America is growing older and more populous. What does that mean for you?
By Elaine Schiff

Three hundred million Americans and counting. “So, what?” we hear you say. So, plenty. The U.S. is the world's third-most-populous nation - behind China and India - and fast becoming one of the world's oldest. Today about one in eight Americans is 65 or older. By 2030 roughly one in five will be considered a senior, roughly 75 million people.

This emerging demographic tsunami offers a few upsides:
Longer life spans. It's the biggest single reason there will be so many older Americans in the years to come. Average life expectancy in the U.S. today is approximately 77 years. By 2050 that number will rise to about 85 - an increase of slightly more than 10%.

Every politician knows that seniors are the most reliable voters. That's why they call Social Security the third rail of American politics. Today Americans 65 and up represent 12.4% of the population, but about 22% of all voters. In 2030, seniors will comprise about 20% of the U.S. population and a powerful 35% of the electorate.

The senior vote will matter more than ever. More living options. Old-age homes will become a relic as developers and service providers create an even wider array of living arrangements for retirees, from immaculately maintained gated communities to assisted living facilities to communal housing to full-time retirement communities on luxury cruise ships.

The downsides:
Social Security crisis. According to its trustees, Social Security will face possible bankruptcy by 2041. The fund will have run dry, if current trends prevail. The reason? Because of a burgeoning population of seniors, there will be many millions more Americans collecting Social Security with fewer working-age people available to fund the sprawling program. At that point, the choices will be somewhat dire:

• Enact a massive payroll tax hike on workers and businesses to fund the deficit;
• Radically cut benefits;
• Raise the retirement age and press the elderly back into the workforce.

The likeliest scenario, say many experts, is a combination of all three of the above. So, if you're thinking of retiring at 65, you might have to think again.

Medicare crisis. Believe it or not, the Medicare fund is being depleted faster than the Social Security fund. If reforms aren't enacted soon, the program's trustees project insolvency by the year 2020. And just like Social Security, the solutions are the same: Hike taxes, slash benefi ts, raise the retirement age.

Alzheimer's crisis. Approximately 4 million Americans suffer from Alzheimer's, which is the third-most-expensive disease to treat after cancer and heart disease. It already costs the U.S. $100 billion a year. According to the Center for Aging Society, longer life spans mean that by 2050 some 14 million Americans will be Alzheimer's victims- more than the population of Illinois. Alzheimer's would then be an epidemic.

Money crunch. If you live longer, you'd better have a plan for getting a lot more mileage out of your nest egg. That million bucks you've got socked away somewhere will have to support you for the next 20 or 30 years - or more. According to current trends, you could end up being retired for as many years as you spent working. Consider this: There's a 50% chance that a 65-year-old man will live to age 85, and a 25% chance he'll make it to 91. For 65-year-olds a decade or two from now, the chances of living into one's 90s will be even greater. In the meantime, prices will continue to rise during your retirement years. Between today's long life spans and tomorrow's inflation, you'll have to be very disciplined to keep your savings from disappearing while you're still alive.

The solution:
Keep your assets invested in a combination of conservative stocks and bonds. Then start your retirement by withdrawing no more than 4% to 5% of your savings annually, ratcheting up that amount each year by the inflation rate. This, say many fi nancial planners, is the most reliable way to maintain your cash flow over many decades without entirely depleting your life's savings.