Promoting Economic Security at Older Ages through Workforce Development

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Abstract

The 2008-2009 collapse in the stock market wiped out trillions of dollars in retirement account wealth and forced millions of boomers to rethink their retirement plans. Working longer is commonly seen as the key solution to the retirement financing dilemma. However, poor job prospects prevent many older people with limited education from working into later life. This testimony for the Senate Special Committee on Aging argues that Congress could improve the economic security of these older adults in retirement and in the years leading up to retirement by increasing government-funded employment and training services.

Testimony

Thank you for the opportunity to submit written comments on the retirement income challenges facing the boomer generation. The collapse of the stock market, which lost about 50 percent of its value between June 2007 and mid-February 2009, highlights the fragility of the American retirement income system.1 The destruction of trillions of dollars in retirement account wealth is forcing millions of boomers in their fifties and sixties to rethink their retirement plans. Many workers will likely respond to unexpected shortfalls in future retirement income by delaying retirement. In fact, extending the work life is commonly seen as the key solution to the retirement financing dilemma. Working longer allows people to receive additional earnings, save more, accumulate more Social Security and pension credits, and reduce the time over which their savings must be spread. Simulations show that workers can increase their annual retirement income by 9 percent on average by working only one additional year (Butrica, Smith, and Steuerle 2006). Average retirement incomes would grow by 16 percent for low-wage workers.

Many older people with limited education, however, are unable to continue working into later life. Health problems force many out of the workforce, but even those healthy enough to keep working are unable to find jobs. They often lack the skills that employers value and the tools to find available jobs. Congress could improve the economic security of these older adults in retirement and in the years leading up to retirement by increasing government-funded employment and training services.

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