As a teenager growing up in the '60s, I looked forward to two milestones in life: my 17th birthday so I could get my driver’s license, and turning 18 so I could vote. The election process is the cornerstone of our great nation, and one of the most crucial ways we can voice our opinion and play a role in democracy is to vote.
As boomers head to the polls this November, studies show financial issues and the economy will be on the top of our minds. So many of us are concerned with our legacy, and what we are able to leave behind to benefit our kids and grandkids so they can live a better, more prosperous life than we did. Boomers on the cusp of retirement are worried about the fate of Social Security, pensions and 401(k)s. We are coming to grips that most of us will have to work longer and harder to be able to afford to retire.
A new study from AARP shows not-yet-retired boomers’ top concern this election cycle is the economy—and they want more action and plans from the candidates on how they will work to fix the lackluster recovery.
I had a chance to speak with Nancy LeaMond, executive vice president for AARP’s State and National Group, (www.aarp.org) and she further explained what the survey revealed and what boomers are counting on this November.
Boomer: What did the survey find as the top economic worry of boomers that may increase their anxiety level?
LeaMond: AARP’s new "Anxiety Index" measures boomers’ worries on more than just job security. Issues including rising prices, health expenses, retirement security as well as political gridlock all negatively affect boomers’ economic circumstances.
As more Americans approach the age they thought they’d retire or plan to retire, they face anxieties about their health and economic security. As for retirement security, 72% believe they’ll have to delay retirement, 65% worry they won't have a comfortable retirement and 50% don't think they'll ever be able to retire. This overwhelming insecurity leads boomers to conclude that Medicare and Social Security have become even more important for their future.
Boomer: Why is the baby boomer generation the first to show such high economic anxieties concerning their future retirement security?
LeaMond: We have long discussed the decline of the traditional pension and how it is harder for workers to save for retirement. Additionally, the Great Recession and the stock market’s often ungenerous fluctuations has led to a loss of retirement income, job loss, home loss and the added burden of caring for both parents and children for many boomers. In many cases these issues separately or together haven’t been faced by previous generations.
As they struggle to make ends meet, boomers are watching lawmakers yelling at each other or cutting deals behind closed doors—so it’s no surprise that just 8% of those we surveyed approved of the work Congress has done.
Boomer: Why do you feel the insecurity of non-retired baby boomers leads them to conclude that Medicare and Social Security have become even more important for their future?
LeaMond: According to our survey, 59% of baby boomers across party lines think they’ll rely on Social Security and Medicare even more than they planned because of the economic downturn. This is a generation for whom 401(k)s did not exist when they started working, and who have witnessed the steady decline of jobs that come with a pension.
As they approach retirement, many are beginning to recognize the critical foundation that Medicare and Social Security provide for retirement security. But there’s more to the numbers than that. Today, about half of America’s seniors have an income under $20,000 per year and, about half of the people in Medicare spend 17% of their income on health care costs. More than one in three working households age 21 to 64 has no individual savings set aside for retirement. It’s important to note that just over half of voters age 18-49 have confidence they can afford to retire, so Medicare and Social Security are likely to become even more important for future generations.
Boomer: I am turning 62. Given the volatility of the Social Security program and politicians wanting to change it, would it be safer if I was already collecting Social Security when the change occurs?
LeaMond: While our national budget runs a deficit, Social Security, a completely separate program has a $2.4 trillion surplus. We all have different needs and priorities for our economic security, but the promise of Social Security remains. If Congress did absolutely nothing, Social Security can pay 100% of benefits to all beneficiaries until 2033, about 100 years from its inception. If you’re turning 62, you don’t need to collect Social Security because you’re worried about what politicians may do to it. Even though politicians know full well Americans in both parties support and value Social Security, voters overwhelmingly think candidates have not done a good job of explaining their plans for both Social Security and Medicare.
Moving forward, these voters – across party lines – say that getting more information on the candidates’ plans on Social Security and Medicare will help them determine their vote on Election Day and more than 9 in 10 voters also believe these issues are too big for either party to fix alone—they require Republicans and Democrats to come together. For more information about when you should take Social Security for your own economic security AARP has both Social Security and retirement calculator, and in the fall we’ll be revamping the website that has our free retirement planning tools over at www.aarp.org/readyforretirement.
Boomer: How is the Social Security cost of living adjusted (COLA) determined each year and do they take into consideration the inflation rate?
LeaMond: The Social Security Administration (SSA) calculates the cost of living adjustment (COLA) each year by basing the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the last year a COLA was determined to the third quarter of the current year. There was no increase in 2010 or 2011 because there was no increase in the CPI-W even though costs for food, utilities and health care continued to increase during that time. The COLA increase for 2012 helps to ease the financial hardship many older Americans face today, but in most cases serves as a modest supplement to an already modest income.