What a Growing Dependency Ratio Means For Your Retirement

The dependency ratio is a calculation devised to measure the relationship in a particular economy of the non-productive, dependent individuals to the productive, working ones. For purposes of the ratio, which is a demographic as well as an economic tool, dependents are defined as between zero and 14 years of age and those who are 65 and older. Productive workers are between 15 and 64 years old. The formula is:

Although constrained by the limitations of considering those in the low age range of workers as productive when most, in fact, are not and in deeming all those 65 and older as not working, when many are, the dependency ratio helps measure the pressure an economy faces in supporting its non-working population. The higher the DR, the more the economy is burdened by its non-working members.

U.S. trends

With the baby boomer segment of the population aging, it may seem intuitive to think the DR has been on a dramatic upward spiral in recent years. However, although the population aged 65+ has been increasing, that has been counterbalanced to some degree by a decreasing birth-rate, thus lowering the previous years’ numbers of those aged 0-14.


While the DR may not change dramatically, the actual economic impact is likely to be greater. The working population will be supporting more seniors and fewer children, but seniors, by far, utilize more social services than kids. Social Security, Medicare and Medicaid costs are likely to rise.

Your retirement

Social Security is one component of retirement planning, but your age may very well determine what you can expect to receive. From Social Security Administration statistics:

  • In 1940, the life expectancy of a 65-year-old was almost 14 years; today it is just over 20 years.
  • By 2035, the number of Americans 65 and older will increase from approximately 56 million today to over 78 million.
  •  There are currently 2.8 workers for each Social Security beneficiary. By 2035, there will be 2.3 covered workers for each beneficiary.

The extent to which Social Security will be there for your retirement is beyond your control. What is within your control, however, is to proactively establish a retirement plan whereby you can live a long, hopefully healthy, life beyond your working years. Spinnaker Investment Group can help you realize your goals and dreams. Contact us today.


The information contained herein is based on internal research derived from various sources and does not purport to be statements of all material facts relating to the securities mentioned. The information contained herein, while not guaranteed as to the accuracy or completeness, has been obtained from sources we believe to be reliable. Opinions expressed herein are subject to change without notice.

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