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Families across America are facing retirement years with less financial resources than they expected and are likely to need. Rebuilding the foundations of retirement security will require a multi-pronged effort. Social Security must be strengthened for the long haul. New savings programs are needed to make up for the decline of traditional pensions and reliance on 401(k)s. Many of us will have to work longer than we expected in order to build up nest eggs that will last a lifetime. Government, private employers and individuals all must help. In an era of growing longevity, inaction only will make this challenge more costly to address.

Social Security

Social Security’s role as the centerpiece of lifetime guaranteed, inflation-protected, retirement income has never been more important, and AARP is committed to strengthening it for the long term. Social Security is an earned benefit that protects people of all ages, and must continue its invaluable role in providing disability and survivors’ benefits to most families.

We believe that Social Security should provide an adequate floor of protection, should be fair to all regardless of marital status, and should be financially stable for the long term.

Social Security is not the cause of current budget deficits. But its 75 year financial outlook is weakening and must be shored up for future generations. Importantly, the measures needed to keep Social Security on sound, long-term footing can be moderate in nature and phased in to protect current retirees.

A fair and balanced strategy to preserve Social Security for the long haul will include some moderate changes to revenues and benefits. But the changes need not cause hardship for those who need benefits most or harm the middle class. The sooner changes are made, the more gradual they can be, and the more time people will have to adjust their financial plans.

The essential guarantee of Social Security can never be supplanted by investments in volatile financial markets. Private savings have an important role, but only as a supplement, and they should not be funded by money needed for Social Security’s long-term commitments.

Savings and Pensions

Building a more secure future will require new strategies to promote saving. Tax incentives and financial education can bolster this effort. Young people should be taught to embrace the “savings habit” early in life, and that early withdrawals do lasting harm to their nest eggs.

Employers should be encouraged to retain traditional, defined-benefit pensions, which provide better protections than 401(k) plans and Individual Retirement Accounts. Defined benefits protect individuals from the uncertainties of financial markets. Employers should keep their promises and recognize that workers rely on benefits that have long been in place. While beleaguered state governments may need to adopt reforms for the future, retirees and workers near retirement should be protected from benefit cutbacks.

At the same time, individuals need to save more for potentially long lives in retirement. We need more savings programs centered in the workplace that rely on the convenience of payroll deduction. More employers should automatically enroll workers in 401(k) and similar, tax advantaged savings plans. Employers that offer no retirement plans should be required to give workers the option of payroll deductions that go directly into Individual Retirement Accounts. Government can encourage added saving by offering a match to such contributions.

Working Longer

For those who are able, postponing retirement is a potent strategy for meeting the financial challenges of old age. By saving for more years, and postponing withdrawals from nest eggs, workers can substantially improve their wealth in retirement. Unfortunately, issues of health, physical endurance and employer attitudes can keep this option out of reach. Many displaced older workers are finding it difficult to get new jobs.

Age discrimination remains an insidious reality. The government should vigorously enforce age-discrimination laws and make sure older workers are not victimized in cases of corporate restructuring and downsizings.

Older workers can be a valuable resource to employers, offering great experience and interpersonal skill. Many employers recognize and tap this resource, while others should be encouraged to do the same. Employers should offer career development opportunities to workers of all ages, and adopt policies, such as flexible scheduling and phased retirement, that encourage employees to prolong their careers. For their part, workers have a responsibility to stay productive as the years pass. They should learn new technologies, embrace training opportunities, and keep up with evolving business practices that help their employers stay competitive.

A Real Safety Net

AARP seeks adequate funding for the safety net programs that help both families who have newly fallen on hard times and families who consistently have trouble making ends meet. This assistance takes the form of cash, health care, energy, nutrition, housing and other aid. We recognize that the state and federal governments face a budget squeeze that will force difficult decisions involving outlays and revenues. But our great country can still afford a decent safety net for its neediest families.

Rising costs for health care and other necessities are dangerous for families on fixed or limited incomes. Increasingly, people are postponing medical treatment and struggling over which bills to pay first—if at all. Medicaid is a vital support for low-income Americans and millions of older persons who need long-term services and supports, and any savings must be carefully chosen to avoid harming those who depend on it. But smart savings that reduce administrative waste while preserving access to care can make sense. AARP urges greater coordination of all low-income assistance programs, as well as administrative streamlining and more effective outreach, to make sure needy individuals get the help they qualify for.

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