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The Four Pillars of Retirement Security Social Security Pensions & Savings Earnings Health Insurance
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Social Security Pensions/Annuities Public Assistance Assets Misc. Other Wages Source: March 2004 Current Population survey Percent of retirement income from all sources
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Social Security: Cash Flow Estimated OASDI and Cost Rates, 2001-50 [as a % of taxable payroll] 8 9 10 11 12 13 14 15 16 17 18 19 20012005201020152020202520302035204020452050 Year Percent of Taxable Payroll 2018
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Social Security: Projected Trust Fund Assets $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 20012005201020152020202520302035204020452050 Year Billions of Dollars Assets at end of year, including interest 2042 2028 We are here (in current dollars)
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Significant Savings Required at All Income Levels to Maintain Standard of Living in Retirement Pre-Retirement Family Income $50,000$80,000$120,000 Income at 70% replacement level$35,000$56,000 $84,000 Income from Social Security (at Full Retirement Age)$20,436$26,820 $35,364 Income needed from savings and investments$14,564$29,180 $48,636 Principal needed at retirement to generate above income (if withdrawn at 4% per year) $364,000$729,500$1,215,900 Extra needed for average medical costs per couple $300,000 TOTAL savings needed for a secure retirement $664,100$1,029,500$1,515,900
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Defined-Benefit Pensions Disappearing Source: Alicia H. Munnell, Kevin E. Cahill, and Natalia A. Jivan, An Issue In Brief, Number 13, Center for Retirement Research at Boston College, September 2003. % of Wage & Salary Workers Covered by Plan Type, 1981-2001
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Median Amounts in Retirement Accounts by Age Group, 2001 and 2004 Source: Brian K. Bucks, Arthur B. Kennickell, and Kevin B. Moore, “Recent Changes in U.S. Family Finances: Evidence from the 2001 and 2004 Survey of Consumer Finances,” Federal Reserve Bulletin, January, 2006. (in thousands of 2004 dollars)
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I in 4 people between 45-54 are taking money out of 401(k)s, IRAs
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Personal Saving Rates Have Declined Steadily for Two Decades Source: Federal Reserve Board, Flow of Funds Accounts, Table F10, Derivation of Measures of Personal Saving, various years. Trends in Personal Saving Rates, 1985-2006
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Boomers’ Net Worth Median Net Worth Source: AARP Public Policy Institute research 2004 figures, include home equity; Boomer ages 42-60 currently
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Older Americans are Working Longer Source: U.S. Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey, 1985-2005, accessed at http://data.bls.gov/PDQ/outside.jsp?survey=ln. Labor Force Participation Rates for Persons Aged 55 and Older, by Age Group, 1985-2005
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Options to Strengthen Social Security...
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Raise payroll tax ½ percentage point24% Include newly-hired State/Local workers9% Raise max. wages subject to Soc Sec tax43% Gradually raise age of full benefit to 70 38% Increase calculation period to 38 years16% Index benefits for “average longevity”25% Reduce benefits for new retirees ( by 5%) 26% Diversify 15% of Trust Fund investments16% “Superlative” index the COLA calculation14% Raise the earliest eligibility age10%
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Social Security Poll Results Reform OptionsWould ConsiderFAVOR Increase wage cap to $150,00081%71% Increase FICA ½ percent72%59% Lower benefit formula 10% for higher income only 67%56% Invest small portion (15%) of Trust Fund 54%40% Raise retirement age to 7047%33% Index benefits for average longevity46%30% 5% benefit cut for NEW retirees43%28% Convert from wage-indexing to modified price-indexing 37%26% PUBLIC OPEN TO ADEQUATE ADJUSTMENTS
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Social Security Poll Results RepublicanDemocrat Reform Options FAVORConsiderFAVORConsider Increase wage cap to $150,00072%83%72%80% Increase FICA ½ percent57%68%62%76% Lower benefit formula 10% for higher income only 53%64%59%69% Invest portion (15%) of Trust Fund50%63%34%50% Raise retirement age to 7037%52%32%44% Index benefits for avg. longevity32%49%30%44% 5% benefit cut for NEW retirees25%43%29%45% Convert from wage-indexing to modified price-indexing 25%36%27%38% NO LARGE DIFFERENCES BY PARTY
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Social Security Poll Results Retirement Savings AccountsFAVOR Employers should be required to offer payroll deductions to an IRA 79% All workers should be enrolled in and contribute to a 401(k) plan, unless they opt out 75% Favor individual retirement savings accounts that supplement Social Security, with contributions from both employee and employer 71% PUBLIC FAVORS SUPPLEMENTAL SAVINGS
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Medicare Reform
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Source: MedPAC analysis of the Medicare Current Beneficiary Survey, Cost and Use file, 2004 People on Medicare By Income
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(% "not a problem") (% “always") (% "not a problem") (% “responding “9“ or “10”) CAHPS Health Plan Survey Comparison 2006 Source: 2006 CAHPS Health Plan Survey Chartbook Medicare Medicare beats Commercial Plans in Patient Satisfaction last 5 years
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Rise in Health Care Costs per capita Source: Health Affairs, Trends, Health Spending Projections, February 2007 Projected
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NOTES:
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Costs for Total Medicare Program Billions Overall Medicare Costs Projection Source: CMS, National Health Accounts
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Costs for National Health Expenditures Billions Overall Medicare Costs compared to Overall Health Costs Source: CMS, National Health Accounts Costs for Total Medicare Program Projection
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Analysis of Cost Growth over 4 years Source: National Health Expenditures Accounts: Definitions, Sources, and Methods used in the NHEA 2004, CMS General Inflation Medical Inflation above general inflation Population Growth Intensity, Volume, Technological Change & other residual factors Factors in Healthcare Cost Growth 2000-04
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Annual Malpractice Premiums compared to total HC Expenditures Source: In 2005, total National Health Expenditures were $1.988 trillion, CMS. The 2005 amount spent on malpractice insurance was $12 billion, according to NAIC $1.988 TRILLION in Health Care Expenditures $12 billion in Malpractice Premiums
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Malpractice Premiums as a Percent of Physician Gross Income Source: www.cms.hhs.gov/MedicareProgramRatesStats/downloads/mktbskt-economic-index.pdf 2006, 2005 datawww.cms.hhs.gov/MedicareProgramRates Percent of Physician Income 2005
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Effect of Excess HC Cost Growth
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NOTES:
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4 Health Sectors with Biggest 10-year Cost Increases, 1995 through 2004 Source: Calculations by PPI AARP using Centers for Medicare & Medicaid Services, Office of the Actuary, CY 1960-2004 National Health Expenditure Data Hospitals Rx Drugs Physician & ClinicalServices Administration & Net Cost of Private Ins 27% 21% 15% 9%
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Percent of Population 100% 20 40 60 80 20%40%60%80%100% 0% 3% of costs for 50% of people 22% of costs for 1% of people % Health Care Dollars Spent Good Chronic Care Management Key to a Large Segment of Cost SOURCE: Conwell & Cohen, Agency for Healthcare Research and Quality, Statistical Brief #73, March 2005
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Shared responsibility is necessary BusinessGovernment Individuals
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2004 Election Analysis –About 43% of the total vote was cast by 50+ –About 17% was cast by Americans 65+ –About 17% was cast by Americans under-30
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