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Rebuilding the Middle Class: A Blueprint for the Future

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

We also have to address the high cost of long-term care in this country, and that means shoring up the Medicaid program.  Medicaid is generally regarded as a program for the poor.  But in reality, Medicaid has a huge impact on the middle class, as well.

Whether we like to admit it or not, Medicaid is our country’s long-term care program.  In fact, Medicaid pays for roughly two-thirds of the beds in nursing homes nationwide. The cost of long-term care is so expensive, that many middle-class Americans — after spending all of their own savings — end up relying on Medicaid to pay for their care.

This is an issue we have to face. It affects us all. That’s why we were glad to see that the fiscal cliff legislation passed by the Congress and signed by the president created a bipartisan commission on long-term care.  It’s a positive step.

A third issue we have to address is the low savings rate and the large gap — one estimate is over $6 trillion — between what individuals have saved and what they will need in retirement.

The combination of high unemployment, low savings, decaying traditional or defined-benefit pensions, decreased home values and longer life expectancies means that too few are accumulating enough to last through their lifetime. We must do more to increase access and incentives for people to save.

Social Security remains the critical foundation of income security for the overwhelming majority of people.  And because of low savings rates and high health care costs, future retirees will rely on it even more.

Efforts to strengthen Social Security for the future must take into account the retirement savings gap, and the fact that the percentage of income Social Security replaces is already declining due to the rise in the normal retirement age to 67.

Social Security solvency is a major concern.  But, we can’t address solvency without also taking into consideration — adequacy.

Simply looking at solvency without considering adequacy again misses the larger goal of shoring up the income security needs of the nation. How we achieve solvency matters.  It matters to government … to business … to the economy.  And, it matters to people.

So, as we look to protect and strengthen Social Security, we are guided by some basic principles:

  • Any changes to Social Security should be discussed as part of a broader conversation about how to help Americans prepare for a secure retirement.
  • If you pay into Social Security, you should receive the benefits you’ve earned over a lifetime of hard work.
  • Your Social Security benefits should keep up with inflation for as long as you live.
  • You should continue to be covered in case you become disabled and can no longer work, and your family should continue to be protected if you die.

At AARP, we will also provide educational support and advocate for policies to help people save.  And we will encourage better pensions and more private savings in addition to — not at the expense of — Social Security.  
This is about people, not just numbers.  Our fear is that in recent debates Washington has forgotten that.

The recent debate over the fiscal cliff focused on people with incomes over $400,000 dollars a year, yet the typical senior has an income of only about $20,000 dollars a year.

Let me repeat that. The typical senior has an income of only about $20,000 a year.  And for most of them, their Social Security benefit makes up a large chunk of that income.

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