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Rebuilding the Middle Class: A Blueprint for the Future

AARP CEO A. Barry Rand offers a plan for financial security

Corrine, from Milwaukee is a prime example.  She is 62 years old and married.  Five years ago, Corrine’s husband lost his job.  He found work, but then lost that job last March.  Corrine works two part-time jobs without benefits.  When her husband lost his job last spring, they went on COBRA to get health insurance.

They quickly found that the costs were too high for their budget, so Corrine bought a catastrophic plan with a very high deductible, which saved them about $200 a month, but gave them less coverage.

Corrine’s husband has since found a job as a clerk in a grocery store deli — resulting in a 60 percent cut in his income.

Suddenly, their retirement is uncertain and scary.  They are thinking about starting to collect Social Security at age 64 to help pay the bills, even though they would be missing out on a fuller benefit by waiting a couple of years.

Unfortunately, Corrine’s story is not unique.  AARP’s own “Anxiety Index” tells us that the top concerns among people 50-plus and their families are all related to health and financial security:

  • Having Medicare and Social Security benefits available in the future
  • Having adequate health insurance coverage, and
  • Paying for health care expenses.

We hear this from our members all the time.  A member in Pittsfield, Mass., sent me this letter.

“Social Security will be my main source of income when I retire — if I ever get to.  I have a 401(k) also, but it has been hit hard, and I don’t think I can catch up again by the time I am 65.  Without Medicare, I will never be able to retire.  Please do not eliminate or cut those benefits to those of us who have already put in hard-earned dollars all our lives.”

Their concerns reflect the larger trends.

  • The latest census data show that the typical American family got poorer during the last decade: 15 percent of Americans now live in poverty — the highest level since 1993.  And, in 2012, the number of Americans living under 125 percent of poverty reached an all-time high of 66 million.
  • More Americans are reaching their 60s with so much debt that they can't afford to retire.
  • More low- and middle-income households are turning to “credit cards” to help meet daily living expenses.

And the number of uninsured — 16 percent of the population — now exceeds the combined population of 25 states and the District of Columbia.

That’s hard to even digest.

The possibility of downward mobility in retirement is a looming reality for all workers.  In fact, the ranks of America's poor are on track to climb to levels unseen in nearly half a century, erasing gains from the war on poverty in the 1960s.

Unless we are able to reverse the trends that are driving the decline of the middle class, many of today’s middle-class workers will not have a middle-class retirement.  In fact, 30 percent of those currently in the middle class, will become “low income” in retirement.

Here’s why.  Two main reasons — rising health care costs and financial insecurity. 

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