Are Baby Boomers Going to Drain Social Security Dry?

Two new reports say the elderly population will double by 2050 – stressing programs like Social Security

May 11, 2014 at 12:00PM

Pond
Source: Flickr / quapan.

The U.S. Census Bureau released two new reports a few days ago concerning the aging of America, and the news is somewhat startling. The baby boomer generation, persons born between the years 1946 and 1964, will help populate a cohort of 65-and-older individuals that will number nearly 84 million by 2050. That's almost double their 2012 level of 43 million.

Needless to say, these older persons will present a greater strain on many programs and services, namely, Social Security. The big question is: Will the venerable entitlement program be able to shoulder the strain?

Outnumbering the young
The Social Security Administration system depends upon an "old-age dependency ratio" – which is the ratio of persons aged 65 and over to those that are aged 20 to 64, generally considered to be of working age. Taking a look at the SSA's latest actuarial tables, the dependency ratio for was 22.8% in 2012; by 2050, the intermediate, or best estimate, projects a jump to 38.4%. Scarier still, the elderly contingent is also projected to outnumber 18-year-olds just six years later, by 2056.

That's a weighty problem, since wage taxes of the young and working are the life blood of the Social Security system. The 2013 Report of the Board of Trustees for the system also noted that changes are afoot, though not for the first time. According to the report, income into the Social Security trust fund will exceed costs only until early 2021, after which time the tide begins to turn. By 2033, the combined Old Age, Survivors and Disability Insurance and Disability Insurance funds will be depleted.

The end of Social Security?
Of course, this alarm has been raised before, and doesn't mean that Social Security will go away after 2033 -- only that the trust fund will be depleted. As analysts have pointed out, 75% of benefits would then be payable, rather than 100%. Even the Trustees point out that fact in their report.

Happily, the boomers' retirement wave was foreseen, and accommodated, by changes instituted by the Reagan administration. Still, the decrease will represent a cut in income. And, unless changes are made by congress, boomers will need to plan ahead.

Unfortunately, that doesn't seem to be happening, and it's not necessarily their fault. A recent Gallup poll shows that fewer Americans these days feel able to rely on their 401(k) plans, many of which took a hit during the last recession. In 2008, 54% of respondents not yet retired said that they planned to use these funds as a large part of their income after they retired, while only 48% say the same today.

On the other hand, boomers do seem to realize that depending too much on Social Security isn't a good bet. Though the program was never meant to be the only source of retirement income, Gallup noted that over the past 12 years, 50% to 61% of retirees depended upon SSA benefits as a major income source. At the same time, however, only 25% to 34% of those not yet retired expected Social Security to make up the majority of their retirement income.

How do people plan to make up the difference? That is unclear. In another Gallup poll earlier this year, 39% of boomers said that they would wait to retire until they were aged 66 or older, primarily because of financial limitations. Meantime, fears about not having enough money to retire plagues 59% of Americans these days. As it turns out, boomers are not depleting Social Security -- but many are approaching retirement feeling fairly depleted, themselves.

How to get even more income during retirement
Social Security plays a key role in your financial security, but it's not the only way to boost your retirement income. In our brand-new free report, our retirement experts give their insight on a simple strategy to take advantage of a little-known IRS rule that can help ensure a more comfortable retirement for you and your family. Click here to get your copy today.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers