Millennials’ Biggest Enemy: The AARP

The goal of AARP, the lobbying group for retired Americans, is to take advantage of young people, particularly millennials.

Certainly, they don't admit that explicitly, but their efforts to prop up and expand Social Security and Medicare -- two government programs paid for out of the pockets of young, working Americans -- has had that effect.

Although working millennials are forced to pay for these programs, the benefits they receive are likely to be far less than what they paid in (assuming they receive any benefits at all). Moreover, older Americans receiving these benefits are wealthier than their younger counterparts, and are getting much more than they "paid for."

AARP: The anti-millennial lobbying group
With annual revenues over $1.2 billion, the AARP is one of the most powerful lobbying groups in the US. For the most part, it uses this power to protect and expand the programs that transfer wealth from the young to the old.

Back in January, millions of young workers saw their paychecks shrink -- if you're one of these workers, you can thank the AARP. The group urged lawmakers in Washington not to extend the Social Security payroll tax holiday, and, as has happened consistently in recent years, the AARP got its way.

For current workers, 6.2% of every dollar made goes toward Social Security (in addition to the other 6.2% your employer pays on your behalf). In effect, the check your grandmother gets every month comes directly out of your salary.

They didn't pay for it and they don't need it
And it's likely that you need that money far more than your grandmother. In the US, the older you are, the less likely you are to live in poverty. As an age bracket, just 12% of seniors live in poverty; among children under the age of 18, the rate is more than double -- a full 27%.

Wealth, too, is heavily concentrated in the hands of the old. According to Pew Research, households headed by a senior were 47 times more wealthy than those headed by someone under the age of 35. To some extent, this seems intuitive: as you age, you accumulate assets and wealth. However, transfer programs have, over time, exaggerated this difference -- back in 1980, the wealth disparity was only 10-to-1.

Older Americans may inclined to fire back, alleging that they "paid for it" -- except, no, they didn't. The Urban Institute estimates that an elderly couple that turned 65 in 2010 paid about $122,000 worth of Medicare taxes throughout their life, but that same couple is on pace to receive $387,000 in benefits.

Meanwhile, those benefits have been increasing: A decade ago, the AARP pushed for Medicare Part D, a government program to subsidize medication for seniors -- yet another wealth transfer from young to old.

As that wealth has shifted, so has spending power. Today, the typical 90-year old spends 135% what the average 40-year old earns, and twice what the average 30-year old spends. Much of that can be attributed to the government: For every dollar the government spends on children, it spends $6 on the elderly.

Millennials will be left holding the bag
Sure, you may say, but in time, won't millennials get to take advantages of these programs? Perhaps, but if current projections prove true, it's very unlikely.

By 2050, the cost of providing Social Security and Medicare to Baby Boomers is expected to eat up 20% of the US' annual GDP. As former hedge fund manager Stanley Druckenmiller notes, tax rates historically top out at that level -- meaning that in 27 years, every dollar collected in taxes will go toward paying for these programs.

Plans have been offered up for reform, to alter benefit payouts so that current workers will be able to get their fair share. Yet, any attempts at reform have been resisted bitterly by the AARP -- the group simply won't stand for it.

But demographics are not on their side. Eventually, these programs will have to be reformed, and when they are, it's likely that millennials -- young workers currently paying for them -- will be left holding the bag.

Want to overcome your enemies and retire rich?
The best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.


Read/Post Comments (11) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 13, 2013, at 12:20 PM, FredSword wrote:

    Although I am not totally in agreement with AARP, I think there are some points to be made about this article. First of all, if you assume an annual interest rate of 5%, the contributions over the average years of employment yield $431K, which is greater than the amount the retiree expects to draw in Social Security payments. Second, during my working life, I did what I am asking the millennials to do, that is I paid for my parents during their retirement years, along with their medical expenses. Most of the financial analyses done recently have shown that the average Social Security recipient will receive less than they contributed on average if they retired starting in 2011. Before that, workers retiring received less than they contributed if factored by average investment gains over the years.

  • Report this Comment On October 13, 2013, at 1:56 PM, peckbill wrote:

    They want the GOP out because they hurt the elderly. The GOP has told so many lies during the past two years concerning budget and economic problems that the American people have turn a deaf ear to the GOP. The GOP is now trying to shift the blame for all the past two years of government to the Democrats, but it won’t work. The GOP is citing past years, as far back as 2006, to shift the blame; it won’t work. America has not had a budget for the past three years; who is to blame? The GOP is to blame. The people in the GOP members of the House and Senate of Congress have their own agenda (their agenda is beginning to fall apart and fragment) and they are not willing to work with other members of Congress or the grass roots people to resolve the problems. The Patient Protection and Affordable Care Act was approved by the full Congress in 2010 and signed by the President; in 2012 the GOP asked the Supreme Court to review the law for Constitutionality; the Supreme Court headed by a GOP President appointee told Congress and the American people that the Law was constitutionally correct. Money is not the problem; there is plenty of it to go around, but authorization to spend the money must come from the Congress and the GOP, both House and Senate, are telling the Democrats and the people of America NO, not unless we get our way. The GOP’s agenda(s) is/are built on lies and big money. If Wall Street calls and tells the GOP to “do it”, it gets done. The GOP is holding the American people hostage to get their childish way in Congress. The American people will not be held hostage and in the near future, it may be 2014 or even 2016, the American people will get regain their freedom. We do not need the GOP or it’s so called “Tea Party Members”; America was built on the foundation of freedom by, for and of the people. We will replace each and every GOP member over the next few years and those of you idiots that think your money can keep buying favor in government will get a great shock. If need be the Congress shall consist of Democrats and Independents; the name of you GOP members who try to switch, like Lieberman, shall be remembered as the cowards and members of Congress that held the American people hostage over childish agendas. A few good Congressmen, like McCain, may be politically hurt in the process, but America must be first on OUR agenda. Misfits the likes of Cruz, Paul, Ryan and other notable members of the GOP must fall to the will of the people. Five Democrats who side with the GOP are Reps. Ron Kind (Wis.), Jim Cooper (Tenn.), John Barrow (Ga.), Jim Matheson (Utah) and Mike McIntyre (N.C.).

    Beginning now and continuing into 2014, 2015 and 2016 we must and will target every GOP member in all levels of government for replacement.

  • Report this Comment On October 13, 2013, at 2:27 PM, envone wrote:

    At the end of 2011, the Social Security Trust Fund contained $2.7 trillion, up $69 billion from 2010.[1] The fund is required by law to be invested in non-marketable securities issued and guaranteed by the "full faith and credit" of the federal government. Hence all of the fund is in very low interest Treasury Securities which keep the borrowing rates low for all people--Millennials included. Everyone might thank senior citizens for those low interest loans.

    With 2.7 trillion dollars in the Social Security Trust Fund, Millennials are hardly paying for their grandparents retirement checks. The average monthly social security check is less than $1200, hardly an indication of wealth.

  • Report this Comment On October 13, 2013, at 2:35 PM, growlandw wrote:

    We (Boomers) didn't start Soc-sec or Medicare. We had no choice but to pay in to these programs. Don't blame us for claiming what is our due. Instead keep the gov't from ROBBING the soc-sec trust fund and then reform soc-sec and medicare to be actuarily sound.

    Also, most seniors spend everything they collect back into the economy, to everyone's benefit.

  • Report this Comment On October 13, 2013, at 3:23 PM, treehugger22 wrote:

    This is a very poorly written article meant to scare all the younger generation. There are many more "Boomers" who will struggle to have enough to retire on than who will live a lush life on Social Security income. Why not tell the younger generation that we worked hard to "earn" the right to get our "pay check" from the Guberment just like they will have to do.

  • Report this Comment On October 13, 2013, at 6:33 PM, NNNNNNNNmmmmmmm wrote:

    One of several despicable things AARP did was get the CAT Act reversed. The Catastrophic Medicare Cut was an attempt in the late '80s to put Medicare on a better financial footing by requiring higher premiums for the top earning retirees. If it had stayed in place Medicare would be operating at break-even instead of in a mutli-trillion $ hole, but AARP said it wasn't fair that the people using the insurance - and only those that could easily afford it - should pick up more of the cost and reduce the Medicare welfare subsidy they received. Blame AARP, greedy seniors and cowardly pols for the state of Medicare.

  • Report this Comment On October 13, 2013, at 6:50 PM, FreddieMi wrote:

    It is difficult to reconcile Baby Boomers duality of position. On the one hand, they argue that they paid into the "system"; did what they were "supposed to do", and should be paid out regardless of how much they put in. In a totalitarian state this would be at least plausible--but this is a democracy.

    And so on the other hand we have Baby Boomers, starting with Bill Clinton, raiding Social Security to fund the government instead of raising taxes on the Baby Boomers. In addition, it was a Baby Boomer, George Bush, who passed the "Bush tax cuts" with the help and overwhelming approval of Baby Boomer voters.

    You can't have your cake and eat ours (your children's) too. You voted for low taxes on top earners as you entered into your golden earning years. You were told this would happen. And now you expect your children to pay for your choices at the polls over the last twenty years. Let me assure you that is not going to happen.

  • Report this Comment On October 13, 2013, at 7:56 PM, mallshouse wrote:

    Ageist drivel and nothing more.

  • Report this Comment On October 13, 2013, at 8:41 PM, JDBond wrote:

    Wow... There is so much fear mongering, waving red meat and red herrings in this opinion piece that it is enough to make my head spin...

    (1) Social Security and Medicare... are not going to go away... ever. The entire population is aging and the entire population sees the benefits of having a protected source of income during old age.

    (2) Social Security was supposed to be one stream of income... the other streams were a. pensions and b. personal savings/investments.

    a. Pensions have been eliminated by most private companies, under funded by governments and under attack in general by the powers that be (usually wealthy individuals and organizations.

    b. Lots of us in our 30, 40, 50 were doing ok in the saving and investment departments... then bamm we were hit with 1. wage stagnation, 2. the recession, 3. the housing crisis/housing bubble burst... and before that the tech bubble bursting...

    In addition, lots of us have aging parents... who are not off boating in the south pacific and... college payments for our kids.

    What the writer of this article fails to understand is that the "millennials" are our kids... and the AARP are their parents and grandparents... we are not attempting to hurt them... we are family...

    So... take this generational baiting and shove it wear the sun doesn't shine.

    cause we will be there for our kids and they will be there for us.

  • Report this Comment On October 13, 2013, at 8:46 PM, mortmain wrote:

    AARP is a symbol of crony capitalism. They are an insurance company that stands to benefit from ACA.

  • Report this Comment On October 13, 2013, at 8:59 PM, neamakri wrote:

    Social Security;

    dozens of years ago the country of Chili privatized their Social Security system (it was like ours). Since then everything in their economy has improved, a lot.

    All we need to do is copy their new privatized system.

Add your comment.

DocumentId: 2680230, ~/Articles/ArticleHandler.aspx, 4/20/2014 12:21:13 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement