Social Security Warning Amid US Population Shift
America's Aging Population Raises Concerns Over Social Security's Future
The demographic shifts in America, characterized by a growing and aging population, have raised concerns among financial experts regarding the long-term sustainability of the Social Security system. The Social Security Administration (SSA) data reveals that the number of Social Security claimants has risen by over seven percent in the past five decades, with the average growth rate being 1.8 percent.
The U.S. population has experienced a significant increase of over 103 million people since the 1970s. According to SSA data, the proportion of Social Security beneficiaries has correspondingly risen, reaching 15.7 percent of the population in 2023. By 2030, one in every five Americans is projected to be aged 65 or above.
Funding Crunch Looms as Retiree Numbers Increase
The Census Bureau anticipates that beyond 2030, the U.S. population will continue to grow slowly, age considerably, and become more racially and ethnically diverse. However, the increasing number of retirees coincides with a time when the Social Security system is already facing a funding crunch.
The expected depletion date of the Social Security program's Old-Age, Survivors, and Disability Insurance (OASDI) fund has been pushed back to 2035, based on the combined reserves of the retirement and disability benefit trusts. If the funds run dry, the SSA predicts that only 83 percent of scheduled benefits could be paid at current rates in 2035.
Experts Warn of Disrupted Worker-Retiree Ratio
Chris Orestis, president of Retirement Genius, expressed concern, stating that historically, it has taken approximately two workers to support one retiree on Social Security. However, the ratio has been disrupted, and the fiscal strength of the program is being undermined.
Ron Hetrick, senior labor economist at market analytics firm Lightcast, echoed Orestis' sentiments, stating that a large number of retirees is not an issue in itself, but the proportion of retirees to new workers is the problem. He explained that retirees' demand for goods and services remains high, but the workforce will have significantly fewer people to provide those goods and services moving forward.
Rising Costs and Expenditures
The SSA spent $1.4 trillion in direct payments to beneficiaries in 2023. The Population Reference Bureau estimates that Social Security and Medicare expenditures will increase from a combined 9.1 percent of gross domestic product in 2023 to 11.5 percent by 2035 due to the large share of older adults in the population.
The looming question remains: Can the Social Security system adapt to America's changing demographics and secure its financial future?
Other Federal Programs includes unfunded pension liabilities for federal civilian and military employees, as well as other unfunded obligations.
The total of $120 trillion in unfunded liabilities aligns with the statement from Congressman Josh Brecheen, which accounts for the major entitlement programs like Social Security ($41.2 trillion) and Medicare ($55.1 trillion), as well as veterans benefits ($6.9 trillion) and other federal unfunded obligations estimated at around $16.8 trillion.
It's important to note that these estimates are based on certain assumptions and projections over a long time horizon (typically 75 years), and the actual unfunded liabilities could vary depending on various economic, demographic, and policy factors. Nonetheless, the staggering $120 trillion figure highlights the significant fiscal challenges facing the United States in meeting its long-term obligations to current and future beneficiaries of these programs.