For simplicity in this post I'm going to call those 65 and over "retired" and everyone 19-64 "working."
In the last 40 years the number of workers per retiree has crept downward very slowly from 5.9 in 1960 to 4.9 today. When you consider women entering the workforce and the proportion of the population under 19 dropping 30% this has not increased the burden on workers at all. The number of retirees per worker is going to remain fairly constant until 2010, and then drop dramatically over the next 20 years to about 2.8 in 2030. This represents a 75% increase in the retiree burden on each worker in just two decades. It is my feeling that society will not be able to support this boom in retirees at the current typical retiree standard of living (which is far far higher than any time in history), and it is going to become much harder to live off of pensions and investment income.
This problem is usually discussed in the context of social security and medicare. While it is almost certain that something will have to change by 2020 in those government programs (and probably well before that), I think the problem extends further. The problem lies not just with public pensions, but with a small number of workers supporting a large number of non-workers. It doesn't matter whether that support comes from investment returns, investment returns funneled through private pensions, or the government. All of these areas of support are going to have to be depressed from their current levels in order to discourage people from retiring.
My question is this: what form will that take, and how can I protect against it?
As I mentioned before, I think the benefits offered by SS and Medicare will need to drop. Another possibility that comes to mind is that interest rates may remain low for the next couple of decades. More dramatically, inflation may shoot up to reduce the value of current debt holdings. And lastly, the stock market could drop or remain stagnant for the next couple of decades.
What do you guys think of those possibilities? Am I worrying needlessly, or is this a reasonable expectation for the next 30 years? Is there anything to do to enable me to retire during that time, besides hoard more money than the next guy?
In the last 40 years the number of workers per retiree has crept downward very slowly from 5.9 in 1960 to 4.9 today. When you consider women entering the workforce and the proportion of the population under 19 dropping 30% this has not increased the burden on workers at all. The number of retirees per worker is going to remain fairly constant until 2010, and then drop dramatically over the next 20 years to about 2.8 in 2030. This represents a 75% increase in the retiree burden on each worker in just two decades. It is my feeling that society will not be able to support this boom in retirees at the current typical retiree standard of living (which is far far higher than any time in history), and it is going to become much harder to live off of pensions and investment income.
This problem is usually discussed in the context of social security and medicare. While it is almost certain that something will have to change by 2020 in those government programs (and probably well before that), I think the problem extends further. The problem lies not just with public pensions, but with a small number of workers supporting a large number of non-workers. It doesn't matter whether that support comes from investment returns, investment returns funneled through private pensions, or the government. All of these areas of support are going to have to be depressed from their current levels in order to discourage people from retiring.
My question is this: what form will that take, and how can I protect against it?
As I mentioned before, I think the benefits offered by SS and Medicare will need to drop. Another possibility that comes to mind is that interest rates may remain low for the next couple of decades. More dramatically, inflation may shoot up to reduce the value of current debt holdings. And lastly, the stock market could drop or remain stagnant for the next couple of decades.
What do you guys think of those possibilities? Am I worrying needlessly, or is this a reasonable expectation for the next 30 years? Is there anything to do to enable me to retire during that time, besides hoard more money than the next guy?