �ff�c��. O�� anal��sis sh�ws
��ha�� alm�s�� half �f ��h� inc��as� in n��� w����h f�� Ea�l�� ���m��s has c�m� f��m
ass��� app��cia��i�n, wh���as a�� ��h� sam� ag� ��h� Sil�n��s ��li�d �n saving ���
inc��as� ��h�i� n��� w����h (Exhibi�� 5).
A�� ��h� sam� ��im�, ��h� ���m��s b����w�d m���. Th� sha�� �f h��s�h�lds wi��h
m����gag�s alm�s�� d��bl�d, and ��h� p��c�n��ag� wi��h ��v�lving c��di�� inc��as�d b��
Exhibit 4
BOOMER SAVING RATES HAVE NOT PEAKED DURING PRIME EARNING YEARS LIKE PREVIOUS GENERATIONS
-15
-10
-5
0
5
10
15
20
25
30
35
25 30 35 40 45 50 55 60 65
Saving rate by cohort, household balance sheet measure% of disposable income
Age (cohort midpoint)
Source: McKinsey Global Institute US Consumer Model, v7.2
Late BoomersEarly BoomersLate SilentEarly SilentForecast
15
25 p��c�n��. Th� n��� �ff�c�� is ��ha�� ��h� ���m��s a�� ca����ing fa� m��� d�b�� la���� in
lif� ��han p��vi��s g�n��a��i�ns. Th� ���m��s hav� n�a�l�� 1.5 ��im�s ��h� am��n��
�f liabili��i�s, and ��h�i� av��ag� liabili����-���-n��� w����h �a��i� is 54 p��c�n�� high�� ��han
��h� Sil�n��s a�� ��h� sam� ag�. This is �v�n b�f��� ��h� f�ll �ff�c��s �f ��h� h��sing
ma�k��� d�clin� hav� pla���d ����.
TWO-THIRDS OF BOOMERS ARE UNPREPARED FOR RETIREMENT
W� �s��ima��� ��h� n��� ��s�l�� �f ��h� Ea�l�� ���m��s’ w�ak saving is ��ha�� app��xi-
ma���l�� ��w�-��hi�ds �f ��h�s� h��s�h�lds a�� �np��pa��d f�� ����i��m�n��—��ha�� is,
��h��� will n��� b� abl� ��� s�s��ain app��xima���l�� 80 p��c�n�� �f ��h�i� sp�nding as
��h��� ag�.2 Ev�n if w� all�w ��ha�� ��h�s� h��s�h�lds can ��ap ��h�i� h�m� �q�i����, ��h�
p��p����i�n �f p��pa��d Ea�l�� ���m�� h��s�h�lds is n� high�� ��han �8 p��c�n��
(Exhibi�� 6). Th�s, wi��h���� maj�� chang�s in b�havi��, ab���� ��w�-��hi�ds �f ���m��
h��s�h�lds a�� h�ading f�� sha�p d��ps in ��h�i� lif�s����l�.
This ��s�l�� ma�� b� s��p�ising ��� s�m� b�ca�s� b���h agg��ga��� and av��ag� ��al
n��� w����h a�� high�� f�� ��h� ���m��s ��han f�� ��h� Sil�n�� g�n��a��i�n. ���� ��h�
agg��ga��� and av��ag� fig���s a�� h�ld �p b�� a c�nc�n���a��i�n �f ���m��s wh�
a�� ind��d v���� �ich. F�� �xampl�, Ea�l�� ���m��s wi��h n��� w����h ab�v� $125,000
in 2005 �wn�d 42 p��c�n�� �f �����al c�h���� n��� w����h, v��s�s �6 p��c�n�� f�� Ea�l��
Sil�n��s a�� ��h� sam� ag�.
2 S�� Chap���� 4 f�� m��� d���ails �n ��� app��ach ��� d�fining ����i��m�n�� p��pa��dn�ss.
Exhibit 5
9881 81
50
2
1.1
EarlySilent1965-1975
19
2.0
LateSilent1975-1985
19
3.2
EarlyBoomers1985-1995
50
5.3
LateBoomers1995-2005
Impact ofsavings
Impact of financial &real estate capitalgains
= 100%
BOOMERS HAVE BENEFITED DISPROPORTIONATELY FROM ASSET APPRECIATION
* Age refers to cohort midpoint.Source: McKinsey Global Institute US Consumer Model, v7.2
109 108
57
-9
1.7
EarlySilent1975-1985
-8
2.9
EarlyBoomers1995-2005
5.7
43
LateSilent1985-1995
Cohort ages 35-45 Cohort ages 45-55
Change in household net worth at the same age*$ trillion, 2000; %
16
L��king m��� cl�s�l�� ac��ss ��h� dis���ib���i�n �f inc�m�, �n� s��s ��ha�� man��
middl�-inc�m� and �v�n �pp��-inc�m� famili�s will s����ggl� ��� main��ain ��h�i�
lif�s����l�s. L�ss ��han half �f Ea�l�� ���m�� h��s�h�lds �a�ning $60,000 ���
$90,000 p�� ���a� a�� p��pa��d f�� ����i��m�n��, �v�n if h�m� �q�i���� is incl�d�d. Of
c���s�, l�w��-inc�m� famili�s will fac� ��h� g��a���s�� diffic�l��i�s—j�s�� 18 p��c�n��
�f h��s�h�lds �a�ning l�ss ��han $�0,000 p�� ���a� a�� p��pa��d f�� ����i��m�n��
(25 p��c�n�� if h��sing �q�i���� is incl�d�d).
In ��� s��v���, w� f��nd ��ha�� man�� �np��pa��d h��s�h�lds a�� w���i�d ab����
��h�i� financial f������ b��� ��ha�� man�� ���h��s a�� �nawa�� �f ��h�i� si���a��i�n. W�
c�ncl�d�d ��ha�� ��h� ���m��s, in facing ����i��m�n��, c��ld b� divid�d in��� ��h���
dis��inc�� a����i���dinal g���ps—��h� confident, ��h� vulnerable, and ��h� disadvantaged
(Exhibi�� 7). Th�s� g���ps b��adl�� c����la���d wi��h ��h� �c�n�mic c�ndi��i�n �f ��h�
h��s�h�lds in ��h�m, b��� had a n�mb�� �f sp�cific cha�ac����is��ics�
Confident—This g���p acc��n��s f�� alm�s�� half �f ���m�� h��s�h�lds, and
��h��� b�li�v� ��h��� a�� w�ll-p��pa��d financiall�� f�� ��h� f������. This is ��h� �ich�s��,
h�al��hi�s��, b�s�� �d�ca���d, m�s�� ma��i�d, and m�s�� �p��imis��ic g���p. H�w�v��,
��h��� a�� ��w� ����p�s �f c�nfid�n�� h��s�h�lds ��ha�� sha�� simila� a����i���d�s and
aspi�a��i�ns b��� hav� diff���n�� financial m�ans. Th� “affl��n�� c�nfid�n��s” hav�
��h� wh���wi��hal ��� f�lfill ��h�i� aspi�a��i�ns, whil� ��h� “�nawa�� c�nfid�n��s”
sha�� ��h�s� aspi�a��i�ns b��� d� n��� hav� ��h� ��s���c�s ��� m���� ��h�m.
Exhibit 6
PROLONGING SAVING HAS A DRAMATIC IMPACT ON THE NUMBER OF BOOMERS WHO CAN MAINTAIN THEIR LIVING STANDARDS
69
40
31
20.6
Baseline
60
20.6
Prolonged savings scenario
Unprepared
Prepared
100% =
Source: McKinsey Global Institute US Consumer Model, v7.2; US Aging Consumer Survey, 2007
62
31
38
20.6
Baseline
69
20.6
Prolonged savings scenario
100% =
Net financial assets onlyNet financial assets and monetize home equity
Early Boomer households retirement preparation, 2006millions of households; %
17
Vulnerable—This g���p acc��n��s f�� a li����l� m��� ��han a q�a����� �f ��h�
�����al. Th�s� h��s�h�lds hav� l�w�� inc�m� ��han ��h� c�nfid�n��s and l�ss
��han half ��h� n��� w����h. Th��� als� ���nd ��� hav� l�w�� �d�ca��i�n l�v�ls and
a l�w�� lik�lih��d �f b�ing ma��i�d. N�a�l�� 70 p��c�n�� �f ��h�s� h��s�h�lds
a�� �np��pa��d f�� ����i��m�n��—b��� ��h��� a�� awa�� �f ��h�i� p��dicam�n��. Th�
v�ln��abl� h��s�h�lds hav� w���i�s ab���� ��h�i� financ�s, ��h�i� h�al��h, and ��h�
dang�� �f l�n�lin�ss in ����i��m�n��. �an�� a�� f��s���a���d wi��h ��h�i� liv�s and
p�ssimis��ic ab���� ��h� f������ and d� n��� b�li�v� ��h��� can c��n�� �n famil�� ��
��h� g�v��nm�n�� ��� bail ��h�m ����.
Disadvantaged—A li����l� m��� ��han a q�a����� �f ���m�� h��s�h�lds falls in���
��h� disadvan��ag�d ca���g����. Th�s� ���m��s hav� had l�w inc�m�s ��h���gh-
���� ��h�i� liv�s and a�� ��h� l�as�� �d�ca���d, l�as�� lik�l�� ��� b� ma��i�d, and ��h�
m�s�� lik�l�� ��� hav� ��h� p����s�� h�al��h. Th��� w����� ab���� ��h� aff��dabili���� �f
h�al��h ca�� and wh���h�� g�v��nm�n�� p��g�ams will b� ��h��� ��� s�pp���� ��h�m.
���� ��han ��h���-q�a�����s a�� �np��pa��d f�� ����i��m�n��.
WORKING TWO YEARS LONGER CAN SIGNIFICANTLY BOOST BOOMER
PROSPECTS
D�spi��� ��h� s��a�k p��dicam�n�� �f man�� ���m�� famili�s, i�� is n��� ���� la��� ��� ��ak�
ac��i�n. Th� ���m��s will hav� ��� p�s��p�n� ����i��m�n�� ��� financ� i��—w��king l�n-
g�� ��� b�ild ��h� savings ��h��� will n��d. O�� anal��sis sh�ws ��ha�� if Ea�l�� ���m��s
Exhibit 7
BOOMERS FALL INTO THREE ATTITUDINAL GROUPS
Note: Boomers aged 50-61 when surveyed used as a proxy for total Boomer cohort.Source: McKinsey Global Institute US Consumer Model, v7.2; US Aging Consumer Survey, 2007
46%(9.5 million households)
26%(5.4 million
households)
28%(5.7 million
households)
Distribution of Early Boomer household by attitudes, 2006100% = 20.6 million households; $ thousand, 2000
Confident (affluent & unaware):
Mean
Median
After-taxincome
Networth
111
79 414
878
Vulnerable (aware):
Mean
Median
After-taxincome
Networth
86
69 148
366
Disadvantaged:
Mean
Median
After-taxincome
Networth
19
17 8
130
18
can c�n��in�� ��� acc�m�la��� ass���s f�� an �x���a fiv� ���a�s, shif��ing ��h� av��ag�
p�in�� a�� which ��h��� b�gin ��� d�aw d�wn ��h�i� ass���s f��m ag� 65 ��� 70, ��h� n�mb��
�f �np��pa��d h��s�h�lds w��ld b� c��� b�� ab���� half (s�� Exhibi�� 6). W� �s��ima���
��ha�� ��his w��ld ��q�i�� ��h�i� m�dian ����i��m�n�� ag� ��� �is� f��m 62.6 ���da�� ���
64.1 b�� 2015—an inc��as� �f ab���� ��w� ���a�s.
An inc��as� in ��h� m�dian ����i��m�n�� ag� �f ��his magni���d� ma�� n��� s��nd lik�
m�ch, b��� ��his is a n�mb�� ��ha�� has shif���d sl�wl��� Ov�� ��h� ��h��� d�cad�s f��m
1970 ��� 2000, ��h� m�dian ����i��m�n�� ag� d�clin�d b�� ��h� sam� am��n��. S� ��h�
chall�ng� is ��� ��v��s� ��ha�� ����nd, b��� a�� a m�ch m��� �apid pac�.
S�ch chang� is v���� p�ssibl�. Lif� �xp�c��anci�s a�� inc��asing. O�� s��v��� sh�ws
��ha�� m�s�� ���m��s a�� awa�� ��ha�� ��h��� will n��d ��� d� s�m� kind �f w��k pas�� ��h�
���adi��i�nal ����i��m�n�� ag�. As Exhibi�� 8 sh�ws, 85 p��c�n�� �f ���m��s ��hink i�� is
a�� l�as�� s�m�wha�� lik�l�� ��h��� will c�n��in�� ��� w��k. Tw�-��hi�ds �f ��h�s� m�s�� lik�l��
��� k��p w��king f���s�� ��h�ms�lv�s d�ing s� p�ima�il�� f�� financial ��as�ns.
Cl�a�l��, w��king l�ng�� will n��� b� �n��gh ��� �ns��� ��ha�� all �np��pa��d ���m��s
can main��ain ��h�i� living s��anda�ds in ����i��m�n��. Fi�s��, �v�n if ���m��s w��k l�n-
g��, ���ghl�� a ��hi�d a�� s��ill n��� p��pa��d f�� ����i��m�n��. Of ��his g���p, half hav�
ann�al inc�m�s b�l�w $�0,000 and ab���� ��h���-q�a�����s hav� inc�m�s b�l�w
$60,000. Nin�����-fiv� p��c�n�� �f ��h� �np��pa��d h��s�h�lds hav� n��� w����h l�w��
��han $100,000.
Exhibit 8
* Figures do not sum to 100 due to rounding.Source: US Aging Consumer Survey
Likelihood of returning to work% of non-retired boomers
FINANCIAL NEEDS ARE PRIMARY REASONS FOR WORKING LONGER
15
47
38Extremely likely,very likely
Somewhatlikely
Not very likely,not likely at all
18
115 1
7
24
35
1OtherMake positive changeEnjoy job, skillsin demandWant to stay busy,or social interactionNeed benefits
Maintain or improvelifestyle
Meeting expenses
*100% =
Primary reason for expecting to work in retirement% of boomers expecting to work
Financial reasons
19
S�c�nd, n��� all �f ��h�s� sa��ing ��h��� in���nd ��� w��k will b� abl� ��� d� s�. �an��
will b� �nabl� ��� k��p w��king b�ca�s� �f h�al��h p��bl�ms �� ���h�� ag�-��la���d
diffic�l��i�s. O�� s��v��� f��nd ��ha�� half �f ��h� ���m��s wh� hav� ����i��d �a�l�� did
s� f�� h�al��h ��as�ns. A significan�� maj��i���� �f ��h�s� wh� ����i��d f�� h�al��h ��a-
s�ns a�� in v�ln��abl� �� disadvan��ag�d h��s�h�lds, p��cis�l�� ��h�s� wh� m�s��
n��d ��� k��p w��king. Als�, n�a�l�� half �f ���m��s a�� in ph��sicall�� d�manding
�cc�pa��i�ns s�ch as c�ns����c��i�n, p��d�c��i�n, and s�m� s��vic� j�bs ��ha�� ma��
mak� i�� n�c�ssa��� f�� ��h�m ��� swi��ch j�bs, which is diffic�l�� la���� in lif�.
���� p�lic�� mak��s and b�sin�ss l�ad��s m�s�� ac�� ��� �nabl� ��h�s� wh� can
w��k l�ng�� ��� d� s�. W��king l�ng�� is als� ��h� b�s�� answ�� f�� ��h� �c�n�m��
as a wh�l�. T� mak� �p ��h� savings gap, ��h� ���m��s als� c��ld b�gin sha�pl��
c�����ing ��h�i� sp�nding. H�w�v��, as Exhibi�� 9 sh�ws, ��his w��ld damp�n �v��all
�c�n�mic g��w��h. W��king l�ng��, �n ��h� ���h�� hand, w��ld b��s�� lab�� f��c�
pa���icipa��i�n, ��h���b�� inc��asing ����p��� g��w��h. Enabling ���m��s ��� w��k l�ng��
w��ld add m��� ��han $12 ���illi�n ��� US �DP �v�� ��h� n�x�� ��h��� d�cad�s—an
am��n�� �q�ival�n�� ��� �n� ���a� �f �DP ���da��.
Al��h��gh ��h��� w��ld b� cl�a� b�n�fi��s ��� �nabling ��h� ���m��s ��� w��k l�ng��,
��h��� a�� significan�� l�gal and ins��i�����i�nal ba��i��s ��ha�� n��d ��� b� �v��c�m�.
Th��� incl�d� a va�i����� �f disinc�n��iv�s f�� b���h �mpl�����s and �ld�� w��k��s. ��v-
��nm�n�� p�lic�� mak��s and b�sin�ss�s sh��ld mak� s�v��al sp�cific chang�s.
Th��� incl�d��
Reallocating health insurance costs for older workers. Ins��anc� c�s��s climb
wi��h ag�, c��a��ing a disinc�n��iv� f�� b�sin�ss�s ��� ����ain �� hi�� �ld�� w��k-
��s. And al��h��gh ��dica�� c�v��s ����i���s ag�d 65 and �v��, ��h� p��g�am
c�v��s li����l� �� n�n� �f ��h� h�al��h ca�� c�s��s �f �mpl�����s a�� ��his ag� if ��h���
w��k f�� c�mpani�s p��viding ins��anc�. Th� iss��s �f ins��ing �ld�� w��k��s
hav� b��n la�g�l�� ign���d in ��h� d�ba��� �v�� h�al��h ��f��m, b��� ��h��� ��q�i��
a�����n��i�n and ac��i�n.
Enabling businesses to offer flexible work arrangements to mature workers.
�an�� ���m��s sa�� ��h��� a�� willing ��� k��p w��king if ��h��� can d� s� pa��� ��im�,
�� w��k f��m h�m�, �� g�ad�all�� ��d�c� ��h�i� h���s and pa��. S�ch p��g�ams
a�� al��ad�� wid�sp��ad in g�v��nm�n�� and �d�ca��i�nal ins��i�����i�ns, b��� b�si-
n�ss�s hav� h�ld back pa���l�� ���� �f c�nc��n ��h��� migh�� vi�la��� f�d��al laws
�n ��ax�s, p�nsi�ns, and ag� disc�imina��i�n. P�lic�� mak��s sh��ld am�nd
��h�s� laws ��� ��m�v� s�ch c�nc��ns. ��sin�ss�s ��h�n sh��ld �ff�� m���
fl�xibl� w��k a��ang�m�n��s. W��k��s, in ����n, will hav� ��� b� fl�xibl� �n pa��
and b�n�fi��s.
20
Reforming private pensions and Social Security to remove disincentives to
working longer. �an�� d�fin�d b�n�fi�� p�nsi�n plans calc�la��� b�n�fi��s acc��d-
ing ��� f��m�las ��ha�� �nc���ag� w��k��s ��� ����i�� �a�l��. ��sin�ss�s and �ni�ns
sh��ld ��w�i��� ��h� ��l�s ��� ��m�v� disinc�n��iv�s ��� w��king l�ng��. Simila�l��,
lawmak��s sh��ld chang� ��h� wa�� S�cial S�c��i���� ����i��m�n�� b�n�fi��s a��
calc�la���d ��� ��d�c� disinc�n��iv�s ��� w��king m��� ��han �5 ���a�s.
Ea�l�� ���m��s, ag�d 54 ��� 6� ���da��, wh� a�� �np��pa��d f�� ����i��m�n�� will
hav� ��� ��l�� p�ima�il�� �n w��king l�ng�� ��� b�ls���� ��h�i� financ�s. ���� ��h� La���
���m��s, ag�d 44 ��� 5�, hav� m��� ��im� ��� als� b��s�� savings b�� ���imming ��h�i�
sp�nding. Th��� sh��ld d� s�, b��� ��h��� n��d h�lp. Lawmak��s sh��ld ��f��m and
simplif�� ��h� ��ax c�d� ��� inc��as� inc�n��iv�s ��� sav�. ���� b�sin�ss�s sh��ld
�ff�� �mpl����� savings p��g�ams, s�ch as 401(k) plans and individ�al ����i��-
m�n�� acc��n��s (IRAs) wi��h “a����ma��ic” f�a�����s, s�ch as a����ma��ic �n��llm�n��,
�scala��i�n �f savings �a��� �v�� ��im�, and inv�s��m�n�� in��� div��sifi�d p����f�li�s.
Ev�n wi��h all ��h�s� ac��i�ns, man�� ���m��s will ��l�� �n S�cial S�c��i���� and ��di-
ca�� in ��h�i� s�ni�� ���a�s. P�lic�� mak��s will hav� ��� find wa��s ��� s�s��ain ��h�s�
p��g�ams, a�� l�as�� f�� ��h� m�s�� disadvan��ag�d h��s�h�lds. O��h��wis�, w� will
s�� a ��s��g�nc� �f p�v������ am�ng ��h� �ld��l��—p��cis�l�� ��h� p��bl�m ��h�s�
p��g�ams w��� c��a���d ��� ��adica���.
Exhibit 9
WORKING LONGER IS THE BEST OPTION BECAUSE OF WIDER SPILLOVERS IN THE ECONOMY
Source: McKinsey Global Institute US Consumer Model, v7.2
Real GDP growth under different scenarios, 2000-2025CAGR
3.01985-2006
2.62007-2016
2.52007-2025
2.42007-2035
3.0
2.5
2.4
2.3
3.0
2.9
2.7
2.5
Cumulative GDP difference versus baseline$ billion, 2000
-5,382+12,911
Baseline Restrain SpendingWorking Longer
21
Th�s� chang�s can b� mad�. ���� all �f ��h� pa���i�s inv�lv�d—g�v��nm�n��, �m-
pl�����s, �ni�ns, and ��h� ���m��s ��h�ms�lv�s—will n��d ��� ac��.
•••
Wi��h ��h� imp�nding ����i��m�n�� �f ��h� �ab�� ���m��s, ��h� Uni���d S��a���s is facing
a m�l��i-d�cad� �c�n�mic chall�ng�. H�w�v��, ��h� ���m��s a�� als� a ��sili�n��
and inn�va��iv� g�n��a��i�n ��ha�� has liv�d ��h���gh and d�iv�n maj�� s�cial and
���chn�l�gical chang�s. Th� ���m��s wh� c����n��l�� l�ad ��� b�sin�ss�s and
p�li��ical ins��i�����i�ns n��d ��� ��inv�n�� ����i��m�n�� and c��a��� a m��� fl�xibl�
lab�� ma�k��� ��ha�� �nabl�s and �nc���ag�s ��his g�n��a��i�n ��� w��k and sav�
la���� in lif�.
Th� ���m��s in ��h�i� s�ns��� ���a�s fac� a ch�ic�. Th��� can l�av� ��h� �c�n�mic
s��ag� as ��h� g�n��a��i�n ��ha�� had i��, sp�n�� i��, and l�f�� h�l�s in ��h� US �c�n�m�� f��
f������ g�n��a��i�ns ��� fill. O� ��h��� can b� ��h� g�n��a��i�n ��ha�� ��inv�n���d Am��ica
��h���gh���� ��h�i� liv�s.
188
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