_________________

Forward

During the coming decades, retirement of the 76 million baby boomers - those born from 1946 to 1964 - will pose significant challenges for society as well as for boomers themselves. These challenges stem partly from the fact that the younger population cohorts have far fewer people available to work and pay taxes to defray the costs of public and private retirement benefits and health care. At the same time, increasing longevity compounds the problem. In short, lower fertility and greater longevity are making it more difficult for society as well as for individuals to prepare for retirement, both financially and nonfinancially.

In 2012, the oldest boomers will be 66 years old, the age at which Social Security will pay full retirement benefits to those who are eligible. In 2031, the youngest baby boomers will reach age 67, the age at which full Social Security retirement benefits will be due those who qualify. Medicare will cover the oldest boomers beginning in 2011 and the youngest in 2029 if the current eligibility age of 65 remains unchanged. Financial needs during retirement are provided for privately by individuals and families or collectively by society, or by a combination of both. While individuals and families are responsible for satisfying their individual retirement needs, they need to operate in a basically sound and stable macroenvironment. In policy discussions, it is therefore important to understand the complementary roles of individual and collective responsibilities.

Individuals can and must do their part. Recognizing differences in individual preferences and within limits, one could argue that people can and should try, among other salutary lifestyle behaviors, to stay healthy in order to reduce expenses for themselves and to conserve health care resources for society at large. They should spend their income reasonably, save early and consistently, invest prudently, and diversify their investments. They should plan for the contingency of long-term care needs to avoid impoverishing themselves or their families or becoming a public charge.

Despite these and other like efforts, however, only the wealthiest may succeed, absent an overall social framework that encourages and supports individual efforts. We need a stable government and a well-functioning economy with ethical conduct by business, labor, and government. We need collective measures that are organized or facilitated by government, business, and labor, such as social insurance programs for income security and health care security that are solvent for the long term, work-based pensions that are secure and reliable, and a system of work and retirement that includes arrangements to accommodate those who seek work during older ages. And we need the support and assistance of civic, charitable, and religious organizations. Many such institutions and practices do exist today, but we also need to innovate more, strengthening what we already have and introducing new and better ways.

The challenge of policy development for ensuring greater old-age economic security in the new century lies, in my view, with seeking approaches that balance individual and collective responsibilities. Individual responsibility is expressed by what may be expected realistically of individuals and their families and friends. Collective responsibility is demonstrated by the array of public sector policies (i.e., federal, state, and local governments) and private sector policies (i.e., business, labor, and nonprofits, such as civic, religious, and charitable organizations). To embark on the task of reviewing and modernizing public and private retirement policies for the future, we have as a starting point the Encyclopedia of Retirement and Finance. This comprehensive inventory of policies, institutions, practices and problems is another significant editorial contribution of Lois A. Vitt.

The relative roles of individual and collective responsibilities have undergone significant changes historically. For many decades before the Great Depression starting in 1929, the predominant opinion was that Americans could, by and large, provide for their own old age by individual savings and family assistance and by private philanthropy and public charity if all else failed.
The cataclysmic event of the Great Depression—stock market collapse, bank failures, and mass unemployment—uprooted the social mores of the time, as it exposed, more starkly than in previous business downturns, the hollow protective power of self-reliance, particularly in an industrial society. Mass unemployment for long years stripped many individuals of their ability to earn a living, let alone to save for future needs; a protracted period of financial crises simply swept away much of the life’s savings of many people. Those financially catastrophic occurrences, which exacted untold human costs of ruined dreams and shattered lives, made it clear that, as President Franklin D. Roosevelt declared in his June 1934 message to Congress, it was necessary “to employ the active interest of the nation as a whole through government” to provide safeguards “against misfortune which cannot be wholly eliminated in this man-made world of ours.”

Thus was ushered in an era of government intervention in the ensuing four decades (from the mid-1930s to the mid-1970s), witnessing passage of various major pieces of social legislation in pensions and health care—Social Security, Medicare, Medicaid, and the Employee Retirement Income Security Act (ERISA), to name the most significant.

Since the mid-1970s, however, political pressures have mounted to provide incentives for individuals to take more responsibility for their own future. By the 1990s, welfare reform, Medicare _ Choice, and the continuing debate about Social Security privatization attested tellingly to changing attitudes. Ideology aside or in conjunction, those actual and proposed changes in policy direction reflected a confluence of factors. These factors juxtaposed diminished the fiscal capacity of the government (resulting from slackening productivity and economic growth) against the improved economic status of older people, rendering less compelling the advocacy for age-based social programs on their behalf.

Individuals are increasingly urged by politicians to assume more responsibility for their own retirement. Wittingly or unwittingly, some individuals also declare that they prefer to increase their self-responsibility. However, while individual responsibility is necessary and desirable, it has not proven sufficient. Not everyone has the financial sophistication or good luck to make winning investment choices. Collective responsibility is essential since many conditions in employment, pensions, investments, and health care that adversely affect individuals are occurring at the societal level through no fault of their own.

For example, in recent times, many workers and retirees have fallen victims to the business failures caused by corporate fraud, as illustrated by the notorious cases of Enron, WorldCom, Arthur Andersen, and their ilk. Stock market slumps have substantially shrunk the financial wealth of many individuals; they have also contributed to the large underfunding of many pension plans. Unemployment has sapped the ability of many individuals’ ability to earn an income, let alone to save for their future. Bear stock markets have generated skepticism or reluctance about investing in equities among many investors and would-be investors. Medicare cuts to health care providers have put a large number of the program’s participants at financial and health risks.
Development of public and private sector policies for the century that is unfolding must recognize that potential problems brought about by new and emerging demographic and economic realities carry with them new opportunities as well. For example, when the number and proportion of older people increase, a society is aging. Although an aging society could result in increasing scarcity of workers in the traditional age groups, it may also hold out the promising prospect that some older people, who would have retired under traditional rules and practices, may choose to work longer if conducive work environments are created. The outcome depends a great deal on whether we choose to live under the institutional arrangements that were once meaningful but have now become constraining or whether we venture to alter these arrangements in favor of new and more flexible work and pension systems in order to better utilize our human resources, including those represented by older people.

The world is what we collectively make of it. In designing and maintaining policies for future retirees, we must underscore the role of the government sector in fostering a supportive environment. We must understand how private sector policies of business, labor, and nonprofits may promote or hinder needed adjustments in our institutions and programs as demographic and economic circumstances change. And we must expect individuals and families to do what they can and should in service to themselves and to society. In short, to ensure greater old-age economic security, we need to balance individual and collective responsibilities, as we marshal our resources, private and public. Serving as a sourcebook, the Encyclopedia of Retirement and Finance will be valuable to concerned individuals as well as to specialists and policymakers in both the public and private sectors.

Yung-Ping Chen, Ph.D.
Frank J. Manning Eminent Scholar’s Chair
Gerontology Institute
University of Massachusetts at Boston