Although Medicare covers nearly all Americans age 65 and older, premiums, cost shares, and holes in the benefit package raise concerns about seniors' ability to pay for their health care. This brief, based on newly released data, shows that Medicare Part D, introduced in 2006 to cover prescription drugs, helped reduce out-of-pocket costs. The majority of older adults devoted less than one-eighth of their incomes to health care in 2006. However, nearly half of low-income seniors spent more than 20 percent of their 2006 incomes on health care. Medical costs for seniors should figure into the health-reform debate.

Older Americans face an uncertain retirement future. Policies are urgently needed to shore up Social Security and Medicare, get health care spending under control, and make staying in the labor force at older ages easier, while still protecting disabled workers. This policy brief summarizes a wide-ranging discussion of retirement issues to explore how public policies might adapt to an aging population.

Americans save for retirement by building wealth in personal accounts, home equity, pension plans, retirement accounts and Social Security. We use data from the Survey of Consumer Finances (SCF) and methods to estimate the wealth values of Social Security and pension plans to show how wealth builds over the life cycle. We find that the typical household accrues wealth throughout the life cycle. Households in the bottom income quintile, those that did not complete high school and minorities accumulate much less wealth than their counterparts, and Social Security accounts for a large share of their preretirement wealth.

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.

Designed to promote retirement saving, the Pension Protection Act of 2006 clarified auto-enrollment, auto-contribution, and auto-investment rules in employer 401(k) plans. Early evidence suggests that the legislation boosted these plan features and increased employee participation in 401(k) plans. It is too soon to gauge the act's ultimate success, however, because it hinges on the number of new participants that will eventually amass substantial account balances. Adding to the uncertainty, the recent LaRue Supreme Court decision, which highlights the legal liability that employers face as plan fiduciaries, could undermine future retirement security by making some employers reluctant to sponsor plans.