Experts Seeking Appropriate Policy Response to $45 Billion Retiree Income Shortfall Predicted for 2030

2/13/2004

From: Jim Jaffe, 202-775-6353 or jaffe@ebri.org, Jack VanDerhei, 610-525-6139 or jack@vanderhei.com, both of Employee Benefit Research Institute

WASHINGTON, Feb. 13 -- Government programs that provide aid to the indigent elderly will be severely stressed and find it difficult to respond to a projected $45 billion retiree income shortfall in 2030, according to a variety of experts. Their comments, contained in the February 2004 Issue Brief, published by the Employee Benefit Research Institute, suggests that the policy community has only begun to wrestle with the parameters of the problem.

A continuation of current behaviors will result in an annual shortfall of at least $45 billion by 2030 between the amount retired Americans need to cover basic expenses and what they have, according to a new study by the Employee Benefit Research Institute in collaboration with the Milbank Memorial Fund. That study was the starting point of the December 2003 policy forum on the question sponsored by EBRI's Education and Research Fund.

Few suggested that the savings rate would rise to solve the portion of the problem faced by middle- and upper-income earners who simply aren't saving enough outside of what they are putting into retirement plans. But there was greater concern about those in the lowest income quartile -- particularly single women -- where saving enough was a logical impossibility. States that might be asked to make up the difference, particularly by expanding their Medicaid programs, are currently cutting back because of revenue shortfalls. One speaker suggested that changing tax incentives, which now provide the greatest help to the most affluent Americans -- the group most likely to have enough money for retirement -- could help those with lower earnings.

"This is the beginning of an important debate, " said EBRI President and CEO Dallas Salisbury, "that will have a big impact on how well America's senior citizens live in the decades ahead."