The Truth About Aging Boomers'
Effect on Our Economy

By John B. Shoven, Foreign Policy. Posted March 12, 2008. www.alternet.org


If you forget to die and live too long what do you do for money?

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When the U.S. Social Security system was designed seven decades ago, the 65-year mark was deemed the moment when Americans moved "beyond the productive period" and into dependency. That age was chosen based on mortality risk: a 65-year-old man in 1940 could expect to live an additional 11 years, a 65-year-old woman another 15 years. But medical advances have shifted mortality risks enormously. When an American man hits 65 today, his mortality risk is just 2 percent; he can expect to live nearly 17 more years. He has the same risk of dying that year as a 56-year-old man did in 1940 or a 59-year-old man in 1970. In other words, a 65-year-old today and a 59-year-old in 1970 are the same "real" age. The effect with women is similar. A 70-year-old American woman today has about the same mortality risk as a 65-year-old woman did in 1950.

The implications are significant: The magnitude of the elderly wave that demographic forecasters have predicted is, in reality, far smaller. Forecasts today tell us that the fraction of the population over the age of 65 will grow enormously. But consider what would happen if we replaced the 65-year marker with a mortality risk measurement that governs who is considered "elderly." In 2000, 12.4 percent of the U.S. population was over the age of 65, or about 35 million people. The U.S. Census Bureau predicts that, by 2050, the U.S. elderly population will grow to about 87 million citizens. But if we look instead at the fraction of the population with a mortality risk higher than 1.5 percent, the growth is not nearly as dramatic. By 2050, only 62.5 million Americans, or about 15 percent of the population, will have a mortality risk greater than 1.5 percent. That's hardly a demographic tidal wave. The global outcomes are similarly striking: A mortality-based measurement lowers the projected elderly population in 2050 in Japan, Spain, and Italy by an average of 30 percent.

Just consider the consequences of altering the age when entitlement benefits kick in or retirement becomes mandatory to these new inflation-adjusted measurements. It doesn't mean shortening retirements, just stabilizing them. In 20th-century America, the average length of retirement grew from two years to more than 19 years. As life expectancies continue to rise, retirements will continue to get longer -- and the pension bill far larger. If benefits and retirements are governed by mortality risk instead of age, the costs will be far more manageable. We've witnessed dramatic improvements in life expectancies over the past century. It's time we dramatically improve the way we measure age as well.

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