In one episode of 30 Rock, Liz Lemon and her boss, portrayed by Alec Baldwin, are stuck at Liz’s high school reunion where he’s accepted as a fellow classmate, even though he’s 12 years older than anyone else there. His explanation to Tina Fey’s character is simple. “Lemon, rich 50 is middle class 38, alright?”
For millions of Americans approaching retirement, the ironic modern twist on that observation is that poor 80 is the new 67.5, as a generation faces the prospect of retirement with limited resources and an uncertain future for Social Security and Medicare. Many find themselves unable to retire, and more than a few faced with the prospect of working well past the time they should be passing their days on fishing piers and at card parties.
The numbers have been plain to see for quite some time; America, as a nation, is getting older and less fertile. In 2010 there were approximately 40 million people over 65 in the US; by 2020 that number could reach 55 million. The Social Security Administration’s own figures show the ratio of workers-to-retirees dropped below 3-to-1 for the first time in 2012. By 2030, just over 16 years from now, the ratio is going to drop to 2 to 1.
Added to that older Americans are expected to live longer, with the CDC reporting the average age rising to 77.9 years and the age-adjusted death rate continues to decline. That not only creates problems for our social safety net programs but the economy in general. With more of the nation’s wealth locked up with older individuals, inheritances aren’t finding their way to succeeding generations until they’re in their 60s, a point in life when they don’t really need it anymore.
There are no easy fixes for the predicament an aging population presents. The shortfall in retirement savings is real, and of a such a size currently that if Americans suddenly started saving enough for retirement, the economy would stall and stagnate for decades. Seniors also aren’t getting any credit for the cash they have saved for retirement, as interest rates have stayed so low for so long. Asking older Americans to work a little longer is likely going to be necessary, but doing so traps younger workers farther down the career ladder as seniors filling low-paying jobs takes those positions away from teenagers who spend a higher percentage of their disposable income.
We can’t cheat the math and, unfortunately, there are a limited number of ways to address the Social Security and Medicare liquidity issues.
Means Testing – Older Americans who have done well in life and beat the income spread may need to face the reality that their benefits will be lower when they retire. The idea is to structure the program to encourage seniors to spend more of the money they have already put away. Ironically this also tends to be the group with the most political clout, and there hasn’t been any indication so far that rich people are willing to forgo their Social Security checks.
Working Longer – For some jobs that’s just not realistic; but for people who can work longer, we may be forced to ask them to spend a few more years on the clock. It’s already a reality for many, so that may not be a terrifically painful step.
Lower COLAs – Now we’re cutting into the political red meat with the dreaded chained CPI and other accounting tricks to slow the growth of benefit payments. This is a painful step that ignores the number of seniors already living with food insecurity and barely making ends meet.
Higher Income Exclusions – More political red meat from another group with outsized political clout. If we’re going to ask seniors already living on the edge of poverty to accept lower COLAs, then the wealthy working may also have to face ponying up, paying Social Security taxes on higher incomes.
Allowing More Immigrants In – Here’s another political football that’s mired in legislative deadlock. The fact is we’re not having enough of our own children to support the workforce, so the only option we may have left is to consider allowing in younger immigrant families to take up the slack. It may not be popular in some circles but it would be the fastest way to lower the age of our workforce.
None of these ideas would be popular and all of them are unfair to someone, but the options are limited. Doing nothing is not an option and neither is asking grandma to get by on dog food. All of us may face accepting a solution that pleases no one.