Social Security faces a serious financial challenge with the approaching retirement of the largest generation in American history, the 76 million people born in the “baby boomer” generation. Baby Boomers who were born from 1946 through 1964, will start to reach age 62 in 2008. The cost of Social Security will increase faster than tax income because the population over age 65 will grow quicker than the working-aged population.
When Social Security started in 1935, life expectancy at age 65 was 12½ years. In 2007, it was 20 years for women and 17.5 years for men. By 2030, it is projected to be 19.3 years. While the number of beneficiaries will continue to grow, tax rates still remain unchanged in current law.
By 2032, when the youngest” baby boomers” will have reached 67, there are expected to be 72 million Americans aged 65 and older, nearly doubled from 38 million in 2007.
The beneficiary-to-worker ratio, which compares the number of people receiving benefits to the number of workers paying into Social Security, will rise from 33 per 100 in 2009 to 46 per 100 in 2030.
On a more broad scale, the consumer-to-worker ratio weighs everyone workers support (themselves, children, retirees, and other adults out of the workforce) – to the number of workers.
Fifty years ago when “baby boomers” were children in 1960, every 100 workers supported 262 people. After the” baby boomers” became adults and were in the workforce by 1995, the ratio declined to 200 people for every 100 workers. By 2030, when the boomers are age 65 and older, the proportion is expected to rise to 221 people per 100 workers.
This raises the question; can we afford social security when the baby boomers retire?
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