Wednesday, April 2, 2014
University of Oklahoma Professor of Law Jonathan Barry Foreman writes on "Supporting the Oldest Old: The Role of Social Insurance, Pensions, and Financial Products," for the Elder Law Journal in 2014.
He points to "longevity risk," defined as the risk of outliving one's retirement savings, as "probably the greatest risk facing current and future retirees" in the U.S. As several recent studies demonstrate, such as those cited on the Elder Law Prof Blog here, here and here, many people are not adequately prepared in terms of finances for retirement.
In responding to this risk, Professor Foreman writes thoughtfully, proposing systemic alternatives, including expansion of Social Security and SSI for "the oldest old." Professor Foreman suggests 90 years of age as the starting point for that category. In addition he proposes greater incentives for public and private employers to promote annuities and other "lifetime income products" as components of employment-based retirement packages.
He concludes with a warning based on our national history of frequently failing to make significant changes in advance of a predictable crisis:
"Social insurance programs like Social Security, Supplemental Security Income, and Medicaid will certainly need to be expanded. Workers will also need to be encouraged to work longer and save more for their eventual retirements, and both workers and retirees should be encouraged to annuitize more of their retirement savings.
While these kinds of solutions seem fairly predictable, the answers to two important policy questions have yet to be decided. First, how much will the government require the oldest old to save earlier in their lives? And second, how much will the government redistribute to benefit the oldest old? Unfortunately, if the history of the Social Security system is any indication, both government mandates and redistribution will be modest, and a significant portion of the oldest old will face their final years with inadequate economic resources."
Reading Professor Foreman's tightly focused paper suggests to me that there is, perhaps, a certain irony to all of this. The irony is that by not embracing systemic change, Americans are engaging in a form of financial roulette, betting we won't live long enough to care about the outcome of our gamble.