The Aging of America

Key Facts & Trends

The aging of the baby boom generation along with declining fertility rates is changing America’s age structure. The number of people over age 65 will rise substantially beginning in 2011 as the oldest members of the baby-boom generation reach the 65 year mark.
  • About one in eight Americans are age 65 or above today, compared to one in 10 in the 1950s. By 2030, one in five Americans will be 65 or older, roughly the same as Florida today. The number of people age 65 or older will nearly double between 2000 and 2030.
  • Americans are living longer. In 1950, life expectancy for males at age 65 was 12.6 years and 14.4 years for females. By 2000, life expectancy at age 65 had risen to 15.9 years for males and 19.0 for females. By 2030, it’s projected that life expectancy at age 65 will rise to 18.0 for males and 22.00 for females.
  • Thanks to improving longevity, there will be about six million Americans age 85 or older in 2010—twice as many as in 1990. 
  • In 2031, when the baby boomers begin reaching 85, the number of oldest old will begin rising rapidly, growing to an estimated 21 million by 2050.
  • As America ages, the ratio of workers to retirees will continue to fall. In 1970, there were almost four (3.7) workers for every Social Security beneficiary. Today there are just over three (3.3) workers for every beneficiary. By 2030 there will be just over two (2.2).

Policy Implications

The aging of America poses significant challenges to the economy and to policymakers.

  • As America ages, health care expenditures for America’s elderly population will rise. Presently health care expenditures for those 65 or older account for approximately 60 percent of health care expenditures, 35 percent of hospital discharges, and 45 percent of hospital days.  When the baby boom generation begins retiring, the annual rate on increase of costs for Medicare is expected to jump sharply.  Medicare expenditures for hospital costs alone are expected to rise from 1.49 percent of GDP in 2007 to 2.75 percent by 2030.
  • As the ratio of workers to retirees falls, there will be relatively fewer workers to support public outlays for Social Security and Medicare.  If benefits are not cut, it’s anticipated that payroll tax rates will have to be raised or alternative sources of revenue developed.  The 2007 report of the Social Security and Medicare Trustees projects that Medicare Hospital Insurance reserves will be exhausted by 2019 and Social Security reserves by 2041. 
  • The 2007 report concluded that the Medicare Hospital Insurance “could be brought into actuarial balance over the next 75 years by an immediate 122 percent increase in the payroll tax, or an immediate 51 percent reduction in program outlays or some combination of the two.” Social Security reserves “could be brought into actuarial balance over the next 75 years in various ways, including an immediate increase of 16 percent in payroll tax revenues or an immediate reduction in benefits of 13 percent or some combination of the two.”