The Demographic Time Bomb Behind Social Security's Woes

Money Explainers

Unpack the demographic shifts threatening Social Security. The U.S. population is getting older. See how this impacts government benefits. Understanding the factors pushing Social Security towards depletion. #SocialSecurityFuture. #AgingPopulation.  #EconomicChallenges.

Transcript

00:00Social Security, a cornerstone of financial stability for millions, is facing an unprecedented

00:06challenge. Its trust funds are projected to be depleted by 2034, barring congressional action.

00:14But what's driving this alarming trend? The answer lies in fundamental demographic shifts

00:19within the United States. The nation's population is aging rapidly, placing immense pressure on a

00:25designed with the expectation that a robust workforce would support its retirees. This

00:32delicate balance between contributors and beneficiaries is now significantly impacted

00:37by three key factors. First, more and more people are reaching retirement age. Second,

00:44relatively fewer individuals are entering the workforce. And third, people are living longer

00:50into retirement, extending the period during which they draw benefits. The Census Bureau's broad

00:56dependency ratio, which measures the number of dependent-age people those younger than 15

01:02or older than 65 for every 100 working-age people, highlights this imbalance. This ratio surged by 13%

01:10from 2007 to 2023, despite a decrease in the younger-than-15 cohort during that same period.

01:18This indicates a growing burden on the working population. The aging of the population is

01:25largely a consequence of shifting birth and death rates over time. The national birth rate has been

01:31on a decline since 1990. While immigration does contribute to the workforce, nearly 20% of all workers

01:38immigrated to the U.S. as of 2024. The lowering birth rate is significantly altering the overall age

01:45distribution. This creates a ripple effect. Fewer births mean smaller age cohorts entering the

01:51workforce in future decades. Consider the baby boomers, born between 1946 and 1964, a period of

02:00exceptionally high birth rates. As this large generation has aged, the composition of the

02:06population has dramatically shifted. New births peaked in 1957, with those individuals turning 65 in

02:142022. During this time, the share of the population aged 65 and older nearly doubled, from 9.0% to 17.2%.

02:25The SSA anticipates that the number of Americans aged 65 and older will continue to grow by 26% over the next

02:3412 years, from approximately 61 million in 2023 to about 77 million in 2035. This translates directly

02:43to more people becoming eligible for Social Security benefits and proportionally fewer individuals

02:50contributing to the funds. Compounding the impact of declining birth rates is the fact that the death

02:56rate has also been decreasing throughout the 20th and 21st centuries, extending life expectancy.

03:02From 1959 to 1961, 65-year-olds were expected to live another 14 years, to age 79. By 2022,

03:14this projection increased to another 19 years, to age 84. Larger cohorts of Americans living longer lives

03:21add significant pressure to a Social Security system that has transitioned from decades of surpluses

03:27to recent deficits. Without congressional intervention, the demographic realities paint a challenging picture

03:34for the future of Social Security. Money Explainers

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