Publications on Economic Well-Being

The slumping stock market, falling housing prices, and weakening economy have serious repercussions for older Americans who are approaching retirement or already retired. Seniors have little time to recoup the values of their homes, 401(k) plans, and individual retirement accounts-all important parts of their retirement nest eggs. More and more older adults are working to bolster their retirement incomes, but the rising unemployment rate limits their prospects. This fact sheet examines the impact of the ongoing economic turmoil on retirement savings, home values, and retirement decisions.

Retirees who want to stay in their homes can tap into home equity through a reverse annuity mortgage that pays them a tax-free monthly payment. We show that conversion of home equity into a reliable income stream could provide a significant boost in retirement income, particularly for low-income homeowners with significant equity. The cost of initiating a RAM, however, and many older adults' concerns about borrowing against this asset have limited interest in RAMs. Recent turmoil in the mortgage market and declines in home prices raise additional uncertainties about the potential for using home equity to boost retirement incomes.

Low-wage workers find it difficult to save for retirement. Without savings, they will have to rely on Social Security and pensions. Yet these income sources are based on earnings, which means that low-wage workers will have lower Social Security and pension benefits than higher-wage workers. This brief assesses whether boomers with low earnings between ages 22 and 62 are destined for low income at age 67. We find that nearly two-thirds of this group will end up with low income at retirement, but more than one-third will manage to defy the odds and escape being among the lowest-income older Americans.

Employment is now less physically demanding and less likely to entail difficult working conditions than before, a trend that might spur employment at older ages. However, the shift to a knowledge-based economy has increased cognitive demands and placed a premium on mastering the latest technical skills. Between 1971 and 2006 the share of workers in cognitively demanding jobs (requiring such skills as reasoning, writing, and decisionmaking) increased from 25.7 to 34.8 percent. This development may curtail opportunities for older workers with limited education or those who lack recent training.

In April 2008, the Urban Institute convened an expert panel of researchers inside and outside of government agencies to discuss how best to perform distributional analyses of proposals to reform Social Security and private pensions. The panel discussed key technical issues, including how to measure the baseline income distribution and characterize current policies, how to address changes that alter the timing of taxes and benefits, and how to measure and report gains and losses from policy interventions. The group revealed diverse viewpoints, but we conclude that current methods used in recent UI research fall within the range of reasonable alternatives.