bedowin62
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- Feb 6, 2014
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Coping with the Demographic Challenge: Fewer Children and Living Longer
Summary
Due to demographic changes, the U.S. Social Security system will face financial challenges in the near future. Declining fertility rates and increasing life expectancies are causing the U.S. population to age. Today 12 percent of the total population is aged 65 or older, but by 2080, it will be 23 percent. At the same time, the working-age population is shrinking from 60 percent today to a projected 54 percent in 2080. Consequently, the Social Security system is experiencing a declining worker-to-beneficiary ratio, which will fall from 3.3 in 2005 to 2.1 in 2040 (the year in which the Social Security trust fund is projected to be exhausted). This presents a significant challenge to policymakers.
One policy option that could help keep the Social Security system solvent is to reduce retirement benefits, either by raising the normal retirement age or through life expectancy indexing, to reflect the fact that people are living longer. However, these reductions in benefits have the potential to harm economically vulnerable retirees. Other options, such as progressive price indexing proposals, explicitly protect the retirement benefits of low lifetime earners. Still other options would seek to raise additional revenue for the system.
Since individuals will be living longer in retirement, many policymakers believe it is important to encourage older workers to delay retirement so that they can maintain a quality standard of living throughout their retirement. One proposal to encourage continued work would be to increase the early eligibility age for Social Security benefits from age 62 to age 65. This could possibly hurt individuals who need to retire from physically demanding jobs but would ensure that people receive higher benefit amounts once they were able to fully retire.
Other proposals that could promote more work at older ages include expanding phased retirement options and reforming pension and defined contribution systems to create incentives to work and save.
Introduction
Americans are living longer and are having fewer children. Together these factors result in the aging of the U.S. population and a subsequent strain on the Social Security system. This demographic challenge has been recognized by policy analysts as well as policymakers. President Bush, in his 2005 State of the Union Address (White House 2005), highlighted this problem, saying:
In today's world, people are living longer and, therefore, drawing benefits longer. And those benefits are scheduled to rise dramatically over the next few decades. And instead of sixteen workers paying in for every beneficiary, right now it's only about three workers. And over the next few decades that number will fall to just two workers per beneficiary. With each passing year, fewer workers are paying ever-higher benefits to an ever-larger number of retirees.
This article describes policy implications and some potential policy solutions to this demographic challenge. It first provides context for the policy discussion by examining fertility, mortality, work, and retirement patterns in the United States and then discusses different policy options.
Background
As in many countries, the population in the United States is graying. Table 1 shows how the elderly population has increased over time and how it is projected to grow in the future. In 1950, 8 percent of the total population was aged 65 or older. That share was 12 percent in 2005 and is projected to reach 23 percent by 2080. The elderly population will have more than doubled as a percentage of the total population in just over 100 years. At the same time, the working-age population will have shrunk, from 60 percent in 2005 to 54 percent in 2080.
this is what you losers ALWAYS DO when you are losing the argument; span the boards with propaganda.
your article talks about the "greying" work force, and doesnt address the WORKING-AGE WORKERS CHOOSING NOT TO WORK.