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Pension Research Council Director speaks on new strategies for retirement(News-Gazette, The (Champaign-Urbana, IL) Via Acquire Media NewsEdge) Mar. 10--CHAMPAIGN -- To accommodate folks living longer, the United States must "get people to save more, work longer and retire less," a noted expert on retirement income said. Fewer than a third of people have figured out how much they need to save for retirement, said Olivia Mitchell, director of the Pension Research Council at the University of Pennsylvania's Wharton School of Business. Some have underestimated how long they'll live, and others don't realize how much they'll have to pay for health care, Mitchell said Monday during a lecture at the University of Illinois College of Law. Classically, people looking at their retirement resources have expected 20 percent to come from pensions, 20 percent from stocks, bonds and cash, 20 percent from housing and 40 percent from Social Security benefits, she said. But the poorest third of the population, in terms of income, is "seriously under-diversified," depending almost totally on Social Security for their retirement income, Mitchell said. Social Security itself is "gravely underfunded" and expected to run into cash-flow problems in about eight years, she said. Mitchell said part of America's saving problem lies in "tremendous financial illiteracy," with many people unable to understand how compound interest can affect their savings. Others fail to seek out financial advisers, instead relying on input from relatives, their own judgment or even prayer, she said. "We need to teach people about what they know they should be doing," she added. Mitchell said that in 1950, only 4 percent of the population was 65 or older. Today the percentage is 14 percent, and by 2050, it's expected to reach 20 percent. The number of extremely old people is rising, too. In 1975, there was only a 37.6 percent chance that at least one partner in a marriage would live to the age of 90. By 2005, the percentage had risen to 56.9 percent, and by 2025, it's projected to reach 64.4 percent. "As the world ages, it's growing more female," Mitchell said, noting that female life expectancy outstrips that of men. Aging is "a feminist issue as well," she said. Showing how much health care can cost in retirement, Mitchell said a 65-year-old man can expect to spend $159,000 on out-of-pocket medical and drug expenses over his lifetime, and a 65-year-old woman can expect to spend $184,000. Neither includes nursing home costs, she said. Mitchell said Social Security has an unfunded liability of $13 trillion, and Medicare an unfunded liability of $34 trillion. To deal with Social Security, the nation will either need to raise taxes 50 percent to80 percent or cut scheduled benefits by 25 percent to 30 percent, she said. Social Security benefit expenditures are rising faster than Social Security tax receipts, and the trend lines for taxes and benefits must be brought back together, Mitchell said. "Every day we wait, it gets worse," she said. "As my mother says, 'Time is money.' There's no time to lose." To see more of The News-Gazette, or to subscribe to the newspaper, go to http://www.news-gazette.com. Copyright (c) 2009, The News-Gazette, Champaign-Urbana, Ill. Distributed by McClatchy-Tribune Information Services. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. |