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Policy Fundamentals For Financial Resilience

For people to enjoy economic security as they age, they need a strong Social Security system and better opportunities to build savings throughout their lives and to work as long as they desire and are able. Protection from age discrimination in employment and a strong social safety net are crucial. 

Many Americans are approaching their later years without the financial resources they need to live securely. These populations include people from groups that are discriminated against as well as many others who struggle to pay their bills and have little saved for emergencies. Too many people lack sufficient nest eggs for retirement. A strong Social Security system, better access to workplace retirement plans, and more incentives to promote saving all play a role in helping individuals live out their lives with financial security. In addition, older adults need to have the opportunity to work for as long as they need or desire. Government and the private sector each can take actions to encourage financial resilience for all. 

Social Security

AARP is committed to preserving a Social Security program that retains its essential role and character for future generations. Social Security’s long-term finances will have to be addressed but in a manner that keeps it strong and even more effective for families in the 21st century. Specifically, Social Security should be guided by the following principles:

  • Social Security should continue to provide a stable foundation for retirement income. Social Security is the primary source of retirement income for most Americans. It plays a crucial role in reducing poverty among older adults and enabling retirees to cover basic expenses. Benefits that are guaranteed, adjusted every year for inflation, and last for a worker’s lifetime are among the essential features of Social Security.

  • Social Security should maintain its role in providing crucial protections for families. Social Security includes a life insurance program, which provides income to spouses and children if a worker dies. It also protects individuals who no longer can work due to severe illness or disability. 

  • Any reforms to Social Security should preserve meaningful benefits for future generations. Given Social Security’s critical importance, its long-term finances do need to be addressed, but benefit levels must remain adequate and reflect economic and demographic changes over the last 85 years. All covered workers should contribute equitably to the program and receive benefits.  Reforms should consider the needs of those most reliant on Social Security and those who cannot postpone retirement. Any reforms also should be implemented gradually and should protect current beneficiaries and near-retirees. 

Savings

Millions of Americans have little or nothing saved for the future. A variety of measures can bolster savings and help ensure that more Americans can bounce back from modest financial setbacks — a major barrier to long-term savings — and that older adults do not outlive their retirement money.

  • Everyone should have access to savings vehicles that promote financial security and stability throughout their working lives. People need savings throughout their lifetimes for shorter-term needs, such as dealing with financial emergencies, and for long-term priorities like retirement. They should have access to low-fee accounts and be able to choose among a variety of investment options for retirement savings accounts. Savers should also get unbiased, clear information and advice about their choices. 

  • Workers should be able to save for retirement in the workplace. Only about half of U.S. workers—and even fewer among those from racial and ethnic groups that are discriminated against —have access to employer-sponsored retirement plans. Policymakers can implement policies that make it easier for more employers to offer retirement plans. Employers can structure simple, easy-to-understand retirement plans that ensure more participation and higher savings, such as by automatically enrolling new employees and deducting contributions directly from workers’ paychecks. Upon retirement, participants should have the ability to receive their benefits as some form of guaranteed lifetime income stream rather than as a lump sum. 

  • Policymakers should provide incentives for people to save for retirement. Government policies can provide incentives for people to both participate in retirement savings programs and increase the amount they save. Tax incentives and other mechanisms to subsidize retirement savings should be targeted to people with low and moderate incomes as well as savers with volatile income, limited access to financial institutions, differing financial goals, or a combination of these.  
  • Incentives, protections and access should extend beyond traditional employees. Self-employed individuals, independent contractors, temporary workers, and others who work outside a traditional employment relationship should have access to effectively structured retirement saving plans as well as tax incentives that encourage their participation. In addition, retirement savings programs should be designed so that accounts can be easily moved and accumulations preserved when people change jobs.

  • Employers should fulfill their pension promises. Companies that still offer defined-benefit pensions should continue to offer them, as these plans provide reliable retirement income. The plans must be adequately funded, and regulators should supervise them and enforce consumer protections. Investment and longevity risks should not be shifted to beneficiaries.  

Employment

People should have the tools they need to navigate the risks and opportunities of today’s workplace. All barriers to employment opportunities for older adults should be eliminated. Individuals age 65 and older may have some distinct needs, but support and protections are required for people of all ages.

  • Workers must be protected from discrimination in all aspects of employment. Age-related job discrimination persists despite laws prohibiting it. Far too often, employers refuse to hire or promote older workers, limit their job responsibilities, curtail their benefits, restrict their training opportunities, and target them in layoffs. They also can exclude older applicants from recruiting activities. Hiring and recruitment powered by artificial intelligence tools have made such practices more difficult to detect. Policymakers should ensure that age discrimination claims are treated on par with other forms of discrimination.

  • Employers should provide workers with flexible work arrangements and paid time off. Flexible work arrangements, such as alternative schedules and telecommuting, can make it possible for working caregivers and people with health problems or disabilities to remain on the job. Job-protected leave, such as paid time off for family and medical leave, helps people balance the demands of work with the need to take care of themselves and family members. 

  • All workers, whether in traditional or gig-economy jobs, need protections and benefits. The trend of outsourcing job tasks to independent contractors and temporary workers has left growing numbers of people without the traditional rights and benefits that go with a job. Such elusive, yet basic, protections include the minimum wage, paid overtime, occupational health and safety standards, and civil rights. Policymakers should consider strategies for how to extend current protections to all workers. 

  • Workers deserve assistance preparing for and weathering labor market changes and job displacement. Lifelong training and retraining opportunities are essential, particularly as people work longer. Programs for people who become unemployed can be strengthened. Unemployment-insurance benefits do not reach enough people who need them. 

Assistance For People With Low Incomes

Millions of people in the United States have serious, unmet basic needs. Struggling families and individuals require help to pay for the necessities of life. Programs offering such assistance should be efficiently administered and available and accessible to all individuals who need them. 

  • A strong safety net is important to help people escape poverty. Sometimes people need financial help to pay for essentials like food, housing, transportation, and health care. The government should provide such assistance to all who are eligible. The government should ensure that benefit levels are adequate and assets limits for programs do not discourage saving.  
  • Participation in low-income assistance programs should be promoted. Outreach should be an integral component of low-income assistance programs. Applications for such programs should use language that is easy-to-understand and culturally appropriate. The application process should be well-coordinated so that recipients of one assistance program are informed about and automatically enrolled in all assistance programs for which they qualify. 
  • Food insecurity has a significant impact on the health and well-being of older Americans. Older adults who lack the resources to cover their basic food needs are more likely to die of heart attacks, suffer depression, and have limited ability to live independently. Policymakers should dedicate enough money to food and nutrition assistance programs to fully serve those in need.

Budget and Taxation

Government budgets and the taxation system reflect policy priorities about how to allocate scarce resources and raise the money to pay for those priorities. Given the far-reaching consequences of these decisions, it is important that budget processes be fair and credible and that the tax system generate revenue equitably.

  • The budget process must be transparent and prudent. Proper accountability and oversight of government spending requires government officials to engage in a transparent budget process. Budget processes should use reasonable assumptions, consider straightforward analyses of impacts, and allow enough flexibility to respond to changing circumstances.

  • Policymakers need to raise revenue in a fair manner. Raising revenue should be done equitably among income groups and generations and should consider people’s ability to pay. People with lower incomes should pay a smaller share of their income in taxes and fees than people with higher incomes. People with comparable incomes should be taxed at comparable rates.
  • The tax system must produce sufficient revenue to pay for important national, state and local priorities. Revenue should be adequate to fund and sustain government spending and meet public needs. Government officials should consider the medium- and long-term effects of budget policies. If deficit spending occurs, it should be held to a manageable level to ensure fiscal stability and preserve economic growth.

  • Tax reforms should move toward simplification, not increased complexity. Taxes should be simple for taxpayers to understand and comply with and as easy as possible to administer.