Facing facts

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Perhaps because so many readers have recently told me how much they’ve enjoyed my recent columns, I’ve decided to risk spending some of that capital this month by sharing a number of statistics that I think paint a rather troubling picture and lead to some controversial conclusions.

Because I can’t possibly lay out all the pertinent facts, much less their ramifications, in one column, this will have to be continued next month.

But let’s start with some good news, which has been well-covered in the Beacon and elsewhere: Americans are living longer and healthier than ever before.

In part due to that — and in part due to demographic effects set in motion by the baby boomers’ parents decades ago — our population as a whole is aging rapidly.

According to the Census Bureau, in 1970, 9.8 percent of U.S. residents were 65 and over. In 2010, 13 percent were 65+. By 2030, when the remaining boomers will have reached or passed 65, more than 20 percent of the U.S. population will be 65 or older. 

Plus, as we continuously drive down death rates from the most common diseases, such as heart disease and cancer, we make longevity gains every year at every age.

We might not be surprised when the Centers for Disease Control tells us that Americans’ average life expectancy at birth rose 1.9 years from 2000 to 2010 (from 76.8 to 78.7). But did you know average life expectancy at the age of 65 rose by 1.5 years over the same decade (from 82.6 to 84.1), and by 1.1 years for those who were 75 (from 86 to 87.1)?

These generally positive developments give rise to some serious financial implications.

A 2009 study by the MacArthur Foundation estimated that  “adding 3.1 to 7.9 years to life expectancy by 2050 would add an estimated $3.2 trillion to $8.3 trillion to Medicare and Social Security outlays above current expectations,” Businessweek reported.

That could be a real problem, given that even based on current funding streams, Social Security is anticipated to be able to pay only 75 percent of promised benefits in 2030 unless significant changes are made, and the Medicare program is in nearly as bad a shape.

This year alone, the two programs are already costing U.S. taxpayers more than $350 billion out of general revenues, according to the latest Trustees’ report.

So with the prospect of reduced federal benefits in the future, are boomers in a position to self-fund their longer, more active retirements thanks to regular savings and judicious investments? On the contrary.

Businessweek reports that, “until 2007, when the oldest boomers were staring down the barrel of retirement, baby boomers’ average annual saving rate was negative 0.5 percent. They weren’t just saving too little, they were piling on debt in what should have been prime saving years.”

In contrast, earlier generations raised during or shortly after the Great Depression and living through WWII typically saved more than 10 percent of their income during their middle earning years.

Fortunately, boomers are now saving about 11.6 percent per year on average, but given the importance of compound interest to building up a nest egg, it may be too little, too late. 

And their children, the millennials, are doing even worse, at least for the moment. Americans under 35 are currently spending 1.7 percent more than they are making each year.

There is one group, however, that is sitting rather pretty: Americans 75 and over. Despite the fact that over the past decade median U.S. household net worth has declined from $115,000 to $81,200, according to the Federal Reserve, among those 75 and up, median household net worth increased from $131,000 (in 1989) to $195,000 in constant 2013 dollars.

No doubt we should be happy that the 65 and over age group — which had the highest rate of poverty in the country in 1959 (35 percent) — today has the lowest poverty rate of any age group (9.5 percent).

But we might not be so happy to learn that the current poverty rate of children under 18 is more than twice as high (19.9 percent).

We haven’t even begun to talk about Medicaid — the joint federal/state healthcare and long-term care program for the poor and those with disabilities — and how its fast-rising needs are straining that program in many states as well as on the national level. 

There are facts about that program and many others I could share, and next month I may do some of that. But I think you see where I am going with this.

Please pick up the Beacon next month and give me a chance to finish my thoughts, because I feel there is an important discussion we need to be having in this country.

It starts with facing certain facts. Who knows where it will end?