Social Security is the most important income source for the elderly. Two-thirds of elderly households depend on Social Security for at least half of their incomes. Social Security makes up at least 90 percent of income for one third of elderly households. The full benefit for a medium income worker retiring in 2004 was $16,394. By 2040, this average per-worker benefit will grow (in 2008 dollars) to $23,640.
Personal health care spending per person for the 65 and older population was $14,797 in 2004. This was 5.6 times higher than spending per child ($2,650 in 2004) and 3.3 times spending per working-age person ($4,511 in 2004). Medicare paid $10,606 of this cost in 2007—a value of $21,212 for a couple. By 2040, Medicare spending is projected to total nearly $50,000 (in 2008 dollars) per couple.
The number of workers supporting each retiree under Social Security will decline by one third over the next 20 years and continue declining after that. This decline is largely the result of a 19 year baby boom that took place from 1946 to 1964. The working generation in 2028 will be slightly larger than today’s; however, the number of dependent elderly will roughly double.
Wages and salaries will grow much more slowly than retiree benefits. In 2007 3.3 workers with a combined income of $133,524 supported one retiree. By 2040, 2.1 workers with a combined income of $123,200 (in 2007 dollars) will support one retiree, whose benefits will be twice as expensive. Most wage growth between now and 2040 will be taxed away to cover rising entitlement costs.
The government’s own projections point to the end of the American dream. The combined cost of new taxes to pay rising entitlement costs plus rising private health bills will mean that, if we continue down our current track, the living standards of average workers in America will start to decline in the early 2020s.
Social Security is the most important income source for the elderly. Two-thirds of elderly households depend on Social Security for at least half of their incomes. Social Security makes up at least 90 percent of income for one third of elderly households. The full benefit for a medium income worker retiring in 2004 was $16,394. By 2040, this average per-worker benefit will grow (in 2008 dollars) to $23,640.
Personal health care spending per person for the 65 and older population was $14,797 in 2004. This was 5.6 times higher than spending per child ($2,650 in 2004) and 3.3 times spending per working-age person ($4,511 in 2004). Medicare paid $10,606 of this cost in 2007—a value of $21,212 for a couple. By 2040, Medicare spending is projected to total nearly $50,000 (in 2008 dollars) per couple.
The number of workers supporting each retiree under Social Security will decline by one third over the next 20 years and continue declining after that. This decline is largely the result of a 19 year baby boom that took place from 1946 to 1964. The working generation in 2028 will be slightly larger than today’s; however, the number of dependent elderly will roughly double.
Wages and salaries will grow much more slowly than retiree benefits. In 2007 3.3 workers with a combined income of $133,524 supported one retiree. By 2040, 2.1 workers with a combined income of $123,200 (in 2007 dollars) will support one retiree, whose benefits will be twice as expensive. Most wage growth between now and 2040 will be taxed away to cover rising entitlement costs.
The government’s own projections point to the end of the American dream. The combined cost of new taxes to pay rising entitlement costs plus rising private health bills will mean that, if we continue down our current track, the living standards of average workers in America will start to decline in the early 2020s.