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Social Security Warning Amid US Population Shift – Newsweek

As America’s population grows and ages, financial experts are concerned about the impact on Social Security, as the number of people receiving Social Security benefits increases.

The U.S. population has grown by more than 103 million people over the past 50 years, and according to data from the Social Security Administration (SSA), the percentage of Social Security claimants has increased by more than 7 percent during that time.

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According to SSA data, the average growth rate of Social Security recipients is 1.8 percent. If this trend continues, the number of recipients will increase by about 36,221,550 in 2053, the most recent year for which the Congressional Budget Office provides population projections. Based on population projections, this could represent 27.7 percent of all U.S. residents, or more than a quarter.

And rising numbers of claimants, especially those who are unemployed or retired, mean there are fewer workers paying the taxes that fund the SSA.

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Newsweek I reached out to the SSA for comment via email.

“Historically, it took two workers to support one Social Security recipient, but that ratio has been disrupted, undermining the program’s financial strength,” Chris Orestis, president of Retirement Geniuses, told Newsweek .

“Having a lot of retirees isn’t a problem in itself; it’s the ratio of retirees to new hires that is the problem,” Ron Hetrick, senior labor economist at market analytics firm Lightcast, told Newsweek. “Because as people retire, the demand for goods and services remains high, but there are far fewer people available to provide those goods and services.”

Social Security warnings as America’s population shifts

Photo Illustration: Newsweek/Getty Images

The number of people receiving retirement pensions is growing from 16.5 million in 1970 to 52.7 million in 2023, an increase from 8.2% to 15.7% of the population. U.S. Census Bureau The report also predicts that by 2030, one in five Americans will be aged 65 or older. After 2030, with increasing immigration, “the United States population is projected to grow moderately, become significantly older, and become more racially and ethnically diverse.”

The natural increase in claimants that comes with an aging population comes at a time when the SSA is facing financial difficulties in just over a decade. The projected date of depletion of the Old-Age, Survivors, and Disability Insurance (OASDI) fund, based on the combined contributions in the retirement and disability benefits trusts, has been pushed back to 2035, one year later than previously projected.

If funding runs out and benefits have to be paid solely from tax revenues, the SSA projects it will be able to pay only 83 percent of planned benefits in 2035 at current rates.

“If the number of retirees continues to grow at a higher rate than expected, the funding cliff could occur sooner than 2034/5,” said Michael Collins, CFA, founder and CEO of WinCap Financial. Newsweek“This will depend on several factors, including the pace of growth in the retiree population, changes to Social Security eligibility and benefits, and overall market conditions.”

Steven Cates, chief financial analyst at RetireGuide.com, said a surge in retirements is “unlikely to accelerate the funding shortfall” given the “increase in retirees and Social Security claimants” projected based on current assumptions about tax revenues, average claimant age, disability claims and recipient life expectancy. But he cautioned that “if any of these assumptions change, it will impact our projections.”

Social Security Trust Fund Depleted
When will the Social Security Trust Fund run out?

Statista

In 1970, the total number of claimants for Social Security benefits was 25,700,924, or 12.6% of all U.S. residents. By 2023, the number of claimants will reach 67,076,966. At the midpoint (June 1) population projection, U.S. Census Bureau That suggests 20 percent of the population, or one-fifth of all Americans, are currently receiving benefits.

Through 2023, SSA will $1.4 trillion Direct payments to beneficiaries. Population Reference Bureau Because of the large proportion of elderly people in the population, combined spending on Social Security and Medicare is projected to increase from 9.1% of gross domestic product in 2023 to 11.5% by 2035.