Avalanche of boomers may bury Social Security


By Robert Powell, MarketWatch

Last Update: 7:00 AM ET Dec 19, 2012

There are those who like to say that demography is destiny. And if thats true, then our destiny is becoming increasingly clear. The unclear part may be what to do because of it, particularly as it affects Medicare and Social Security.

Consider, for instance, a recent release from the U.S. Census Bureau.

According to that release, the population in the U.S. is projected to grow much more slowly over the next several decades, but the population age 65 and older is expected to more than double between 2012 and 2060, from 43.1 million to 92.0 million.

Whats more, the older population in the U.S. would represent just over one in five U.S. residents by the end of the period, up from one in seven today, the Census Bureau said.

And the increase in the number of the oldest old would be even more dramaticthose 85 and older are projected to more than triple from 5.9 million to 18.2 million, reaching 4.3% of the total population, according to the release.

Read the report: U.S. Census Bureau Projections Show a Slower Growing, Older, More Diverse Nation a Half Century from Now.

The Census Bureau also said baby boomers, defined as persons born between 1946 and 1964, number 76.4 million in 2012 and account for about one-quarter of the population. In 2060, when the youngest of them would be 96 years old, they are projected to number around 2.4 million and represent 0.6% of the total population.

In addition, the Census Bureau said projections show the older population would continue to be predominately non-Hispanic white, while younger ages are increasingly minority. Of those age 65 and older in 2060, 56% are expected to be non-Hispanic white, 21.2% Hispanic and 12.5% non-Hispanic black.

Other highlights from the release:

  • The nations total population would cross the 400 million mark in 2051, reaching 420.3 million in 2060.
  • In 2056, for the first time, the older population, age 65 and over, is projected to outnumber the young, age under 18.
  • The working-age population (18 to 64) is expected to increase by 42 million between 2012 and 2060, from 197 million to 239 million, while its share of the total population declines from 62.7% to 56.9%.

So what to make of all this? What might policy makers and retirees and those planning to retire do in light our destiny?

A crisis brewing for Social Security and Medicare

Timothy Harris, a principal at Milliman and author of Living to 100 and Beyond, had this to say: Weve seen the economic and social turmoil in Europe where countries have promised more to their populations than they can deliver, he said, making reference to a recent article in The Atlantic. As I was doing research for my Living to 100 and Beyond book, I kept wondering how European countries were able to afford the retirement and health programs that were on their books. Apparently they werent.

In the U.S., he said, were starting to grapple with the impact of our aging population on state and municipal retirement programs, but have yet to face the impact of these demographic changes on Social Security and Medicare. Politicians have a short-term focus, the next election, and the voters that elect them are aging, he said. Given that short-term focus and an aging electorate, were headed for gradually increasing crises in these programs.

Growing population will strain resources

Harris also said projections such as those from the Census Bureau fail to consider the impact of limited resources on long-term population growth.

He noted, for instance, that hes member of a committee of the Society of Actuaries that is looking at not just population growth and demographic changes, but also the resources needed to support future populations and what our country, and the world, must do in order to manage these limited resources.

His advice, though it might sound trite, for those struggling to make sense of a world with limited resources was this: Think long term and plan for the future, the same thing that we should all be doing.

Of note, the issue of managing limited resources in light of population growth and demographic changes will be addressed at the next Living to 100 Symposium, which will take place in early 2014.

Issues that need revisiting

Despite the news that population growth might slowing, Anna Rappaport, who is the head of a consulting firm bearing her name, doesnt think the latest Census Bureau report contains much that we havent known for a long time already. From the perspective of the individual, there is not a lot new to say about this, except that it reinforces the need to think about a society with a different age balance, she said. It is important to think about the different balance and that leads us to the need to keep people engaged as long as possible.

Rappaport said the report does server, however, to remind us of the issues that require revisiting, such as the retirement age, innovative work options, better management of health care, long-term care, and innovative housing.

For instance, she said laws that permit phased retirement and later retirements are definitely needed given the aging of America. Work options to help people work longer, particularly if they can do so on a more limited basis will be important. This should be a focus of policy, employers and individuals, said Rappaport. From a policy point of view, removing barriers to phased retirement is a help. Maybe some tax credits or incentives to support innovation would also be a good idea.

Rappaport said retirement ages should gradually rise and disability programs need to be adjusted at the same time. More focus on implementing programs to help people with disabilities work is also important, she said. Disability is a huge area of concern in several different ways.

The Census Bureau report also highlights the need for creating livable communities and affordable housing. We need to create good options and making them affordable, she said. Continuing Care Retirement Communities or CCRCs are very nice but involve a lot of risk and are too expensive for most people. Rappaport estimated that just 5% to 10% of the population can afford to live in a CCRC.

Rappaport said the village movement, which creates networks of people to help each other in their communities, holds a lot of promise. Her advice to retirees and would-be retirees: Think about village options and support integration, Rappaport said. Build and maintain a good support network and put a lot of thought into where you want to live and remember it can change.

Specifically, for pre-retirees, Rappaport recommends working as long possible and not forgetting risk protection. Plan with a long-planning horizon, she said. Focus on paycheck replacement and dont spend too much.

And finally, she offered these thoughts in light of the Census Bureau report. Think a lot about what is important to you, she said.

Robert Powell is editor of Retirement Weekly, published by MarketWatch. . Follow his tweets at RJPIII.

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