Social Security's financing problems ... are very large and serious. People are living longer, the first baby-boomers are nearing retirement, and the birth rate is low. The result is that the worker-to-beneficiary ratio has fallen from 16.5-to-1 in 1950 to 3.3-to-1 today. Within 40 years it will be 2-to-1. At this ratio there will not be enough workers to pay scheduled benefits at current tax rates. As highlighted by the Social Security Administration (SSA), the aging of the (United States) population, hastened by the impending retirement of the huge baby-boom generation, has caused policy-makers to question whether the U.S. Social Security system can meet the demands for retirement benefits in the future. Because the current system largely pays benefits through taxes paid by current workers, the financial health of the system is sensitive to the ratio of dependents to workers—sometimes called the age dependency ratio or support ratio. Trends and projections of dependency ratios, including the relationship between both older (years 65 and older) and younger (under age 20) dependents to the working-age population in the United States are considered in the first section of this demographic report. Next, the United States is compared to nine other nations, including the seven other members of the G8. In the final section, policy implications of the changing dependent-to-worker ratios are considered in the context of pay-as-you-go (paygo) social security systems. This section summarizes information on trends and projections over time in the ratio of working-age persons to persons in the dependent ages in the United States for the period 1950-2080. The age-dependency ratio relates the number of persons in "dependent" ages (defined here as persons under the age of 20 and over age 64) to those in "economically productive" ages (20-64 years) in the population. It addresses the question of how many dependents are being supported per 100 persons of working age. The age-dependency ratio is divided into old-age dependency (the ratio of persons 65 years and older to those in the working ages 20-64) and child dependency (the ratio of people under age 20 to those ages 20-64). Based on data contained in the Annual Report (2006) of the Federal Old-Age and Survivors Insurance and Disability Insurance ("Social Security") Trust Funds, Figure 1 shows the estimated and projected trends in age-dependency ratios for the period 1950-2080 in the United States. Ratios for years 1950-2005 are historical estimates based on actual data ; years 2006-2080 are model-based projections that rely upon assumptions about future trends in mortality, fertility, and immigration. A detailed table with the underlying population data and age dependency ratios for years 1950-2080 is provided in Table A-1 . Data in this section and in Table A-1 reflect the Social Security actuaries' intermediate assumptions (i.e., their best guess) of future trends in the underlying assumptions. The impact of variability in the assumptions used for the projections is considered later in this report ( Figure 2 ). As seen in Figure 1 , there were 72.5 dependents per 100 persons of working age in 1950; of these, 58.7 dependents were children while 13.8 were older persons. The total dependency ratio reached its height in 1965, just after the last of the Baby Boom generation was born. In 1965, there were 94.7 (of which 76.5 were children and 18.2 were older persons) dependents per 100 persons of working age. There have been divergent trends for the child and old-age dependency ratios in recent decades with the child ratio generally falling and that of older persons increasing. Children continue to out-number older persons in their contribution to the total dependency ratio in 2006 by a sizable margin: there are 45.9 child and 20.3 older dependents per 100 persons of working age. The old-age dependency ratio has generally been increasing since 1950. The baby-boom generation (persons born between 1946 and 1964) will accelerate the rate at which the old-age dependency ratio changes. Baby boomers will begin to attain age 65 beginning in 2011 (for those born in 1946) and continuing through 2029 (for those born in 1964). As highlighted in Figure 1 , the older age dependency ratio will quickly increase as a result of the aging of the baby-boom generation, from about 21.2 to 34.3 older dependents per 100 persons of working age between 2011 and 2029. Population aging, however, will continue to be one of the most important defining demographic characteristics of the U.S. population, even after the youngest of the baby-boom generation passes away. The number of older dependents per 100 persons of working age will continue to increase, albeit at a slower pace than will be experienced during the years in which the baby boomers retire. Based on the SSA Trustees' current assumptions, there will, for instance, be 42.1 older dependents per 100 workers in 2080. These trends reflect forecasts of continuing improved survival at the older ages and continuing low fertility rates. Increasing rates of survival mean a greater number of older dependents (the numerator of the ratio), which in turn increases the old-age dependency ratio. Fewer (than current) births will mean fewer young dependents in the short-run, but will translate into fewer future workers in about two decades. At that time, the net effect will be that the old-age dependency ratio will be increasing (as the number of dependents will be increasing in the numerator) while the number of working age persons to support them will be falling (in the denominator). From the perspective of the Social Security program, the old-age dependency ratio is the most critical of the dependency measures as it relates the number of potential Social Security beneficiaries ($ outlays) to the number of projected payroll tax payers ($ income). Thus, the lower the old-age dependency ratio, the lower the dollars paid out versus received, and the better the finances of the Social Security program outlook. Referring again to Figure 1 and Table A-1 , the child dependency ratio increased from 58.7 to 76.5 child dependents per 100 working age adults between 1950 and 1965, largely reflecting the birth of the baby-boom generation. Since 1965, the child dependency ratio has experienced a mostly steady decline due to falling fertility rates in the United States. Nonetheless, in 2006, the number of child dependents is more than double the number of older dependents—45.9 and 20.3 per 100 working age adults, respectively. The SSA Trustees' current projections assume that child dependency ratios will slowly decline through year 2080 but that the rate of decline will be very slow. Child dependency ratios will stay in the narrow range of 43.9 to 45.9 child dependents per 100 working age adults throughout this 75-year time span. Note that, even with the pending retirement of the baby-boom generation, the number of child dependents has and will continue to be greater than the number of older dependents in each of the years of the time frame considered here. If the Social Security population estimates and projections for the 130-year period of 1950-2080 are correct, then the greatest demographic "burden"—when the number of dependents (children plus the elderly) relative to the working-age population—is already in the past, having reached its height in 1965 when there were 94.7 dependents per 100 persons of working age. The total number of dependents per 100 persons of working age has generally been decreasing since 1965 but is expected to reverse course beginning around year 2013. The change coincides with the retirement of some early cohorts of the baby-boom generation. The composition of the dependency ratio is changing. The number of children per worker has been falling since 1965; most of the anticipated increase in the dependency ratio in the coming decades reflects a growing proportion of older persons (ages 65 and older). These age-specific trends in the age dependency ratios are not, however, off-setting in terms of their federal budget implications. Programs carried out by the federal government focus much more heavily on assisting the elderly population. Based on estimates from the Congressional Budget Office (CBO), the federal government spent a little over one-third of its budget—about $615 billion—on transfer payments and services (with the Social Security and Medicare entitlement programs being the biggest expenditures) for people age 65 and older in FY2000. Federal spending on children was about $148 billion, or $175 billion if payments to the children's parents were included. State and local governments have historically provided substantial support for families with children through spending on elementary and secondary education and other programs. Nevertheless, because federal spending dwarfs state and local figures, total government spending for the average person 65 years or older is still much greater than for the average child. Age dependency ratios, while providing a glimpse at how the age structure of the population is changing, are nonetheless crude measures that do not take into consideration whether persons of working age are actually working and supporting the economy, nor whether dependents are truly economically dependent and receiving transfers from working-age persons. Furthermore, as noted by Friedland and Summer, "society's future is not determined solely by demographic changes. Focusing on the anticipated growth in population by age group is just too simplistic an approach. Rather, the future is shaped by the choices made—or not made—individually and collectively, bounded by the limits in resources and, in particular, knowledge. Knowledge is at the heart of gains in productivity, economic growth, and the advances in medical care, agriculture, communication, transportation, and the environment." The ratios reported here are CRS compilations based on estimates and projections from the SSA.