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Retirement Planning > Social Security

As population ages, it’s not your grandma’s ‘65 and older’

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You might be tired of hearing about the aging of the advisor population, but you shouldn’t be tired of hearing about your aging clients. That’s why a June report by the Census Bureau is so important. The report — 65+ in the United States: 2010, part of the Bureau’s Current Population Reports series of publications — is based on the 2010 census and sheds light on the changing nature of the over-65 population in the country.

Here are some headline numbers:

Internet usage

Between the prior census in 2000 and 2010, the per­centage of the older population using the Internet rose from 14.3 percent to 44.8 percent. While lower than the 75.8 percent of Americans age 3 to 64 who reported using the Internet, the Bureau notes that the “31 percentage-point gap in Internet usage between the older popu­lation and the younger popula­tion in 2010 was smaller than in any year in the previous decade.”

Of Internet users age 65 and older, 89 percent said they used it for email, 62 percent read news online and 40 percent did their banking online. The older population also had “the largest growth rate in the use of broadband between 2009 and 2010.”

Causes of death

At 26.5 percent, heart disease remained the leading cause of death for those over 65 in the 2010 Census, though that was down considerably from the 33 percent of deaths caused by heart disease in 2000.

Cancer remained the second leading cause of death (22.1 percent in 2010; 21.8 percent in 2000), followed by chronic lower respiratory disease, stroke and Alzheimer’s, which at 4.6 percent was up significantly from 2010, when at 2.6 percent it was the seventh-largest cause of death for over 65s.

The 2010 World Alzheimer Report estimates that the worldwide annual cost of Alzheimer’s was $604 billion that year, mostly in North America and Western Europe. The Alzheimer’s Association projects that by 2050, the number of people age 65 and older with Alzheimer’s disease in the U.S. will more than triple, from 5 million to 16 million.

Marital status

The 2010 Census found that 71.7 percent of men age 65 and over were married and living with their spouse, compared with only 42.4 percent of women. That’s partly because 39.9 percent of women aged 65 and over were widowed, compared with 12.7 percent of older men who were widowers. However, a closer look shows an actual decline in the percentage of both men and women over 65 who were widowed over the past 50 years: for men, from 18.8 percent in 1960 to 12.7 percent in 2010; for women, from 52.9 percent in 1960 to 39.9 percent in 2010.

The decline was steepest — almost 50 percent — among the “younger old,” those ages 65 to 74, for both men and women.

Why? One reason is increased longevity, but the other is a significant rise in divorce among the younger old. (For a comprehensive look at what the growth of divorce means for advisors, see Investment Advisor’s September 2012 cover story, The Graying of Divorce.)

The big picture

Now let’s turn to the bigger picture. Thirteen percent of Americans, or 40.3 million, were 65 and older as of 2010, and the Bureau estimates (from its 2012 National Population Projections) that those numbers will grow to 83.7 million, or 20.9 percent of the population, by 2050.

There’s been a real explosion in what the Bureau calls the “older old,” those over 85. They accounted for 1.8 percent (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 percent 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 percent of those aged 75 to 79 are in a nursing home, but 11.2 percent are at 85 to 89, 19.8 percent at 90 to 94, and 38.2 percent 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 percent, which is expected to increase to 73.8 percent 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 percent or more of their total populations; the percentage of over-65s in the U.S. was only 13.1 percent 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 percent voter turnout rate in the 2012 presidential election — (compared, for example, with 41 percent of those aged 18-24).


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