300 million - and older and older
As the population ages, expect to be working longer, paying more for health care and facing tax increases.
By Christian Zappone, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Since the U.S. population crossed the 200 million mark in 1967, America has grown into a more sprawling, more southern and western, suburban nation with more crowded highways.

Next Tuesday the population is set to cross the 300 million mark, and when the country passes 400 million sometime in the 2040s, one of the key demographic shifts looking back will be the aging of the population.

People aged 65 and older made up 12.4 percent of the population in 2000. They will make up 16.3 percent of the population by 2020. In 2030 nearly 1 and 5 Americans will be 65 and older.

The demographic bulge of aging Baby Boomers will affect and influence the nation in the areas of retirement, healthcare, and taxes. Where we live - that will get tougher too.

Retirement

From 1980 to 2000, the economy enjoyed a 44 percent increase in native-born workers aged 25 to 54. The growth rate in that group has since fallen to zero, according to Professor of Political Economy Dean David Ellwood of the Kennedy School of Government.

The dip in available workers is happening while companies are increasingly phasing out defined benefit plans, like pensions, in favor of defined contribution plans, like 401(k)s.

Those two forces means people will work longer. Today, 62 is the normal age of retirement and it's already increasing. Michael Hurd, Director of the RAND Center for the Study of Aging adds that women who traditionally spent less time in the workforce "are working into their 50s and 60s."

"Historically, the enhancement of the Social Security system started a long decline in the working age from the 1950s to 1970s," according to Hurd, and the trend has reversed and will continue to do so.

Greater health and longevity in the aging population, Hurd says, will only reinforce the effect.

Healthcare

The large number of Baby Boomers effectively supersizes their healthcare liabilities, bringing significant implications for the economy and for consumers.

Alzheimer's, for example, is the third most expensive disease to treat after heart disease and cancer, according to the Center for Aging Society at Georgetown University.

And the incidence of Alzheimer's doubles every 5 years for people into their 90s, Hurd says, meaning more cases of the disease are expected.

The Center for Aging Society projects that about 14 million Americans will suffer from the disease by 2050. When you consider the Center for Aging estimates that the disease currently costs $100 billion a year to treat and it only affects 4 million people, the scope of the financial liability to federal and state governments as well as private insurers becomes huge.

The heart of the issue for geriatric illness is whether people "remain healthy until a few years before they die" according to Hurd. Or will they be sick for longer before the end?

Hurd says researchers don't know if the Baby Boomer's increased longevity will translate into increased healthy years or increased unhealthy, costlier ones. The good news "so far, we see a declining incidence of unhealthy conditions" Hurd says.

Income Taxes

With 20 percent of the population over 65 by 2030, according to the Census Bureau, more people will be collecting Social Security, with fewer working age people to contribute to the fund through taxes on their payrolls.

The future "could be bleak" says Scott Hodge, president of the Tax Foundation, "if Washington fails to cover the costs of Social Security and healthcare."

Hodge expects either a raise in income or payroll taxes or the introduction of a European-style VAT tax. A value added tax which is similar to a sales tax but is built into each stage of the good's production.

However the United States approaches the problem, "the solutions become more painful the longer we wait," Hodge says.

Moreover, the political viability of income tax increases changes. As Baby Boomers' move into retirement, their political clout could easily grow because older people are often the most dependable voters.

Cities and transportation

"Over 75% of all older people live in suburban or rural areas," explains Sandi Rosenbloom a professor of planning and gerontology at the University of Arizona. "That will only intensify because of where Baby Boomers live."

And it will bring a lot of problems, she says.

"The only way to get around is to drive a car or be a passenger," Rosenbloom says. "There won't be many destinations [at a walkable distance] or public transportation."

"Even if older people had public transportation many couldn't use it," Rosenbloom says. "By the time you give up driving a car, you can't walk or use public transportation."

Retirement communities tend to be located at the edges of town metropolitan areas, Rosenbloom says. The time it takes a family member to visit or pick up an older person living there impacts the quality of life for the family member, too.

Finally, Rosenbloom notes the majority of older people don't move but retire where they live. Suburban sprawl, which adds to travel time through traffic and distance, exacerbates the isolation many older people already feel.

"The problems associated with unplanned development will only get worse," predicts Eric Antebi of the Sierra Club.

"At the same time, the solutions and benefits of good planning and sound land use will only become more apparent and readily available to communities that want to use them," he says, citing adoption of public transportation systems in such western suburban cities as Salt Lake City, Denver and Phoenix.

Rosenbloom is less optimistic but she said some Baby Boomers, who have been dealing with the problems of aging parents are seeing how the choices made about retirement have a profound effect for the future.

"I think Baby Boomers are having their consciousness raised," Rosenbloom said.

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.