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Fewer Kids Could Mean Lower Benefits, Fewer Caregivers in Future

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A brief from the Center for Retirement Research at Boston College finds that the fertility rate in the U.S. has fallen despite the economic recovery — a time in which people usually have more children.

Is this a big deal? It could be, depending on whether it’s temporary or permanent — which the study sought to find out. While fertility “typically rises in expansions,” this time it’s actually fallen “more than it did during the recession,” the researchers wrote.

Several factors identified by the study indicate that this time it could be permanent. A falling birth rate among Hispanics, a rising share of women with college degrees, a falling birth rate among people who don’t belong to religious organizations and a rise in the female-to-male wage ratio all tend to support the possibility that the drop in the fertility rate isn’t just a transitory thing.

And that could mean trouble for retirees down the line.

Says the report, “The future of the fertility rate is important in that it determines the age structure of the population, the ratio of workers to retirees and, hence, the finances of the Social Security system (which operates largely on a pay-as-you-go basis). According to the 2018 Social Security Trustees Report, a total fertility rate of 1.8 children per woman instead of 2.0 would increase the program’s 75-year deficit by 0.41% of taxable payrolls or a present value of almost $2 trillion.”

The total fertility rate in 2017 was 1.76 births per woman, according to the paper.

And that’s not all, points out CRR’s Squared Away blog. Emphasizing another aspect of the smaller worker pool resulting from a lower birth rate, it says that without an uptick in immigration — not a likely scenario under the present administration — there won’t be any workers coming in from outside the country to offset lower Social Security contributions with their own.

The blog also cites an AARP Public Policy Institute prediction that another thing that will go tough on seniors is the “decline in the number of family members and friends available in the future to care for the elderly.”

Retirement may not be such a slam-dunk after all.

— Check out 3 Big Trends Driving Retirement Planning in the ‘New Normal’ on ThinkAdvisor.


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