The Demographic Time-Bomb Threatening Your Retirement

Authored by Peter Reagan,

America’s aging population, combined with shrinking birthrates and falling immigration, mean fewer workers fund Social Security. Here’s how this demographic reversal could trigger a retirement meltdown…

Retirement: That dream of living comfortably, traveling where you want, spending time with who you want when you want, enjoying good health, and getting to play like teenagers again during your golden years.

For many people, especially as they’re (we’re?) getting older, a comfortable retirement has become more of the American dream than the traditional American dream of owning your own home in a nice neighborhood with your late model car in the driveway.

Like most things in life that are worth having, though, a comfortable retirement requires forethought and planning, and the start of that planning is to notice…

What is going on with Social Security right now?

For most Americans, any hope of a retirement is completely dependent on Social Security. And, as you probably know, Social Security, as a program, has been struggling for a while now. Investopedia tells us the latest: Full benefits currently projected to end in 2034.

Now, you might be thinking, “Hey, I’m frugal. I can comfortably live with a 19% decrease in what I receive in retirement,” but don’t get too excited, yet.

This estimate from the Social Security Administration (SSA) is, in some ways, a best case scenario.

Why do I say that?

It’s simple, really. To explain that, it’s important to first understand how Social Security works.

Social Security is not “your money”

Many people have the misconception that Social Security is kind of like a giant savings account that we’re all forced to pay into – but that we’ll receive back when we eventually retire.

Except that Social Security has never worked like that.

To make a long story short, via Dave Ramsey:

• “Your” contributions go into the same pot as “my” contributions

• The SSA uses that fund to pay benefits today

• …and, if there’s any left, it goes into the Social Security Trust Fund

There’s no account in anyone’s name. Like a business, the SSA uses its revenue (from our taxes) to pay its obligations to beneficiaries. (That’s the way that it’s worked from the beginning.)

So long as revenues exceed obligations, no worries. But when they don’t? This isn’t speculation, by the way – since 2021, the SSA has been running in the red every year. Paying out more than it collects.

That’s a cause for alarm.

The closer we look, the scarier it gets

So, with current Social Security costs being paid by current worker contributions, the easy fix for the revenue shortfall? More workers. Nobody wants to raise taxes – we just need more people gainfully employed to contribute to the system.

Right?

Sure, that could work, but where are they going to come from?

According to the Census Bureau, the share of childless women is rising dramatically – especially among women aged 20-35.

Now, of course, that, in and of itself, doesn’t cause an immediate problem. Starting a family is a personal decision and responsible people have to do a lot of planning before making this choice.

But fewer children means fewer grow up to be productive citizens – fewer workers paying their contributions to keep the SSA afloat. This is part of a larger demographic challenge, as Forbes recently reported:

Economists have warned that a declining birth rate, and aging population, could spell disaster for the nation’s Social Security program – without enough young, working people to counterbalance the number of Social Security dependents, the existing system isn’t sustainable. 

Population growth doesn’t only come from newborns, though. Historically, immigration has been a major source of new workers. Today?

Billal Rahman and Dan Gooding with Newsweek tell us that’s no longer the case:

After more than half a century of steady growth, the United States is experiencing its first decline in immigrant population since the 1960s… 

In January 2025, a record 53.3 million immigrants lived in the country, accounting for 15.8 percent of the population. But by June, departures and deportations outpaced new arrivals, reducing the immigrant population to 51.9 million, or 15.4 percent of all U.S. residents.

Errors in the data? Sorry, Rahman and Gooding address that, too. Regardless of how we look at it, our population is declining.

And the dwindling number of workers, compared to how many people are receiving Social Security benefits, is a real issue.

Worse, these trends are unlikely to change direction.

So, what is the solution?

Realistically, there are three solutions.

The first solution is to increase the number of workers paying into the system. With declining birthrates, the only way that can happen is for older Americans to delay retirement even further and/or for more immigrants to come into the country to work to pay into the system.

Neither of those ways to prop up the number of workers seems likely to happen anytime soon.

Which leads us to the second “solution,” which isn’t really a solution: increased government borrowing to pay Social Security benefits.

Of course, as we saw during the pandemic panic, massive government borrowing to pay benefits (and make no mistake, this would be massive borrowing, possibly on a scale that we’ve never seen before) causes ugly inflation.

So, in this scenario, the federal government could pay out the Social Security checks at the “full” amount, but the dollar would be devalued through inflation which would have the effect of that “full” payout amount to each Social Security recipient not going nearly as far at the grocery store.

I think that we can agree that would be a disaster.

The third solution? Take your retirement into your own hands and build a hedge both against declining Social Security payouts and against inflation by diversifying into inflation-resistant stores of wealth that hold their value regardless of what is going on in politics or the economy.