The New World of Retirement Income Security in America

We have entered a new world of retirement income security in America, with older individuals more exposed to market risk and more vulnerable to financial insecurity than prior generations. This reflects an evolution that has altered the historical vision of a financially-secure retirement supported by Social Security, a defined-benefit pension plan, and individual savings. Today, two of these three retirement income sources — pensions and savings — are absent or of modest importance for many older Americans. Retirement income security now often requires earnings from continued work later in life, which exacerbates the economic vulnerability of certain segments of the population, including persons with disabilities, the oldest-old, single women, and individuals with intermittent work histories. Because of the unprecedented aging of our society, further changes to the retirement income landscape are inevitable, but policymakers do have options to help protect the financial stability of older Americans. We can begin by promoting savings at all (especially younger) ages and by removing barriers that discourage work later in life. For individuals already on the cusp of retirement, more needs to be done to educate the public about the value of delaying the receipt of Social Security benefits. Inaction now could mean a return to the days when old age and poverty were closely linked. The negative repercussions of this outcome would extend well beyond traditional economic measures, as physical and mental health outcomes are closely tied to financial security.