Study: Public Unsure About Ability to Afford Costs of Aging Population

harrislogo.jpgA new Harris Poll shows that most people are not confident that we as a country are prepared to handle the costs generated by an aging population as Baby Boomers grow older.

Economists continue to warn us that the aging populating will create enormous financial problems. In fact, the Social Security system took in less than it will pay out this year said the Obama Administration.

Surveying 2,576 adults online, Harris Interactive found the public is split on whether we will be able to afford the cost of many more old people (33%). According to Harris, 38% said will not be able to do so or 29% are not sure. More younger people (47% of Echo Boomers) and 51% of Gen Xers (aged 34-45) than older people think we will not be able to afford it.

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Other results from the survey found:

  • A 47% plurality of adults – but less than a majority – thinks that it is a good thing that life expectancy is increasing and that there are likely to be many more old people. Older people are much more likely than younger people to believe this; 58% of people over 65 think this but only 35% of “Echo Boomers” aged 18-33. While only 20% of adults think this is a bad thing, fully 34% are not sure.
  • When confronted with a list of five possible ways of addressing the future cost of Social Security and Medicare, a third (35%) of adults say they don’t favor any of them. Possibly they do not believe the underlying premise that there is a problem.
By far the most people (47%) believe we should “encourage people over 65 to work.” The next most acceptable option would be to increase the age of eligibility for Social Security and Medicare (30%). Only 21% think we should raise taxes while very few people (9%) think we should reduce Medicare or Social Security benefits.
  • When told that “most economists think it is inevitable that we will have to do one or more of these things, whether we like it or not” and asked to pick two, the same pattern emerges. Fully 61% favor encouraging more older people to work, and 46% favor increase the age of eligibility. Almost a third (31%) choose increased taxes while very few favor cutting benefits for Social Security (10%) or Medicare (12%).
  • A large 68% to 16% majority (with 15% unsure) believes “we as a society are not adequately prepared to spend more years caring for our aging parents than for our children.”
  • A 50% to 26% plurality of those aged 18-64 believe that “our health care system, as it is now,” will not be able to handle the large number of older people who are likely to have chronic medical conditions such as heart disease, diabetes and arthritis.
  • When told that “many economists think that, to pay for Social Security and Medicare . . . many more people should retire later and continue working after 65,” a large 64% to 25% majority of those under 65 agrees with this.

The large numbers of “don’t know” in reply to some key questions suggests that many people have not given much thought to these issues. But the findings also suggest that many people are at least somewhat aware of the problems, and – if they are clearly explained and understood – are willing to consider some of the possible solutions, unpopular though they may be. For example, many people would be willing to consider policies that would encourage people over 65 to continue working, and to increase the age of eligibility for Social Security and Medicare.

Unsurprisingly, raising taxes or cutting benefits are much less acceptable. However, raising taxes is less unpopular than cutting benefits.

“These findings are interesting and important,” said Dr. Robert Butler, the president of the International Longevity Institute. “It is good to see public support for people working later in their lives. This would not only reduce the economic problems addressed in the survey; research shows that people with purpose and who have something to get up for in the morning live longer and better lives. There is also evidence that increased longevity creates new wealth.”

Most People Believe that We Are Not Prepared for Increase in Longevity and Number of Old People

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  • Raising the age threshold for Social Security benefit payments will NOT take care of the current onslaught of increased need for funding; it will only delay the need, i.e., assuming the increased threshold can take effect immediately. The reason is that average contributions for older workers exceed those of new workers and the number of new retirees each year exceeds the number of new younger workers being added to replace them. Until recently, increased unemployment has simply been exacerbating the problem. The lower funding is currently far outstripping and will continue to outstrip lower benefits due to the high level of unemployment we are and will be experiencing for years to come. No doubt the situation is worse than projected just months ago.

    If the program had been properly funded from inception, this trend would not be going on. If it were a multiemployer defined benefit plan, the plan actuaries would have been restrained from providing actuarial services to such plans by injunction initiated by both the IRS and DOL years ago.

    Since our President has not unveiled his tax legislation, some have speculated that much of the Social Security, Medicare, and Health Care deficit could be picked up in one of the most regressive forms of taxation of all, the Value Added Tax or VAT. This tax would increase the cost of all taxable goods and services. The rate could be raised with little noticeable impact but at a terrible overall cost to the less financially advantaged.

    Although there could be a system for refunding VAT to the financially disadvantaged, the potential for fraud would be horrific. The IRS statistics on fraud related to refund claims for the Earned Income Tax Credit (“EITC”) are alarming. The number eligible for VAT refunds could easily outstrip those eligible for EITC refunds with many of the same characteristics and factors susceptible to fraud but with fewer safeguards.

    While detestable to most seniors, it may be necessary to subject all Social Security benefits to income taxation. It also may be necessary to increase the income tax rates but cap the rate for certain types of income in much the same way that it was before the Reagan Administration.

    To fund the programs of this President, it will be necessary to find old, new, and regressive ways of supporting them.

  • Why isn't the funding of Social Security more of an issue than healthcare reform? We've been dealing with this issue for over 30 years only to continue to kick the can down the road, delaying a solution. Here's an easy solve: raise the income cap on the social security tax from $102K, to $150K or $200K. Or, increase the income cap to a larger income bracket ($300K, 400K, etc.), but reduce percentage of tax.

  • I am 65 and retired in January. The problem is not whether an older person in the workforce is willing to work; it is whether they will be ALLOWED to work. I was a career consultant for 9 years. In that period of time employers decided that 50 was “old.” Now that has slid to age 40. Though a person in their 60's is generally healthier today than in years past companies would rather put them out to pasture than pay for their level of experience and the fact that they can work more efficiently that the younger worker with very little real experience.

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