As Population Ages, It’s Not Your Grandma’s ‘65 and Older’

There’s been a real explosion in what the Bureau calls the “older old,” those over 85. They accounted for 1.8% (or 5.5 million) of the total population counted in the 2010 Census, which might not sound like much until you realize that that percentage is nine times the share of the population that was 85 or older in 1900. They also account now for 13.6% of the over-65 population, a tripling of the 1900 ratio.

The number of Americans 90 and older, now 1.78 million, is expected to quadruple by 2050. That’s an important number because, the report notes, those citizens are more likely to live in nursing homes and to have a disability than their ‘younger’ older brothers and sisters: only 3% of those aged 75 to 79 are in a nursing home, but 11.2% are at 85 to 89, 19.8% at 90 to 94, and 38.2% at 100 years or older.

Actually, there will be many more “sisters” than “brothers” in those nursing homes: while there are 89 men per 100 women in the aged 65 to 69 age cohort, for those 90 and over, there are only 38 men per 100 women.

So what about the future of Social Security? A document on the Social Security Administration website puts its succinctly. Increases in life expectancy are a “factor in the long-range financing of Social Security; but other factors, such as the sheer size of the “baby boom” generation, and the relative proportion of workers to beneficiaries, are larger determinants of Social Security’s future financial condition” (emphasis mine).

So what is the “relative proportion of workers to beneficiaries” according to the 2010 Census?  In Bureau-speak it’s “dependency ratios,” i.e., the proportion of one age cohort to another in a society in which one cohort supports another. The Bureau project that the “older dependency ratio”— the ratio of over-65s in the population to those ages 20 to 64 who are working — is expected to rise sharply as the baby boomers age.

So by 2030, when all boomers will have passed age 65, “the older dependency ratio is expected to be 37, which translates into fewer than three people of working age (20 to 64) to support every older person.”

(For an amusing but educational take on the older dependency ration, see this Allianz Global Investors video)

Another way to look at this, courtesy of a 2010 report by Stephen Goss, chief actuary of the Social Security Administration, is that: “over the past 35 years, there have been about 3.3 workers per beneficiary. After 2030, the ratio will be two workers per beneficiary…With the average worker benefit currently at about $1,000 per month, 3.3 workers would need to contribute about $300 each per month to provide a $1,000 benefit. But after the population age distribution has shifted to have just two workers per beneficiary, each worker would need to contribute $500 to provide the same $1,000 benefit.” Goss’ deadpan conclusion: “Thus, in order to meet increased Social Security costs, substantial change will be needed.”

Yes, there may be some cold comfort in pointing out that the current and projected older dependency ratio is better in the U.S. than in many other countries. For instance, a European Commission study found that in Japan, the older dependency ratio as of 2010 was 35%, which is expected to increase to 73.8% by 2050.

(See this helpful World Bank listing of age dependencies in countries worldwide.)  

The Census Bureau report notes that the U.S. is “relatively young by more developed country standards.” The over-65 population in four countries — Germany, Italy, Japan and Monaco — represents 20% or more of their total populations; the percentage of over-65s in the U.S. was only 13.1% in 2010.

In his 2010 report, the SSA’s Goss wrote “There is no one clear solution to the problem of increased cost for retirees because of fewer workers available to support the retirees, which in turn is caused by lower birth rates. This issue is not specific to Social Security, but also affects Medicare as well as many other private and public retirement income systems.”

But there is one group that likely will have a voice in any such solution to Social Security: Americans 65 or older. They reported a 72% voter turnout rate in the 2012 presidential election — (compared, for example, with 41% of those aged 18-24).

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Check out Why Are So Many Boomers Working Longer? on ThinkAdvisor.