The United States is experiencing rapid growth in its older population, a triumphant result of long-term investments in health and medicine. There have never before been so many older Americans – particularly relative to working-age Americans. And the proportion of the country 65 and older will only keep growing in the years ahead: A decade from now, the number of older Americans will surpass those under 18 for the first time in history.
These changing demographics present both challenges and opportunities for the United States. Additional years of life will offer Americans more time for family, work, and leisure. But a growing elderly population will also need care, support, and integration into the workforce, which is certain to be costly and could threaten the country’s fiscal and economic stability. Avoiding that outcome will require giving workers new opportunities to save before they reach retirement, making the workplace more accessible for older workers and shoring up state and federal budgets.
A gray wave
By 2040, the U.S. population, which currently numbers about 330 million, is projected to hit 372 million. Over this time period, the composition of the population is also expected to shift dramatically. The number of Americans 65 and older will likely increase by 50%, going from 54 million to an estimated 82 million, while the number of those under 65 is expected to increase by just 5%. To grasp the economic implications of this shift, consider that in 2020, for every 100 working-age households – the core of the U.S. tax base – there were only 37 older households. In 2040, however, there will be 54 older households per 100 working-age households, potentially causing great strain not only on the working-age households but also on the government.
This great transformation can be attributed to three factors: birth rates, life expectancy, and migration. First, birth rates have been dropping ever since the end of the baby boom in the mid-1960s. In the United States in the late 1970s, women on average were giving birth to 2.2 children over their lifetimes. Today that number is just 1.7, and it’s not expected to rise (or fall) over the next 30 years. Many factors may have influenced the drop in fertility rates, including increased labor-force participation, earnings, and educational attainment by women; delays in marriage and childbearing; the use of contraceptives; and the cost of raising children.
Meanwhile, life expectancy is growing. In the United States, life expectancy at birth was 77.5 years in 2022 – and should surpass 84 years by 2050. Americans who reach the age of 65 are also living longer. In 1960, Americans who reached 65 could, on average, expect to live another 14.3 years; by 2022, that number was 18.9 years.
Finally, as a small counterbalance to the falling birth rate, migration to the United States – assuming current trends and no changes in public policy – will be a modestly net positive in the years ahead as more individuals migrate into the country than choose to leave. Indeed, as the U.S. fertility rate falls, growth of the country’s population will increasingly be driven by immigration.
Not ready to retire
Maintaining older Americans’ quality of life and protecting the country’s fiscal situation will require ensuring that Americans properly prepare for their retirement. Unfortunately, that does not seem to be happening. Pew-sponsored research published last year assessed the gap between the income that retirees will need – defined as 75% of their pre-retirement income – and the income they’ll likely receive based on current trends. The study found that by 2040, the average American retiree will earn $7,050 less per year than they’ll need.
Read the rest of this piece at The Bush Center.
John Scott directs the retirement savings project at The Pew Charitable Trusts.
Photo: City of Greenville, NC via Flickr in Public Domain.
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