Editor’s Note: This is the second in a series about the unprecedented dependence Americans have on their federal government. The first story showed how the food-stamp program has doubled under President Obama, as it did under President George W. Bush.
NEW YORK – The growing number of retired Americans is developing into a historically unprecedented era of senior citizens dependent on the government at a time when the employment prospects for Americans in a global economy are rapidly deteriorating.
The Pew Research Center noted that Jan. 1, 2011, was the day when the oldest members of the Baby Boomer generation celebrated their 65th birthday. From that day, every day for the next 19 years, approximately 10,000 Baby Boomers would reach the traditional retirement age.
"The aging of this huge cohort of Americans (26% of the total U.S. population are Baby Boomers) will dramatically change the composition of the country," the Pew Research Center wrote. "Currently, just 13% of Americans are ages 65 and older. By 2030, when all members of the Baby Boom generation have reached that age, fully 18% of the nation will be at least that age, according to Pew Research Center population projections."
This is happening at time when there are fewer workers likely to be paying taxes to support the Baby Boomer senior citizens who are retiring with a historically low rate of savings.
TRENDING: Greatest Show on Earth: The Hur report hearing
To compound the problem, the U.S. workforce appears to have hit a new normal in which record numbers of workers are out of the labor force and involuntary part-time work appears to be here to stay.
Baby Boomers retiring in historic numbers
Baby Boomers, the demographic cohort born in the U.S. during the post-World War II era, has been "driving change in the age structure of the U.S. population since their birth," given the exceptionally high birth rates that peaked in 1947 as soldiers returned to civilian life from military service, according to Census Bureau Current Population Report published in May 2014.
Although the Census Bureau correctly anticipates the absolute number of retired Baby Boomers will decline over time through mortality, the impact of the Baby Boomer retirement phenomenon is expected to change U.S. demographics. By 2056, the Census Bureau anticipates the population 65 years and older will become larger than the population under 18 years old.
"Dependency ratios, which measure the number of potential dependents – those in the youngest and oldest segments of the population – relative to the size of the working-age population, provide another way to see the effect of the baby boom cohort on the age structure of the U.S. population," the Census Bureau stressed.
"Much larger increases are projected for the old-age dependency ratio in the coming years as the baby boomers begin to enter the older ages," the May 2014 Current Population Report continued. "By 2030, when all of the baby boomers will be 65 or older, the old-age dependency ratio is projected to reach almost 35, an increase of 14 older residents for every 100 working-age adults. In 2035, the difference between old-age dependency and youth dependency will be less than 2."
Not enough for retirement
A troubling study by Natixis Global Asset Management published in August 2014 showed that even with the assistance of a financial adviser and with access to a 401K plan, many Baby Boomers will not meet their retirement savings goals.
The study featuring 1,000 respondents showed 33 percent of Baby Boomers have put aside less than $50,000, compared to 41 percent of the participants in the Millennial or Generation Y group (those from ages 18 through 33). Baby Boomers have saved an average of $262,541, about a third of the $805,398 they predict they will need at retirement.
"We have a baby boom generation that spent almost entirely what they earned during their peak earning years," Chris Brightman, head of investment management at Research Affiliates, told BankRate in July 2013.
"Now they're looking forward to 30 years of retirement and expecting to earn from their investment portfolio enough to live a similar lifestyle with no drop-off," Brightman said. "But that cannot happen."
The Baby Boomer retirement savings future is complicated by increased life expectations. In 1900, the average life span was 47 years old, but the AARP says a 65-year-old retiring today can expect to live nearly two more decades.
A series of recent studies show additional cause for concern: Approximately 40 percent of Baby Boomers have saved nothing for retirement, while 36 percent of Baby Boomers plan to rely on Social Security as their primary source of income, as evidenced by the 19 percent of Baby Boomers who are offered a 401(k) or similar investment and decide not to participate.
In May 2015, the Government Accountability Office released a report titled "Retirement Security: Most Households Approaching Retirement Have Low Savings," revealing the following:
- Many retirees and workers approaching retirement have limited financial resources. About half of households age 55 and older have no retirement savings (such as in a 401(k) plan or an IRA).
- Over half of all households aged 55 and older have no retirement savings in an Individual Retirement Account, IRA, or a defined benefit plan like a 401(k).
- If we look at those between the ages of 55 and 64 – that is, getting close to retirement, or just did – nearly 70 percent have less than $100,000 in savings.
- Among those with some retirement savings, the median amount of those savings is about $104,000 for households age 55-64 and $148,000 for households age 65-74, equivalent to an inflation-protected annuity of $310 and $649 per month, respectively.
A recent Congressional Budget Office report published in December 2014 found the likelihood Social Security will face bankruptcy is a problem that has worsened under the Obama administration. The gap of Social Security costs exceeding income is expected to grow from about 9 percent in 2013 to 17 percent over the next decade, with the CBO projecting all Social Security trust funds will be exhausted by 2030, unless something is done to increase income above anticipated expenditures.
"As more members of the baby-boom generation retire, outlays will increase relative to the size of the economy, whereas tax revenues will remain at an almost constant share of the economy," the CBO reported. "As a result, the gap will grow larger in the 2020s and will exceed 30 percent of revenues by the late 2020s."
Labor-force woes
As the Obama administration touts 5.5 percent unemployment in May 2015 as another sign of the "recovery" generated by administration economic policies, a record 92.9 million Americans are no longer in the labor force. The labor participation rate hit a new 38-year low in May, at 62.9 percent.
Adjusting the BLS unemployment number to report what is known as "U-6," a measure that includes total unemployed, plus all persons marginally attached to the labor force, plus total part-time employed for economic reasons, unemployment in May 2015 was 10.4 percent.
As WND has reported, economist John Williams, the author of Shadow.stats.com, a website known for arguing the government reports are manipulated for political purposes, has calculated that the real unemployment rate, taking into consideration those who have dropped out of the labor force because of lack of work, has remained above 23 percent since April 2013.
A study published by the Federal Reserve Bank in San Francisco on June 8 suggests involuntary part-time work, an increasing phenomenon during the Obama presidency, is a phenomenon that is here to stay.
"The incidence of involuntary part-time work surged during the Great Recession and has stayed unusually high during the recovery," noted San Francisco Federal Reserve Bank economists Rob Valletta and Catherine van der List.
"This may reflect more labor market slack than is captured by the unemployment rate alone," the economists continued. "Analysis across states and over time indicates that a substantial part of the increase is related to the business cycle."
"However, structural factors such as changes in industry composition, population demographics, and labor costs have also contributed," they concluded. "This suggests that involuntary part-time work may remain significantly above its pre-recession level as the labor market continues to recover."
On June 8, the Bureau of Labor Statistics reported the number of persons employed part-time for economic reasons, the official government definition of "involuntary part-time workers," remained unchanged in May at 6.7 million individuals.
The BLS defines involuntary part-time workers as those who would have preferred full-time employment but were working part-time because their hours had been cut or because they were unable to find a full-time job.
If historically low rates of labor participation persist, combined with continued high rates of part-time employment, where will the U.S. government find the Social Security taxes needed to pay the benefits of retiring Baby Boomers?
"If you are an older American headed toward retirement, there's a good chance you will be poor," warns Merrill Matthews, Ph.D., a resident scholar with the Institute for Policy Innovation.
Not only are the Baby Boomers likely to retire poor, without substantial private retirement savings, they are likely to be increasingly dependent on the federal government to maintain in their retirement years the standard of living to which they have been accustomed.