How Amnesty may impact your healthcare costs in retirement
Today, the United States is facing a major problem it has yet to encounter in its entire 200 year history, and is one that could possibly alter the economic and political landscape going forward.
Despite what you may think while standing fourteen deep in the express checkout line at the grocery store, the United States doesn’t have enough people.
I understand this may not seem to make much sense, but let’s take a closer look at what we know:
First, we know that those we deem to be retired (people receiving both Social Security and Medicare/Medicaid), total about 54 million according to the Social Security Board of Trustees. This little segment of our society is often referred to as the Greatest Generation, on account of them literally saving the world from total annihilation back in WWII.
These days, they mainly provide bumbling comedic counterpoint to tech-savvy Millenials in smartphone commercials. But we’ll get to the Millenials in a bit…
We also know that the generation following the Greatest Generation to retirement, the Baby Boomers, happens to be considerably more populous than their parents, given their birth rates. The US Census totals this generation to be just over 76 million lives when factoring its birth rates.
Here is where the problem stems: these Baby Boomers, who happened to have been born between the years of 1946 to 1964, are also starting to retire. And the one little factoid that seems to be continually left out when this conversation starts, is the total amount of people following these Baby Boomers generationally. Unfortunately for the US, the next generation, Gen X, is considerably smaller than their older brethren, totalling only about 62 million.
So the issue the US is facing, is that for the first time in its extremely short run, the generation that will soon be in retirement is actually larger than the following generation that will support it.
We also know there will be the argument of immigration before amnesty, and it is a correct point to make. But even with “legal” immigration, the amount of Gen X-ers only totals about 93 million.
“No biggie,” you say to yourself. “The next generation after these Gen X-ers should be considerably larger, and will be able to pick up the slack.” Suddenly, a stark realization hits you, and icy pangs of distress run through your body: “Wait – I’m counting on the generation that advanced and promoted the concept of twerking to keep me from having to live off Alpo in my golden years.”
Well, that won’t be the case regardless, as the generation that follows the Gen X-ers, the aforementioned Millennials, only total about 70 million. And as for picking up the economic slack, they probably couldn’t get it done anyways, as according to the US Census, “1 out of every 5 lives under the poverty level”.
On top of that, Millennials are getting married later in life, if they get married at all. They are also saddled with the most amount of debt any one generation has ever had placed on its backs due to college loans and the yearning to keep up with the Chinese kids who make everything these days. Having to drop $600 on the new iPhone every eight months doesn’t help either.
Couple all this wonderful news with the saddening reality that the US fertility rate has literally fallen off a table since our Baby Boom. In the height of the Baby Boom, the fertility rate for the US averaged about 3.5 to 4.1, and then proceeded to drop below that precious 2.1 rate during the entire 1970’s. By the early 1990’s it thankfully crept up a little past 2.1% (Bill Clinton may or may not have been personally responsible for this spike), but now, with the Millennials, the rate has once again dipped back below.
And birth rates don’t seem to be on a reversing trend, as Bloomberg’s Victoria Stilwell pointed out in her article “Birth Rate Drop Lasting” back September 2014.
A direct quote from an interviewee named Janna who is “proud that she kept a plant alive for a whole year”, when confronted with the question of marriage and kids replied (presumably through a mouthful of trail mix), “I want to know who I am before I bring someone else into the equation.”
Janna, “who has a master’s degree in exercise physiology”, wants to wait, as “the longer I wait and the more established I am, the more I’ll be able to provide for the family.” Not only do many people agree with her, but they are doing just the same.
But is she is wrong?
If we look at the math, her choices along with those of the many Millenials that share her thoughts, should cause us to question the overall health of the US economy and health care system.
Again, there are roughly 54 million people receiving Medicare and Social Security, with roughly 208 million able bodies possibly funding these two entitlements, along with the overall US economy, state and federal governments, and all of the other handouts that we as a nation provide.
In just 16 short years when the last Boomer reaches full retirement age in 2031, the numbers are going to drop from 3.5 able bodies possibly funding entitlements (and everything else) to about 2.4 able bodies doing the heavy lifting of paying for everything.
We must also take into consideration that not everyone is actually working and paying taxes (gasp!), but it should be noted that the majority of retirees will be receiving what they believe they are entitled too.
But why Amnesty?
Simple answer: math!
When immigration is included, especially those from Latin American countries, our fertility rate actually increases, According to the Population Reference Bureau. Latinos, as of 2010, had the highest fertility rate of all ethnicities, coming in at 2.4%, while Blacks fell to 2.0%, Whites dropped to 1.8%, and Asians dipped further to 1.7%. Kardashians did their part with a staggering 46% birth rate, but this is hardly sustainable.
In a nutshell, “Latinas” produce the most people, and this is exactly what the United States needs right now. And if the US doesn’t act soon, this safety net may vanish altogether as well.
When the US was wrapping up its Baby Boom and heading to the aptly titled Demographic Winter, Mexico, for example, was still going strong. The fertility rate through the 1970’s was easily 3 times higher than ours, and it didn’t start to wane until the 1980’s.
But the landscape there has also changed, as Mexico’s fertility rate today now flirts just above the magic number of 2.1%, at 2.2%. This means that in just a decade, the amount of people that the US can count on for immigration from Mexico will completely dry up.
Have you ever asked what happened to all of those Polish, Irish, German, Italian, and Jewish immigrants? Well, those countries have also seen an extremely sharp decline of births over the years.
According to the CIA FactBook, Italy, Germany, Poland and even Japan all have fertility rates below 1.5%. France, thankfully, increased its own fertility rate which sat under 2.0% for years. This was partly accomplished by allowing the immigration of people from Africa, as countries there have fertility rates that are still in the double digits.
But who cares if the US has more people, right? Fewer people is a good thing, right?
Maybe yes (shorter lines at the DMV!), but most likely no. Why no? Well, who is going to supplement the lost tax revenue the Baby Boomers produced? Who is going to buy their homes when they want to downsize in retirement? Who is going to buy the products off the shelves to keep our economy going? More importantly, who is going to take care of them as they age?
The US is facing a shortage in the health care arena. According to the American Medical Association, there is expected to be a 125,000 shortfall of physicians by the year 2020, while nurses, due to a large number of them being Baby Boomers themselves, face a shortfall of over 800,000 in the next 10 years.
Couple this cheerful information with how we treat our elderly in the world of Long-Term Care, and retirement looks even scarier for those that refuse to plan for their health.
According to the Department of Health and Human Services, it is expected that 70% of Boomers will need some form of LTC in retirement, and our supply of LTC facilities is, well… sort of not good.
The Kaiser Family Foundation is reporting that in 2011 there were roughly 15,465 Nursing Care Facilities in the United States. These facilities had just over 1.6 million beds with an occupancy rate of just over 84%. For those doing math in their heads, these facilities had just over 1.34 million occupants meaning that there were only about 280,000 beds available.
Next question: how many Baby Boomers heading to retirement? 76 million people and again, there are only about 280,000 vacant beds available for Nursing Care.
Follow up question: even if we wanted to “build” more Nursing Facilities how would we staff them? We now know we have a tremendous shortage when it comes to physicians and nurses and even if we opened the enrollment today by the time the bulk of the students get through schooling it will be too late.
Right now, even if the fertility rate tripled, it still wouldn’t make a difference in how we will pay for the Boomers retiring, or even how we will take care of them. Somehow, the US needs more able-bodied taxpayers, and the time has to be now.
Amnesty may not be a great solution, as it flies in the face of the rules, laws and regulations already set forth, but until we can figure out another way to produce more 30 to 40 year olds who can help pay off the tax burden while also taking care of our elderly it may be the only choice.
To see how health costs may impact your retirement please see www.yourretirementcosts.org