The retirement of the baby boomer generation, which starts this year, could have far-reaching implications for the global economy and will probably redefine how we think about retirement, an actuary in the retirement industry says.

This year, the first baby boomers will turn 65, Craig Aitchison, the managing director of Old Mutual Actuaries and Consultants, says.

Baby boomers is the term used to describe people who were born during a population explosion between 1946 and 1964 in countries that were affected by the Second World War.

Typically, Aitchison says, baby boomers are workaholics who pursue success and have a positive attitude. They have challenged tradition and can adapt to change.

Baby boomers make up a significant proportion of the Western worlds population, Aitchison says.

In general, boomers are well educated and prosperous, and their removal from the ranks of the employed and the taxpaying will have a significant affect on about 28 countries, he says.

In the United States, boomers make up 27 percent of the population and collectively earn about US$2 trillion a year. They control over three-quarters of the assets of that country.

Compounding the problem of their loss to the economic system is the fact that many baby boomers are not well prepared for retirement, and many may come to rely on already overburdened social security systems, Aitchison says.

According to recent report by CNBC, a US poll found one in four baby boomers has saved nothing for retirement. Only one-third of the baby boomer generation is financially well prepared for retirement, Aitchison says.

Despite their relative prosperity, boomers are generally not good at managing money and, as the first generation in history to enjoy the widespread use of credit, they have high levels of debt.

In the US, for example, there are 76 million baby boomers and only 46 million people in the next generation born between about 1965 and 1980 known as generation X.

In 1950, there were 16 taxpayers in the US for every one person who drew social security. Last year, the ratio of taxpayers to pensioners fell to 3.3, and by 2025 the ratio is expected to decrease to two taxpayers for every one person on social security, Aitchison says.

The American social security system last year started to pay out more than it collects from current contributors. There is a deficit of about US$3.2 trillion in social security, Aitchison says, and the retirement of the baby boomers is likely to compound this deficit. This is why policymakers are considering reforming the social security system, Aitchison says.

The removal of the baby boomers from the tax system when they retire will also have a big impact on the US economy.

Aitchison says there are estimates that the annual growth of the USs gross domestic product (GDP) could be reduced by a quarter by the retirement of the baby boomers in that country.

Research shows that your spending peaks when you are in your 50s, he says. McKinsey, a global economic research company, estimates that the retirement and the approaching retirement of the baby boomer generation will lower the US GDP from 3.2 percent to 2.4 percent, and this is likely to have a significant effect on the already struggling US economy, Aitchison says.

However, not everyone agrees that the retirement of the boomers will knock the US economy, he says. Some people that believe that technology will compensate for the boomers absence from the workforce others say the boomers will continue to work in retirement and others say that immigrants will fill the gap left by the boomers.

In addition to the economic effects of the retirement of the baby boomers, the boomers is the generation that will be most affected by increasing longevity, Aitchison.

The baby boomers, in particular, will benefit from longer lives as a result of improvements in medicine and healthier lifestyles.

Aitchison says statistics show that generally if both members of a couple reach the age of 65, there is a one in two chance that one of them will live to at least the age of 85. And there is a 30 percent chance that one of them will live beyond the age of 92, he says.

The average life expectancy in the US is now 77.9 years a big increase from the average life expectancy of 49 in 1900, he says

Living longer is a challenge for people who retire on a fixed amount of money, and people who buy living annuities will struggle to know what level of annuity to draw to make their money last.

Longevity will heighten the problems faced by social security systems in the developed world.

The longevity enjoyed by the parents of the baby boomers is already having an affect on the boomers, because their parents are increasingly becoming unable to support themselves. In fact, Aitchison says, often the baby boomer generation is also known as the sandwich generation, because they are supporting not only their elderly parents but also their children, who are studying longer or struggling to find work. This is particularly true for many South African baby boomers.

A factor that could counteract increasing longevity, Aitchison says, is the higher rates of obesity due to people leading sedentary lives and eating badly.

A trend that should help many baby boomers through retirement is that many of them plan to continue working beyond the traditional retirement age. Generally, baby boomers do not believe in working one day and stopping working completely the next day. US statistics show that, on average, if baby boomers worked two years longer than age 65, half of them would retire comfortably rather than less than one-third, Aitchison says .

However, wanting to work longer is not the same as making it a reality. Many retirees will be prevented by ill-health from continuing to work, Aitchison says.

Baby boomers generally do not regard retirement as something that happens at a particular age, and this is not only because they have to keep working to earn an income.

Few people in the boomer generation have set their retirement at a particular age most (81 percent) plan to retire only once they have sufficient resources.

Aitchison says because the baby boomers make up a significant portion of the local market, financial advice, products and legislation will have to adapt to their need for a more flexible retirement one in which they may slow down a little but not entirely.

In South Africa people in the baby boomer generation are known as the prime timers. They make up six percent of the population and spend about R300 billion a year, which is about 20 percent of national consumer spend, Craig Aitchison, the managing director of Old Mutual Actuaries and Consultants, says.

Prime timers are in much better shape than their counterparts in countries such as the United States, because they have less debt, but many prime timers have saved too little for their retirement, he says.

South Africas social support is at low levels and is accessible mainly by very low-income retirees.

Another key issue is that South Africa has a growing population, Aitchison says. Unlike in the US, there is another generation to take the place of the prime timers as taxpayers. However, should our social security system be extended as has been proposed, the retirement of the prime timers could have a greater impact on it.

Prime timers are generally very well educated, and their retirement could compound the countrys shortage of skills, Aitchison says.

There is a big threat to the financial security of the prime timers that is often overlooked, Aitchison says. This threat is the cost of health care. As a result of improvements in medicine, many more people live longer but either suffer from ongoing chronic illnesses or are survivors of a critical illness, such as stroke, cancer and heart disease.

The increasing use and rapidly escalating costs of medical services are putting pressure on medical schemes. Retirees will face bigger and bigger medical costs, which they will have to pay from their own pockets. These costs could derail their financial plans in retirement.

US statistics show that, on average, the healthcare costs of a 70-year-old are double those of a 50-year-old, Aitchison says.