Coping With the Demographic Challenge: Fewer Children and Living Longer

Abstract

Because of demographic changes, the Social Security system in the United States will face financial challenges in the near future. Declining fertility rates and increasing life expectancies are causing the U.S. population to age. Today, 12 percent of the total population is aged 65 or older, but by 2080 it will be 23 percent. At the same time, the working-age population will shrink from 60 percent to a projected 54 percent. Consequently, the Social Security system is experiencing a declining worker-to-beneficiary ratio, which will fall from 3.3 in 2005 to 2.1 in 2040 (the year in which the Social Security trust fund is projected to be exhausted). This article examines the demographic challenge of an aging population on the U.S. Social Security system and the well-being of the elderly. It describes policy implications and some potential policy solutions to this challenge.

Keywords: Demographic Trends and Forecasts, Economics of the Elderly, Economics of the Handicapped, Public Policy, Retirement, and Retirement Policies

JEL Classification: J11, J14, J18, J26