Demographics of Aging: Why is Our Population Aging? How Will This Aging Affect Us?

National Press Foundation Presented by Steve Goss and Karen Glenn Office of the Chief Actuary Social Security Administration June 11, 2012

The US Population is Aging

What does this mean?

Shift toward more elders, because
Slowed growth for younger ages Faster growth for older ages

But why??????
2

The US Population is Aging

Is it the -- Baby boomers? Individuals living longer? Lower birth rates?

Yes, to all three

Under 65 Growth Will Slow Over 65 Speeding Up

Historical and Projected Social Security Area Population: Intermediate Projection of
the 2012 Trustees Report
500 450 400 350 300

65+

Millions

250 200 150 100 50

20 to 64

Under 20
1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

0 1950

Age Distribution Shifting Older

Historical and Projected Social Security Area Population: Intermediate Projection
of the 2012 Trustees Report
100%
90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1950

65+

20 to 64

Under 20
1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Why Is the Population Aging?

Boomers now reaching retirement age Yes for a while, but --- This would be a temporary bulge Would pass through over time

Permanent change for other reasons!!

Why Is the Population Aging?

Individuals are living longer Death rates have been declining Life expectancies have been rising

Yes, Death Rates Are Dropping

Age-Sex Adjusted Death Rate;
Deaths per 100,000 Population (adjusted to 2000 population)
2000 1800

1600

1400

1200

1000

800

600

400

200

1940

1950

1960

1970

1980

1990

2000

2010

2020

2030

2040

2050

2060

2070

2080

2090

And Life Expectancies Are Rising

(Note gender gap shrinking since 1980)
Life Expectancy at Birth and at 65 (Period)
Projections from 2012 Trustees Report Intermediate 90 Female at Birth 80 70 60 50 40 30 20 10 0 1940 Female at 65 Male at 65

Male at Birth

1950

1960

1970

1980

1990

2000

2010

2020

2030

2040

2050

2060

2070

2080

2090

Why Is the Population Aging?

Individuals

living longer is just one piece of

the puzzle

Aging

of the Population

Changing age distribution Recall growth in younger population is slowing

This is not due to death rates

10

The BIG factor for the next 20 years

Birth

rates have dropped

This

permanently changes age distribution

Immigration

has provided some counterweight --- but not enough

11

Birth Rate Dropped from 3 to 2;

Particularly Considering Survival
U.S. Total Fertility Rate: With and Without Adjustment for Survival to Age 10
5

TFR

AdjTFR
2

1875-1925 1926-1965 1966-1990 1991-2003

1885 1895

Ave TFR Ave AdjTFR 3.67 2.85 2.84 2.69 1.99 1.95 2.01 1.99
1905 1915 1925 1935 1945 1955 1965 1975 1985 1995 2005

0 1875

12

Birth Rate Dropped from 3 to 2;

Increase in Immigration Helps Some
Historical and Projected Total Fertility Rate and Augmented Total Fertility Rate to Include Net Immigration: U.S.
4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 1940

1950

1960

1970

1980

1990

2000

2010

2020

2030

2040

2050

2060

2070

2080

2090

13

How will this Aging Affect Us?

Fewer

working age people

Compared to aged dependents

Workers

will need to support more retirees Or more young or old individuals will need to work

14

Consider Dependency Ratios; OK So Far

Total and Aged Dependency Ratios, 2011 Social Security Trustees Report
1.00 0.90 0.80 TOTAL dependency ratio 0.70 Historical Data

Dependancy Ratio

0.60 0.50 0.40 0.30

(Population under 20 and 65+ / Population 20-64)

AGED dependency ratio 0.20 0.10 0.00 1975 1980 1985 1990 Year 1995 2000 2005 2010 (Population 65+ / Population 20-64)

15

Big increases ahead; not due to LE

Total and Aged Dependency Ratios, 2011 Social Security Trustees Report
1.00 0.90 0.80 TOTAL dependency ratio 0.70
Intermediate Projection No increase in Life expectancy after 2010

Intermediate projection compared to no mortality improvement after 2010

Dependancy Ratio

0.60 0.50 0.40 0.30 0.20 0.10 0.00 1975 1980 1985 1990 1995 2000 2005 2010 2015 AGED dependency ratio

Intermediate Projection No increase in Life expectancy after 2010

2020

2025

2030

Year

16

Stable after shift for lower births

Total and Aged Dependency Ratios, 2011 Social Security Trustees Report
1.00 0.90 0.80 0.70 TOTAL dependency ratio Intermediate projection compared to no mortality improvement after 2010

Intermediate Projection

No increase in Life expectancy after 2010

Dependancy Ratio

0.60 0.50
Intermediate Projection

0.40 0.30 0.20 AGED dependency ratio 0.10 0.00 1975

No increase in Life expectancy after 2010

1985

1995

2005

2015

2025

2035

2045

2055

2065

2075

2085

Year

17

More Dependents per Worker

Ultimately, each year, each day ------Goods and services of todays workers are shared with all in the population Economics is just how we distribute the scarce resources

18

Pay-As-You-Go System Depends on Current Population

OASDI Covered Workers per OASDI Beneficiary 10 9 8 7 6 5 4 3 2 1 0 1950 1970 1990 2010 2030 Program Matures High Cost Scenario 2050 2070 2090
19

Demographic Change

Low Cost Scenario

One Example: US Social Security Cost Rising as Percent of GDP Above Currently Scheduled Revenue
10 9 Historical 8 7 Cost 6 5 4 3 2 1 0 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 Non-interest Income Projected

Percent of GDP

20

What to Do ?
Aging population is largely due to lower fertility With fewer workers per population --Need lower consumption per person

- Workers share more, or others just get less

Will

we find ways to encourage working longer?

Political balance will determine the outcome

21