Will We Retire Later and Poorer?

Abstract

There is no Social Security crisis. There is, though, a demographics crisis. Between 1940 and 2003, longevity in the U.S. increased by nearly 14 years, but the retirement age for full Social Security and Medicare benefits will have increased by not even a single year. For dependency ratios to remain stable as the boomers reach retirement age, we need far more workers or far fewer retirees, or the boomers will need to retire to more constrained lifestyles. The solution for the demographics crisis is found in some mix of these developments. Financial solutions do not work because the more money we seek to transfer to retirees through taxation, the more they can bid for a limited supply of goods and services, boosting prices. And the more money retirees have saved, the more assets they will be able to sell to buy goods and services, depressing asset values.