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How are finances experienced by older adults in general?
- less income (drops to about half or one-third, have fixed incomes unless returning to work)
- constant inflation (prices go up which make living with fixed incomes difficult)
- marriage protects (better income)
- improved over time (poverty levels decreased over time)
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Where are the sources of income shifting to in later life?
social security and assets rather than earnings income
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Who are todays oldest cohort and what were their lives like?
- children of the great depression
- less children, more jobs available, and better educated (all leading to cumulative advantage)
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What challenges did the aging baby boomers face and what were the results of those challenges?
- more economic challenges because they did not save as much as the oldest cohort
- resulted in delaying marriage for education, having fewer children and waiting to have children, and women went to work
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How does social security work and what is the future of social security?
- children pay for your social security
- less social security will be available in the future due to less workers available for the increase in retirees
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What are the options for restoring social security?
- restoring the trust fund
- means testing
- privatization
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What are the ways for restoring the trust fund and what would happen?
- raising the retirement age (leads to job discrimination, competition for jobs, and ability to obtain job varies based on life expectancies)
- reducing benefits (having to change "credit" formula and eliminate cost of living adjustments)
- increasing revenues
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What is the current means testing and how would it change based on the proposed affluence test?
- current means testing is very low providing benefits to a high range of people including the upper class
- proposed affluence test would prevent benefits to the 1% (upper class) and thus discourage saving that would potentially put some people into the upper class level
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What is the idea behind privatization and potential problems with this idea?
- providing people with the ability to save their own money
- allow the government to invest our money in stocks to save our money for us
- problems with these ideas are: not everyone has expert financial advisors or is good at saving money
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What are the private sources of income in old age?
- employer pensions (defined benefit plans and defined contribution plans)
- personal savings
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What is involved in Defined Benefit Plans?
- vesting rules (how long you have to stay with employer)
- Employee retirement income security act (required companies to establish minimum vesting standards, set more stringent funding requirements, and establish better methods of reporting plan benefits and finances to workers)
- Pension Benefit Guarantee Corporation (assists companies with paying employee defined benefit pan when company falls)
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What is involved in Defined contribution plans?
company contributes a specific amount of money to match the amount put in from paycheck (have to stay with company 5 years to receive contributions)
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