The retirement security of one of America’s largest populations could cause a ripple effect into the broader economy, according to a U.S. News article.
With the baby boom generation approaching old age in record numbers, the nation is facing a “looming catastrophe” unless people begin changing their ways—and changing them soon, says the article.
Nearly 4 in 10 retiree households do not have sufficient income to cover monthly expenses, according to research from Fidelity Investments.
Additionally, over half of Americans have saved less that $25,000 in total savings, not counting the value of their primary homes or pension plans, Ronald O’Hanley, Fidelity’s president of asset management and corporate services, told U.S. News.
What’s more, O’Hanley says, is that about 28% have set aside less than $1,000.
Boomers will have to consider their financial preparedness as factors such as longevity and healthcare are expected to consume much of what this group has saved for retirement.
Studies have shown that 70% of Americans will require long-term care services, writes U.S. News, and as most long-term care is paid for by Medicaid, a swelling boomer population could end up swamping the program in the years to come.
As individuals usually have to spend-down their savings to be eligible for Medicaid, they are not likely to afford private insurance that would cover the costs of long-term care.
Funding Medicaid expansion by higher payroll taxes, suggests the article, would increase financial support to this aging population without adding to deficits.
Since health care is one of the biggest expenses for retirees, forcing people to save more money for health care would help to reduce retirement expenses, and would in turn result in a strengthening of the nation’s retirement system, according to U.S. News.
Written by Jason Oliva