Millennials' Biggest Enemy: The AARP

Millennials' Biggest Enemy: The AARP

The goal of AARP, the lobbying group for retired Americans, is to take advantage of young people, particularly millennials.

Certainly, they don't admit that explicitly, but their efforts to prop up and expand Social Security and Medicare -- two government programs paid for out of the pockets of young, working Americans -- has had that effect.

Although working millennials are forced to pay for these programs, the benefits they receive are likely to be far less than what they paid in (assuming they receive any benefits at all). Moreover, older Americans receiving these benefits are wealthier than their younger counterparts, and are getting much more than they "paid for."

AARP: The anti-millennial lobbying group
With annual revenues over $1.2 billion, the AARP is one of the most powerful lobbying groups in the US. For the most part, it uses this power to protect and expand the programs that transfer wealth from the young to the old.

Back in January, millions of young workers saw their paychecks shrink -- if you're one of these workers, you can thank the AARP. The group urged lawmakers in Washington not to extend the Social Security payroll tax holiday, and, as has happened consistently in recent years, the AARP got its way.

For current workers, 6.2% of every dollar made goes toward Social Security (in addition to the other 6.2% your employer pays on your behalf). In effect, the check your grandmother gets every month comes directly out of your salary.

They didn't pay for it and they don't need it
And it's likely that you need that money far more than your grandmother. In the US, the older you are, the less likely you are to live in poverty. As an age bracket, just 12% of seniors live in poverty; among children under the age of 18, the rate is more than double -- a full 27%.

Wealth, too, is heavily concentrated in the hands of the old. According to Pew Research, households headed by a senior were 47 times more wealthy than those headed by someone under the age of 35. To some extent, this seems intuitive: as you age, you accumulate assets and wealth. However, transfer programs have, over time, exaggerated this difference -- back in 1980, the wealth disparity was only 10-to-1.

Older Americans may inclined to fire back, alleging that they "paid for it" -- except, no, they didn't. The Urban Institute estimates that an elderly couple that turned 65 in 2010 paid about $122,000 worth of Medicare taxes throughout their life, but that same couple is on pace to receive $387,000 in benefits.

Meanwhile, those benefits have been increasing: A decade ago, the AARP pushed for Medicare Part D, a government program to subsidize medication for seniors -- yet another wealth transfer from young to old.

As that wealth has shifted, so has spending power. Today, the typical 90-year old spends 135% what the average 40-year old earns, and twice what the average 30-year old spends. Much of that can be attributed to the government: For every dollar the government spends on children, it spends $6 on the elderly.

Millennials will be left holding the bag
Sure, you may say, but in time, won't millennials get to take advantages of these programs? Perhaps, but if current projections prove true, it's very unlikely.

By 2050, the cost of providing Social Security and Medicare to Baby Boomers is expected to eat up 20% of the US' annual GDP. As former hedge fund manager Stanley Druckenmiller notes, tax rates historically top out at that level -- meaning that in 27 years, every dollar collected in taxes will go toward paying for these programs.

Plans have been offered up for reform, to alter benefit payouts so that current workers will be able to get their fair share. Yet, any attempts at reform have been resisted bitterly by the AARP -- the group simply won't stand for it.

But demographics are not on their side. Eventually, these programs will have to be reformed, and when they are, it's likely that millennials -- young workers currently paying for them -- will be left holding the bag.

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