GOLDEN VALLEY, Minn. - In the 20th century the planet's population doubled twice. It will not double even once in the current century. Moreover, the number of people over 65 is set to double within just 25 years. KARE 11 financial contributor Dan Ament, Financial Advisor with Morgan Stanley, joined KARE 11 Sunrise to discuss the economic impact these dramatic demography changes may hold, as reported by The Economist.
We are living longer – There are about 600 million people age 65 or older today. By 2035, an estimated 1.1 billion people (13% of the population) will be above the age of 65. In 2010, there were 26 adults age 65 or older for every 100 adults between the ages of 25-64. By 2035 it is projected rise by more than 70% to reach 44 for every 100.
20% of Americans over 65 working – This compares to just 13% in 2000. In Germany nearly 50% in their 60s are employed today, compared to just a quarter about a decade ago. At 83, Warren Buffett epitomizes this demographic trend: for highly skilled people to go on working well into what was once thought to be old age. Across the rich world, well-educated people increasingly work longer than the less-skilled. Some 65% of American men aged 62-74 with a professional degree are in the workforce, compared with 32% of men with only a high-school certificate. In the European Union the pattern is similar. The notion of a sharp division between the working young and the idle old misses a new trend, the growing gap between the skilled and the unskilled.
Widening wealth gap – The trend of staying in the workforce won't just benefit the aging workers but also, in some ways, society as a whole. Growth will slow less dramatically than expected; government budgets will be in better shape, as high earners pay taxes for longer. It's not all good news for the economy -- wealthy older people will accumulate more savings, which could weaken demand. Inequality may increase and a growing share of wealth will eventually be transferred to the next generation via inheritance, entrenching the division between winners and losers still further.
Economic Impact – The traditional wisdom holds as the population ages and transitions into retirement, slower economic growth may result as retirees draw down their wealth to live coupled with saving less. While that position seems logical there are some that cite the fact that many 65+ workers have no plans to retire soon, coupled with the opinion that these experienced workers are often more productive.
Pressure on policy makers – As this story unfolds, policy makers will face the conundrum of developing appropriate policy. Their goals: to not only support sustained economic growth with a changing complexion of our population, but also to foster the education and training to keep the American workforce educated and skilled for the future competitive global economic landscape.
Bottom line – You are not alone if you plan to work, whether by choice or necessity, later than you once planned. Continue to innovate yourself to keep your competitive edge in the workplace. Take the time NOW to assess your financial readiness for the future and implement a plan to prepare yourself for a comfortable and financially independent future!