Here’s what lower U.S. birth rates could mean for Social Security

Women gave birth to fewer children during the Covid-19 pandemic.

If these low U.S. birth rates continue, it could have a lasting economic impact, including retirement and Social Security benefits.

The total fertility rate has been declining for years. In 1964, women of childbearing age had an average of 3.2 children. By 1974, that number fell to 1.8, according to the Center for Retirement Research at Boston College.

Flash forward to 2019 and the provisional total fertility rate was just 1.7, according to a March 2020 report from the Centers for Disease Control and Prevention. Then, Covid-19 led to even fewer births than expected in 2020. Recent research from Cornell University found that the U.S. birth rate declined by 7.1% during the pandemic.

Pregnancies that were delayed from 2020 to 2022 may be deferred to 2024 to 2026, according to the Center for Retirement Research.

Yet there are reasons to believe that the birth rate could stay low.

The age of motherhood has been increasing in both the U.S. and other developed countries for the past couple of decades, according to Anqi Chen, assistant director of savings research at the Center for Retirement Research.

Today, for women in the U.S., that age is around 30 years old. At the same time, that total fertility rate of 1.7 children per woman as of 2019 was well below the replacement rate of 2.1 children.

Factors affecting birth rates

How fewer births affect retirement

For women who have fewer children, there could be a potential upside in retirement.

Many women face a so-called “motherhood penalty” due to the fact that their earnings are reduced with each child they have, which permanently reduces their lifetime incomes.

This can carry over into retirement, particularly due to lower income through Social Security benefits.

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Women having fewer children could minimize the effects of the motherhood penalty, given that their earnings would not suffer as much.

However, because Social Security is a pay-as-you-go system, fewer births would also mean fewer future workers available to contribute to the system. Consequently, that could result in an “everyone penalty,” with lower benefits for everyone, Chen said.

“If there are fewer workers in the future, then that definitely could impact the amount of money going into the Social Security system, which would affect benefits too,” Chen said.

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