Beyond Fifty: America's Future
William D. NovelliAARP Executive Director
The City Club of Cleveland
July 20, 2001
Good afternoon. It's a real pleasure for me to be back here at the Cleveland City Club. I was here several years ago when, as president of the Campaign for Tobacco Free Kids, I was waging war on the tobacco industry. That was an issue I felt very strongly about - and still do.
I'm here today in a different capacity to talk about a different issue, but one that I feel just as strongly about. I'm just concluding my seventh week as the new executive director and CEO of AARP. And the issue I want to talk to you about is the impact the 50+ population is going to have on America's future.
For me, the milestone of turning 50 came ten years ago. Frankly, I didn't think it was any big deal. But society tried hard to convince me that it was. I got the humorous birthday cards reminding me that I was getting "old." I got the gag gifts, the black balloons, the condolences from friends telling me that I was now officially "over the hill." And, yes, I also received the letter inviting me to join AARP.
I was thinking, "Boy, have they got it wrong. I'm not getting old - I'm just getting started… And, this AARP thing looks like a pretty good deal to me, I think I'll join." I never dreamed then that ten years later, I would be the one sending out the letters inviting people to join AARP.
Fifty is somehow the demarcation point signifying the beginning of old age - and it's deeply ingrained in our society. It's even evident in our language. Think about it. We become 21 as a glorious rite of passage. We hit 50 like a brick wall. Then, we turn 65 like it's the expiration date on a carton of milk gone bad.
As deeply ingrained as it is, this imagery is changing fast. It's changing because the baby boomers don't buy into the myth. And, it's changing because it simply isn't true, if it ever was.
People turning 50 today have half of their adult lives ahead of them. They are beginning to use that milestone to question what they want to do with the rest of their lives instead of viewing it as a time of decline. For many it is a time to enjoy new-found freedoms, make new choices, and dream new dreams. In America, there is a whole new paradigm for life after 50 - especially when we consider the numbers.
- One of the more than 76 million boomers turns 50 every 7.5
seconds.
- With every coming year, over 4 million men and women will
join the ranks of 50+ America.
- This is changing the fundamental age distribution in our population. In 1900, only 13 percent of the population was age 50 or over. In 2000, it was over 27 percent. And, by 2020, it will be over 35 percent.
Aging is a global phenomenon. It's especially noticeable in the countries where the birth rate is declining. Take Italy: the birthrate is down to about a third of the replacement rate; in Japan, down to about half. According to Peter Drucker, "The youth market is over."
Except in the English-speaking countries where immigration is accepted and birthrates are still (barely) adequate to maintain the population. Says Drucker, "It's an old rule that the population group that is both the biggest and growing fastest determines the mood." The fastest growing group in the U.S. is 55+.
This demographic revolution will change virtually every aspect of our society. It has tremendous implications for us as individuals and for our society as a whole. As I said earlier, it creates a new paradigm for life after 50. So these are exciting times.
There are at least four major areas where this demographic revolution will reshape America's future. Let me begin with economic security.
In May, we released our first in a series of annual reports on the state of 50+ America. This report, titled Beyond 50: A Report to the Nation on Economic Security, looks at how the 76 million people age 50+ are faring as they prepare for and experience retirement. The study also identifies some new trends that are emerging as the baby boomers turn 50.
Like the rest of America, the 50+ population is extremely diverse - in ethnicity and culture, life experiences, attitude and outlook and in economic status. The disparities between the "haves" and the "have nots" are highly evident. The "haves" are those who have enjoyed the cumulative advantages of higher-wage jobs with employer-based pensions and health-insurance coverage, allowing them to save more for their own for retirement. The "have nots" earn substantially less, do not have jobs that provide defined benefits or 401(k) plans, tend to be on the wrong side of the digital divide and lack health insurance. Shockingly, there is a 40 percent chance that an American will be poor at some time after age 60.
Building a secure retirement has traditionally been thought of as a three-legged stool, with the three legs represented by Social Security, Savings, and Pensions. This concept long held that if people had these three sources of retirement income, they could handle balance the financial demands of their retirement years.
But today, the traditional three-legged stool of retirement income no longer defines what it takes to build a secure retirement. A secure retirement foundation in today's America has to be built on four strong pillars: Social Security, savings and pensions combined, earnings from continued work, and health insurance.
Piecing together a viable retirement without Social Security is an extremely improbable equation for most Americans. Without Social Security, nearly 1 in 2 people over 65 would live in poverty, instead of 1 in 10 who live in poverty today. It provides, and will continue to provide, an average of 40 percent of total retirement income and much more than that for lower and modest-income retirees. For a quarter of those 65+, Social Security constitutes 90 percent or more of their income. Most Americans would not have a viable retirement without it, and it will continue to be a critical source of retirement income in the future.
Two of the three legs of the old retirement stool, for all intents and purposes have become one - pensions and savings have essentially become functional equivalents. Americans can no longer assume the natural balance that traditional "defined-benefit" pensions once lent to a retirement portfolio. In fact, we see a virtual one-for-one switch by employers from traditional pensions to 401(k) plans. This trend shows no signs of abating, and it fundamentally alters the balance of risk in retirement income, shifting it from the employer to the employee.
Then we have earnings from continued work. We know that about 80 percent of baby boomers expect to keep working past traditional retirement age, either full-time or part-time. They either want to, or they have to for economic reasons. They expect to be active and engaged and do not envision sitting out their retirement on a three-legged stool, or any other kind for that matter. In other words, "retirement" is being redefined, and doesn't necessarily mean leaving the workforce. This means that the third pillar of a secure retirement is continued earnings.
We also found in our study that escalating health care costs so profoundly affect the pocketbook that adequate health-care insurance must be the fourth pillar of retirement security. Out-of-pocket health costs average 19 percent of income for persons 65 and over. The percentages are even higher for those with low incomes: those without Medicaid spend almost HALF of their total income on health care. Without significant protection from health-related expenses - especially for prescription drugs and long-term care - virtually no one in today's 50+ America can be economically secure. Here's why:
- Although HMOs and employer and other supplemental health
plans may offer a degree of prescription drug coverage, Medicare
itself does not. This affects people of ALL incomes. It's not
a matter of how rich you are, but rather, how many pills a day
you take. According to a 1998 Wall Street Journal poll, 80
percent of retirees use a prescription drug every day. The
average Medicare beneficiary takes 18 prescriptions a year.
Technological and medical advances have helped us live longer and
healthier lives, but have also led to living longer with chronic
illnesses and disabilities. Prescription drugs can prevent and
cure many illnesses and reduce hospitalizations. They can also
extend the period of time that people can live independently. At
the end of this month, Medicare marks its 36th anniversary. On
July 30th, Medicare Monday, we're planning to celebrate by
delivering a cake to all members of Congress in their D.C. and
back home offices - with a slice missing. This missing piece, of
course, illustrates what's missing in Medicare: a voluntary,
affordable, accessible prescription drug benefit. It's our
top legislative priority.
- But what happens when people can no longer live independently
and require long-term care? America HAS no long-term care system,
instead only a fragmented patchwork of public and private
programs, impossible for many to understand or to navigate. The
cost for long-term care services in 1999 came to $133 billion,
about 11% of total U.S. health expenditures for that year.
And this doesn't even count the high costs in time, stress and lost wages to families and friends who provide unpaid long-term care services.
All this makes the need for prescription drug and some measure of long-term care coverage more acute. We are playing catch-up with our demographics. And the clock is ticking.
Baby boomers are caregivers for aging parents. The "me" generation is becoming the "us" generation. Often boomers help out their parents financially with health-care expenses, including prescription drug costs. As for long-term care, consider this: for $55,000, you can pay for more than two years at Case Western Reserve, with $13,000 to spare - or a year's stay at a nursing home. The standards are dramatically higher at Case.
Nobody grows up and looks forward to entering a nursing home, or even an assisted living facility. The vast majority of people prefer receiving health care in the comfort and security of their own homes and communities. Even there, it can cost $64 per visit for a home health aide.
Caregivers of older loved ones, on average, pay close to $20,000 out-of-pocket over a two to six year period to help with expenses. Many are also sandwiched between parents and the needs of dependent children. The U.S. 2000 Census Report shows a rise in non-traditional families as well as boomers taking care of nieces, nephews, and other children not related by blood. And more grandparents than ever provide primary care for their grandchildren.
Caregiving responsibilities can take center stage in people's lives. A recent AARP study, "In the Middle: A Report on Multicultural Boomers Coping With Family and Aging Issues," found that most 45 to 55-year-old Americans are not overly stressed RIGHT NOW by their intergenerational caregiving responsibilities. In fact, most derive a great deal of satisfaction in providing care for loved ones. But, as you can guess, those with lower incomes fared less well. And juggling the needs of dependent children and older loved ones becomes much more trying as aging takes its toll.
Especially at risk for stress and stress-related illnesses are women: they generally shoulder most of the caregiving responsibilities. And 75% of women aged 45 to 55 are employed full time. Many must take time off, work in less responsible positions, even leave the workforce, because of their caregiving responsibilities. This leads to women earning less and spend less time in the workforce, resulting in lower Social Security benefits. To compound this, women generally live about seven years longer than men, meaning their resources must last longer.
Caregiving is not just costly to employees. A MetLife-sponsored study found that informal caregiving costs U.S. employers between $11.4 and $29 billion a year because of lowered productivity.
In 20 years, the oldest boomers will be turning 75 themselves. Clearly, something needs be in place by then. We believe that a prescription drug benefit in Medicare and a mix of financing sources for long-term care, accompanied by adequate protection for those with low incomes, will go a long way to stabililize the health insurance coverage that is the fourth pillar of retirement security.
All this inevitably raises the issue of end-of-life care. Medicare already has a hospice benefit, but we must eliminate barriers to using it. More health-care professionals need to be educated in geriatrics and trained to manage pain better as well as deliver palliative care. And families need to communicate with each other about their end-of-life wishes. This takes planning - all the way from drawing up advanced health care directives to burial arrangements. In today's America, end-of-life quality care is sadly lacking. We can do better.
While we can't avoid death, we can prolong independence and avoid disease. A MacArthur study on successful aging produced a formula for maintaining health for as long as possible: stop smoking, eat right, stay fit, keep active and engaged. This takes personal commitment. Although boomers are smoking less than previous generations, the sad fact remains that they are even more obese. Obesity contributes to health-related conditions such as osteoporosis, diabetes and cardio-vascular disease.
By modernizing public and private policies as well as making environmental changes, we can reduce obesity and encourage more physical activity by:
- Making stairways visible and safe;
- Maintaining attractive, open urban centers for pedestrians
and bicycle riders;
- Developing worksite exercise programs; and
- Incorporating multi-generation fitness activities into community settings.
This is such a vital issue that we are currently collaborating with the Robert Wood Johnson Foundation to begin a program of physical activity for those 50 and older. We are beginning with fitness events this fall to promote healthy lifestyles.
Another element in successful aging is to stay active and engaged. People 50+ are the keepers of the culture. Their knowledge, experiences and skills can help sustain America. We need to must find ways to tap into this enormous reservoir of energy and talent. To dramatize how "retirement" is being redefined, a survey we conducted found that nearly two in three 50- to 75-year-olds view "retirement" as a time to begin a new chapter, start new activities, and set new goals. Spending time with grandchildren, traveling, continuing to work and engaging in lifelong learning opportunities contribute to a sense of well-being.
Fulfillment also comes from volunteering and civic involvement. According to our survey, half of all adults in this age cohort plan to incorporate volunteer activities into their blueprint for later life. It's a way to make a difference in people's lives, to leave a legacy, to give something back.
So-called retirement, now being re-invented, is fast becoming the longest life stage - from 20 to 30 years - for many Americans. As we've seen, it doesn't mean departing the workforce: people will work full or part time; will begin second, even third, careers, or will start up their own business. Retirees in the 21st century will be the healthiest and best-educated generation of American seniors. They are looking for meaningful activity and are not interested in just filling up time. We have enhanced AARP's field presence, with an office in every state, the District of Columbia, Puerto Rico and the U.S. Virgin Islands open by the end of the year, to mobilize people for advocacy AND to provide opportunities for meaningful community service that will help our members improve the social fabric of their communities.
Some of our existing efforts include helping low income older people file income taxes and find permanent employment through a job-training program, a safe driving program, and a grief and loss program. We plan on more.
Some forecasters the graying of America, indeed, of the world, as a calamity, one that will deplete resources and cause nations to go broke. Absolutely not. It's an opportunity for governments to modernize and sensibly plan for the economic and health care needs of generations to come. It's an opportunity for employers to increase productivity by expanding programs such as flex time, telecommuting, alternative work schedules, phased retirement, and to creatively use their retirees by re-employing them for selected projects or to serve the community. Instead of being a drain, older Americans want to, and are able to, contribute to society.
Let's not forget that this population represents a hugely profitable market - in this country, boomers control 70% of total household worth - $7 trillion dollars of wealth. American grandparents spend about $30 billion a year on their grandchildren. That's another reason why negative stereotypes of aging will go the way of the High Fi, and that a more positive image of aging is emerging. It's a combination of demographics and dollars. Look at the ads in AARP's magazines: Modern Maturity and My Generation. You'll see cars, computers, financial services and much more. America's marketers know about demographics and dollars.
To conclude, here's what we'd like on America's to-do list for the next decade:
- Strengthen the solvency of Social Security and modernize
Medicare by offering a prescription-drug benefit;
- Develop a creative funding mix for long-term care, coupled
with safety nets for low-income people;
- Expand high quality, cost-effective home and community-based
services;
- Provide incentives for people to become more physically
active;
- End age discrimination in the workplace - ability, not age,
should determine employability.
- Protect consumers from predatory lenders and others who would
prey on the vulnerabilities of older people;
- Provide incentives to homeowners and builders who make
modifications that extend people's ability to live
independently at home; and
- Increase funding for accessible, affordable public transportation to increase mobility of the older population, extending those services to suburban and rural areas.
We have much to learn from the successes of other countries. This country, too, has much to offer.
As more and more people around the world experience life at 50+, they will begin to understand what we at AARP have discovered through our research and the experience of our members: age is just a number, and life is what you make it. Myths about aging are shattered on a daily basis. As Yogi Berra said, "The future ain't what it used to be."
