Individual economic security is a cornerstone of our nation’s long-term prosperity, and financial well-being in retirement is a key component of this goal. However, rising life expectancy, combined with the risk of health shocks that will require spending huge sums of money on long-term services and supports, makes retirement planning a daunting challenge. Many Americans rightly worry that they will not have enough money to live comfortably in retirement. Furthermore, our nation’s population is getting older: the share of the U.S. population over the age of 65 was 8.1 percent in 1950 and is projected to more than double,reaching 20.9 percent by 2050. Combined with rising health-care costs for seniors, these trends put increasing pressure on Social Security, Medicare, and Medicaid. To call attention to this particular set of economic challenges, The Hamilton Project will release a new set of economic facts on this topic and will host a public forum featuring two new proposals to improve financial well-being for retiring Americans.
Rising life expectancy and growing costs for long-term services and supports (LTSS), such as home health care and nursing home care, have increased the importance of saving for retirement. Over the last 50 years, the likelihood of a 65-year-old man reaching age 80 has increased by 50 percent and the likelihood that he reaches 90 has more than doubled. Living longer often means eventually relying on LTSS, but Medicaid and Medicare do not provide complete coverage for these services, and the private insurance market for LTSS is small, leaving consumers with more than $50 billion in out-of-pocket expenditures in 2013. Approximately one in five Americans reaching retirement age will face more than $40,000 in out-of-pocket costs for LTSS.
Against this backdrop of dramatic increases in life expectancy and potentially exorbitant outlays on long-term services and supports, the net worth of the typical household nearing retirement age fell to about $166,000 in 2013, slightly below the inflation-adjusted $177,000 median in 1989. Furthermore, Americans’ assets have been shifting toward defined-contribution plans that require greater individual responsibility in making financial decisions and accumulating savings.
On June 23, The Hamilton Project will host a forum to discuss these trends in Americans’ financial security and preparedness for retirement and two new discussion papers aimed at addressing these challenges. Economist Wesley Yin of UCLA will present a proposal to expand long-term care insurance coverage through the private insurance market with a voluntary subsidy and shared-risk program. Economist John Friedman of Brown University will discuss a proposal to improve policy for retirement savings accounts by creating a single Universal Retirement Saving Account and shifting the tax subsidy for retirement savings from individuals to employers who help workers save.
Former U.S. Treasury Secretary Robert E. Rubin will introduce the topic, followed by a keynote address by U.S. Secretary of Labor Thomas E. Perez. A roundtable discussion of each proposal will follow. Yin will be joined by Howard Gleckman, Resident Fellow of the Urban Institute; Alice Rivlin, Director of the Center for Health Policy; and Thomas McInerney, President and Chief Executive Officer of Genworth Financial, Inc. Friedman will discuss his proposals with James Poterba, President of NBER and Debra Whitman, Chief Public Policy Officer of AARP.
For the full agenda and to register for the forum, please click here.
For updates on the event, follow @hamiltonproj and join the conversation using #RetirementSecurity.