How Do Demographics Affect the Economy?

Back in 2019, economists claimed that the large population of older Americans, dubbed the “silver tsunami,” was creating a drag on the economy. The fear was that Americans were aging toward retirement at a faster rate than young adults were entering the workforce. Not only does this put a strain on our finance-as-we-go Social Security and Medicare programs, but a smaller workforce is less able to drive economic growth in the future.¹

Then the COVID-19 outbreak descended in 2020, which could result in a dramatic shift in our demographic mix. While Americans 65 and older account for 16% of the population, they represent 80% of people who are dying of the coronavirus. In just the first five months of the pandemic, the 65-and-up cohort represented between 70% and 94% of COVID-19 deaths, with variance by state. People age 85 and older accounted for 33% of those deaths.²

These numbers don’t just change the demographic picture, they also represent a transition in wealth. While estimates in wealth transfer from baby boomers to younger generations have been projected as high as $70 trillion over the next few decades, that timeline could move up. Because people age 65 and older are more vulnerable to the severe complications of COVID-19, some of those windfalls could be occurring sooner. That means family members will have to figure out the best way to handle an unexpected inheritance ahead of schedule.³

If you are looking at an inherited windfall, we can help guide you with strategies for your unique situation. There are numerous new laws and rules associated with things like inherited IRAs, as well as strategies you can take advantage of to position yourself for both investment growth and a reliable stream of income during your retirement. Please contact us to discuss.

Meanwhile, Americans are having fewer babies. Because many of today’s young adults entered the job market when the country was in a severe economic recession, it has taken longer for many to get a foothold in their career and build up a financial war chest. To do this, many have delayed buying a home and starting a family. In fact, between the start of the financial crisis in 2007 and 2018, the total fertility rate in the U.S. fell by 23%, from 2.12 children per woman to 1.73.⁴

As such, our population is growing at the slowest rate since the 1930s. The pandemic has not helped that statistic. Between July 2019 and July 2020, the nation grew at the lowest yearly rate since at least 1900 as a result of reduced immigration and birth rates.⁵

The Economic Innovation Group, using July 2020 data from the U.S. Census Bureau, shows that population growth is uneven across states. While the population has declined in California, Illinois and New York in the past few years, states with the highest rates of population growth since 2010 include:⁶

• Utah (17.1%)
• Idaho (16.3%)
• Texas (16.3%)
• Nevada (16.1%)
• Arizona (15.8%)

Much of that migration could be due to baby boomers moving to warmer climates as they retire. However, recent trends also suggest that younger adults with their newfound ability to work remotely will be inclined to move out of highly populated cities to more affordable areas of the country.

If we can help in any way give us a call at 801-990-5050.

Our firm assists retirees and pre-retirees in the creation of retirement strategies utilizing investment and insurance products. Advisory services offered through B.O.S.S. Retirement Advisors, an SEC Registered Investment Advisory firm. Insurance products and services offered through B.O.S.S. Retirement Solutions. 

¹ Chris Farrell. Forbes. Aug. 25, 2019. “Is An Aging Population Hurting The U.S. Economy?” https://www.forbes.com/sites/nextavenue/2019/08/25/is-an-aging-population-hurting-the-u-s-economy/?sh=7a208e4d3aa1. Accessed Jan. 25, 2021.

² Meredith Freed, Juliette Cubanski, Tricia Neuman, Jennifer Kates and Josh Michaud. Kaiser Family Foundation. July 24, 2020. “What Share of People Who Have Died of COVID-19 Are 65 and Older – and How Does It Vary By State?” https://www.kff.org/coronavirus-covid-19/issue-brief/what-share-of-people-who-have-died-of-covid-19-are-65-and-older-and-how-does-it-vary-by-state/. Accessed Jan. 25, 2021.

³ Kristen Beckman. BenefitsPro. Nov. 19, 2020. “The great wealth transfer: What boomers and their families need to know.” https://www.benefitspro.com/2020/11/19/the-great-wealth-transfer-what-boomers-and-their-families-need-to-know/. Accessed Jan. 25, 2021.

⁴ Gilles Pison. World Economic Forum. Jan. 13, 2021. “People have more children in the north of Europe than the south. Here’s why.” https://www.weforum.org/agenda/2021/01/children-europe-eu-north-south-divide-childcare-social-policy-children-mothers/. Accessed Jan. 25, 2021.

⁵ Stef W. Kight. Axios. Jan. 11, 2021. “America’s population growth is slowing down.” https://www.axios.com/america-losing-population-growth-census-data-0342f3b6-8e98-41a9-92de-209f823d0d63.html. Accessed Jan. 25, 2021.

⁶ Kaia Hubbard. U.S. News & World Report. Jan. 13, 2021. “Population Growth Rates Are Highest in These States.” https://www.usnews.com/news/best-states/articles/2021-01-13/us-population-growth-rate-slowed-in-past-decade-report-shows. Accessed Jan. 25, 2021.