Entitlement Spending: Aging Benefits
When you combine better health care with generous pensions you get (choose one):-
- – happy retirees
- – happy politicians
- – insufficiently funded national pension programs
- – the eurozone
- – the United States
- – other
To select an answer let’s start with 1935. Just passed, the Social Security Act will give benefits to people 65 and older in several years. With 41.9 workers for every retiree in 1945 and 16.5 in 1950, the revenue source was more than sufficient. Moreover, in 1935, life expectancy was 58 for men and 62 for women. (Adults who reached 21 did have a 50-60 percent chance of reaching 65 and beyond.)
Fast forward to 2013. The average man lives until approximately 76 and the average woman, 81. The worker retiree ratio for 2012 was 2.9. And as more baby boomers retire, it will get worse.
In their 2013 report, the Social Security Trustees announced that because current workers’ checks could not cover retirees’ obligations, the system had a deficit during 2010, 2011 and 2012. The good news is that they have a Trust Fund to cover deficits. The bad new is that the Trust Fund will probably be empty in 2033. That means benefits will have to plunge or taxes soar or the age of eligibility change. Or maybe the unexpected will occur and all will remain okay.
More daunting, in Europe, by age 55, more than one third of the population of all countries has retired except for Sweden, Denmark and Finland. You know the eurozone situation– huge pension obligations, free access to health care, retirement length averaging 13-20 years, and unemployment averaging 12.1 percent in July.
Returning to the quiz, what might you fill in for “other?”
Sources and Resources: You might want to look at this historical/future projections chart of worker beneficiary ratios since 1980, pp. 12-13 in the Trustees 2013 report. For Europe, I got my statistics from this article which uses Eurostats as its source.
Please note that sections of this post have appeared previously.