The Urban Institute is collaborating with the Stanford Center on Longevity on the challenges and opportunities for living well while living longer. Motivated by the Stanford Center on Longevity’s Sightlines Report, Urban scholars are exploring issues and policy initiatives across the age span, from millennials to baby boomers. This post is part of a series culminating in our June 14 event, Rethinking the Future: the Opportunities of Longevity.

At the same time that Americans are living longer, healthier lives, they are also living more financially fragile lives. Ironically, as longevity is increasingly an expectation, the financial health of many Americans in their later years has become more and more uncertain.

Take, for example, the financial situation of your typical American approaching retirement within 10 years, someone around age 57. In 2013 dollars, that person’s family income would have been lower than that of someone of similar age in 1996. Furthermore, income has become less predictable since the 1970s; nearly one-third of Americans say their income varies from month to month, and four in 10 whose income or expenses vary monthly have found it hard to pay their bills.

Not only does this 57-year-old have less certainty about the money coming into their household day by day, but they are also holding on to less money over time. Americans ages 55 to 64 lost 14 percent of their median net worth between 2010 and 2013—postrecession recovery years—dropping from $192,300 to $165,900. These numbers mask considerable variation by race: the typical African American family approaching retirement has, on average, over $1 million lower net worth than a white family approaching retirement, and that racial wealth gap has grown over time. It is no wonder that the typical 56- to 61-year-old in 2013 has just $17,000 in retirement savings, half of what those the same age held in 2007 on the verge of the recession ($35,929). This is hardly a sizable nest egg upon which future retirees can sustain a long postemployment life.

Why do near retirees today have less wealth than in the past? For one, their debt has grown. Baby boomers (on average, age 58 in 2013) typically had $91,741 in debt, nearly double what members of the silent generation held at the same age ($52,347 in median debt). Housing is the biggest debt on baby boomers’ overall ledgers; they owe a median of $72,442 toward mortgages versus $40,067 held by the silent generation at the same age. Even education debt doubled—to a median of $3,691 compared with $1,139—with some of that owed toward children’s educations. Tenets of the American Dream—housing and education—are dampening another long-held aspiration: a comfortable retirement.

The link between financial security and a long and healthy life runs through multiple channels, raising the potential for public policy in many fields to help enhance longevity by improving financial security. Policymakers could consider:

• Policies that require—and support—inclusion of effective strategies to build financial capability , including financial coaching in particular, in community colleges, returning citizen programs, workforce development programs, and other direct social services programs. Such policies should also include a requirement that the effectiveness of the strategies be monitored and evaluated to generate continuous improvement and shared learning.
• Policies that better encourage savings and investment among lower-income and lower-wealth families. The tax code, whose savings and investment incentives heavily favor upper-income families, is ripe for rethinking, including turning all or part of some deductions into credits and expanding credits such as the child tax credit and saver’s credit and making them refundable. The Treasury Department’s myRA portable retirement account shows promise but would take hold more quickly with enhanced promotion.
• Policies that increase the opportunities for students from families across the wealth and income spectrum to get meaningful and productive postsecondary education without going into excessive debt. These policies could range from incentives for more effective collaboration between community colleges and job providers to better guidance for students in choosing postsecondary pathways and paying for school. They could also include free tuition, enhanced state support for postsecondary education, and major revisions in the federal student loan programs, including in particular income-based repayment programs and revisions to the bankruptcy code.
• Policies that better protect individuals and families against medical catastrophe. These could include better protection under the Affordable Care Act of the nonelderly with serious illnesses and reducing or eliminating gaps in Medicare coverage, including limiting out-of-pocket expenses and adding some coverage of long-term care.
• Policies that enable individuals and families to obtain housing stability as owners or renters, build wealth through payments on well-designed and sustainable mortgages, and gain access to communities that provide an opportunity for financial security and economic advancement. Policies that increase housing stability will also increase financial stability and enhance longevity, whether it’s reforming the mortgage interest deduction to make it more valuable to lower-income households, pursuing policies that affirmatively further fair housing, developing new mortgage products and homeownership preparation programs that make homeownership safer and more sustainable, or changing local land-use restrictions to make it possible to build and preserve healthy mixed-income communities.

Over the next several years, Urban Institute researchers will work to better understand the connection between financial stability and longevity, and will explore and evaluate the evidence to develop appropriate policies in these areas.

More posts in this series:

• What we need to understand about the future of work
• Living long and living well: How can we care for the nation’s caregivers?

• How can we help older workers realize their potential?