Friday, June 19, 2015

The Clear and Present Financial Dangers Facing Future American Generations Due to an Aging Society

We're getting older. As a result, we're living longer and requiring more old age income and expensive medical care.

Financially America is largely ignoring this elephant in the room. We're saving and investing too little for old age, both as individuals and for American society as a whole.

Collectively such items as 401(k), IRA, public pension, Social Security, ObamaCare and Medicare underfunding paint an ugly picture of the financial burdens we're passing on to future generations.

The one chart that scares deficit hawks the most offers a revealing look at the developing ugly scenario:

"The Congressional Budget Office on Tuesday published its 128-page outlook on the budget. But there’s one chart that will make any deficit hawk stand on edge.

It’s this one — of the projected aging of America.

The aging of the country will have profound impacts on the economy.

First, there are the direct costs, from Medicare and Social Security. Federal spending for Social Security and the government’s major health care programs is projected by the CBO to rise to 14.2% of GDP by 2040 — basically, twice the average over the past 50 years.

That’s mostly due to the aging of the population, though it’s also due to increased per-person spending on health care and the increased usage of Medicare due to the Affordable Care Act. One startling fact: Medicare’s average spending for an 85-year-old is more than twice that for a 66-year-old.

Then, there are more subtle ways aging will impact the economy, and hence, the deficit. As baby boomers reach retirement age, they are more likely to leave the labor force. That said, as Americans live longer, they are able to work longer — the CBO says by an additional three months for every extra year on the planet.

The CBO projects the deficit to be 7% of the economy and the federal debt to be 107% of the economy by 2040, compared to 2015 projections of a deficit of 3% of the economy and a debt of 74% of GDP."

Summing Up

The facts are clear.

Our unwillingness as a society (both individuals and politicians) to face them clearly and not pass the burden on to future generations is baffling to me.

Our kids and grandkids deserve better from us.

That's my take.

Thanks. Bob.

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