Why Declining Birth Rates are Horrendous for Your Retirement


“U.S. Birth and Fertility Rates Hit a Record Low in 2018”

“Birth Rate in U.S. Falls to Lowest Level in 32 Years, CDC Says”

Earlier this week, I saw headlines like these flash up on my phone.

On the surface, it seems obvious. More people are choosing to delay having kids and often that results in fewer children. More people are deciding to not have any kids at all. Anecdotally, you may know people (or be a person) who struggled to conceive.

What’s not so obvious, however, is that declining birthrates are absolutely catastrophic to things as varied as pensions, real estate prices, Social Security, other social programs, and the fiscal health of governments.


My mind is keyed into headlines like the ones above for a few reasons. Much of my work has involved statistical analysis, so population dynamics naturally catch my eye. Moreover, an old article of mine goes into depth on the issue of the coming insolvency of the Social Security funds.

Related: Social Insecurity

I won’t repeat the details of that lengthy post here, but you can check it out by clicking the link above.

The basic gist of the post is that we need X number of people working and paying taxes to support Y number of Social Security recipients.

We’re not approaching, but are actively in, a situation where the math no longer works. 

The Signs

The Social Security Administration openly admits that soon, it will no longer be able to meet its commitments.

Across the country, pensions remain severely underfunded since the 2008 financial crisis. Even with recent stock market outperformance, these pensions are not able to meet their projected cash disbursement needs.


How It All Ties Together

The common problem between these disparate issues is the fact that we had a baby boom (a sudden increase in the number of births) and now we are in a baby glut. With advances in medicine, people are living longer lives and the ratio of their non-working life to working-life continues to increase.

With fewer taxpayers supporting a larger base that no longer works and pays taxes, finances quickly become strained. Not as many people are paying into pensions, Social Security, and other programs. The number of people paying in, in most cases, is well below the minimum required to maintain the programs.

How’s This Relate to Me and My Retirement?

Don’t rely on Social Security for your retirement. When you look at your income sources, put a big old “0” next to that line item. You’re wise to do the same in almost any country, unless you’re in Africa, the Middle East, India, or any other country with a lot of young people.

Pensions are also problematic. Try to diversify away from relying on a pension by building other income streams through investing. 

I mentioned real estate earlier and I’m not going to leave you hanging. The population dynamics prevalent in Western nations are highly deflationary. If demand for real estate goes down, prices should go down as well. If prices go down, rents are likely to also go down as more people buy housing and fewer renters exist. If a large portion of your retirement will be supported by rental income, keep this in mind. As the “system” seeks to balance, expect prices to fluctuate. 

We haven’t seen real estate prices decline significantly and long-term yet. This is largely the influence of various government policies and the fact that the Federal Reserve WANTS inflation.

With moderate inflation, the existing U.S. debts get easier to pay off with every passing year. However, the reality on the ground is that we have a deflationary dynamic. There is a constant and delicate balance between inflation and deflation.

Related: Inflation, the Destroyer of FIRE


I don’t know what the future holds. I look at the worst-case possibilities and plan accordingly. What I do know is that it’s a mistake to use Social Security or a mediocre pension as a crutch and expect it to support you in old age. They’re a nice plus if you get them, but don’t rely on other people for your future.

One other potential option you should look into is geoarbitrage. It might make more sense to move to another country where your income will go much further. Start thinking of potential backup plans now before others do and you’re more likely to do well. Following the crowd only leads to higher prices and less of an opportunity. 

Related: Geoarbitrage: Turbocharge Your Early Retirement




  1. Dr. McFrugal May 20, 2019
    • Moose May 20, 2019