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Testimony Before the Senate Special Committee on Aging on Managing Retirement Assets

For older workers, the decision about whether and when to retire is important. For many, the decision to continue working is an economic one: additional income and/or health care coverage. Returning to the workforce after a period of time is not always easy for older workers. Skills may be out of date and age discrimination is a serious problem. These workers tend to be unemployed longer, are less likely to become reemployed, and are more likely to experience earnings and benefit losses if they do find work.

At what age boomer's choose to retire will have a considerable impact on the labor force. In recent years, policymakers have encouraged later retirement by gradually raising the age for full Social Security benefits, eliminating the earnings test for working Social Security beneficiaries who are at the full retirement age, and by increasing the delayed retirement credit for those who postpone collecting benefits until age 70. Policies governing employment, retirement, and income taxation could foster longer labor force participation and protect the rights of those age 50+ workers who choose to stay on the job.

AARP supports the development and implementation of work options, including phased retirement programs, that would expand employment opportunities for age 50+ men and women who must and/or want to work. We are helping create solutions to meet the needs of the workforce and age 50+ employees through research, information, advocacy, and training programs. For their part, workers must be educated about what they need to do to remain employable.

From a public policy perspective, a number of initiatives would help keep older workers in the labor force. These include eliminating barriers to phased retirement programs, vigorous enforcement of employment discrimination laws, increased attention to the training and employment needs of vulnerable groups, and an older worker-friendly and better-funded job training system.

E. Health Coverage. Maintaining health care coverage is important to those in the labor force as well as those who are in retirement. Without adequate health coverage, a major health problem can seriously erode or even wipe out savings at a time when replacing any lost income may be difficult or impossible.

The decline in the share of employers offering retiree health benefits in recent years is a matter of increasing concern. Between 1993 and 2004, the percentage of large employers offering health benefits dropped from 46 percent to 28 percent for retirees under age 65 and from 40 percent to 20 percent for Medicare-eligible retirees. Even those who have employer-sponsored health benefits face higher costs because employers pass an increasing portion of rising health care costs to retirees. Retirees also face changes in coverage, such as increased cost-sharing or caps on employer contributions. If the price of retiree health benefits grows beyond the reach of retirees, they may lose coverage and become vulnerable to the risk of major out-of-pocket health costs particularly if they become seriously ill.

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