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Future of Retirement? Looks Like Work

As anyone who's been watching the presidential debate series knows, Social Security, Medicare and Medicaid comprise some of today's pivotal political talking points, even if it's not always clear what a given candidate plans to do about them. The use of entitlement programs as a political lever is hardly news, but this past month, the stakes went up. The National Research Council's Committee on the Long-Run Macroeconomic Effects of the Aging U.S. Population released a report revealing that a large proportion of current and future retirees are counting on these entitlement services to get them through retirement. It also proposes some solutions, although not everyone will like them.

The NRC predicts that disruptive demographic changes will continue to transform the retirement landscape. US life expectancy will hit 84.5 by 2050 (note that averages understate the vast numbers of people already living past 85 years old), an overwhelmingly positive trend, except for the fact that only one-fifth to two-thirds of older adults have saved for retirement. Worse, those who have saved have been hit hard by the housing crisis and recession. In short the gift of longevity has all of us concerned with a new problem, will our lifespan outpace our wealthspan?

One way to make sure older adults in the future have money socked away is to convince them to start saving now, while they're young. (This is easier demanded than accomplished without raising wages or somehow making the instant reward of purchasing a wide screen TV today less rewarding than watching hi-def in 3D.) But even baby boomers and even the first wave of Gen X who will be retiring sooner than later could benefit from financial literacy in order to best leverage their assets, the study suggests.

The biggest, and possibly most controversial, step the NRC recommends is to raise the age of retirement. "Age 65 is an increasingly obsolete threshold for defining old age and for conditioning benefits for the elderly," the report states. Despite the obvious drawbacks of this approach, as a solution, it's a twofer. Not only do adults who work longer draw less money from savings and entitlement coffers, but they continue to contribute to them for longer as well. Moreover, if delaying retirement sounds like a prison sentence, the good news is we're capable of doing the time. Disability rates are down and trending lower, and many of the years that have been added to the average lifetime are healthy ones. The report also contends that the current low expectation for retirement age is something of a late 20th-century artifact. In the past, older adults used to expect to work for longer.

Importantly, the report suggests that an increase in older workers shouldn't rob the young of jobs. "In normal times, outside of deep business cycle recessions, the overall number of jobs is determined primarily by the size of the labor force. If anything, an increase in older workers is predicted to slightly increase the wage rates of young workers," the NRC says.

What's the upshot? The future is far from pure doom, although we may have to work longer than in the past few decades. And older adults will continue to lean heavily on Social Security, Medicare, and Medicaid, the latter two of which will be affected by the rising price of healthcare. 

Put another way, in life, you're guaranteed death and taxes. Pushing back on the former necessarily doesn't guarantee an increase in the latter, but something's got to give. According to the NRC, that something is our current retirement age of 65.

 

MIT AgeLab's Lucas Yoquinto contributed to this article.

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