6 Retiree Issues That Must Be Addressed

As older Americans become a larger segment of society, today’s financial and health crises will worsen.

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The so-called Congressional "Super Committee" is doing its thing, whatever that is, to come up with a package of federal budget cuts and head off a fiscal train wreck later this year. The Republican presidential contest features no shortage of proposals to cut taxes and spending. They say that's the ticket to a stronger economy. At the same time, President Obama is barnstorming the country to sell his plan to raise spending and taxes. He says that's the ticket to a stronger economy. Small wonder that public approval rates for politicians would enter negative territory if that was possible.

[In Pictures: The Best Places to Retire in 2012]

And small wonder that almost none of what's being discussed these days will address the growing problems of America's older population. While the clock ticks, older Americans continue to be the nation's fastest growing population groups. Whatever economic, health, and quality-of-life issues seniors face today are getting bigger along with those population numbers. Neither the swelled ranks of seniors nor their needs are going away,

Here are six senior issues that absolutely must be dealt with—not discussed or studied further. We can't continue to kick these cans down the road. Heck, there is a wall at the end of this road, and it's getting closer every day.

Social Security. The degree to which seniors rely on Social Security was already large before the recession, and is now even bigger. For the bottom 20 percent of Americans age 65 and older, in terms of income, 83 percent of their paltry average income of up to $12,000 comes from Social Security. For the next fifth, with incomes up to $19,880, 82 percent comes from Social Security, And for the "middle class" of senior households, with incomes between $19,880 and $31,300, 64 percent of their financial support comes from Social Security. The next highest group gets 44 percent of its income from Social Security, and the top income group of seniors in the country, with incomes of $55,890 and up, still relies on Social Security for 18 percent of its income.

[See Social Security's Long-Term Outlook.]

Don't tell these folks that the Social Security annual cost of living adjustment (COLA) doesn't matter. It's huge. Now, proposals to cut the COLA have become a popular "painless" part of proposals to improve Social Security's financial footing so it doesn't run out of money in 25 or 30 years. Given that the COLA is the only inflation protection that most retirees have, and given the enormous reliance of seniors on Social Security, are cuts in the COLA really such a hot idea? Might it not be more likely that increasing our spending on this program is really in the nation's interest?

Private Retirement Plans. Reliance on Social Security has grown in large measure because private retirement benefits have failed to shore up senior retirement finances. How could they, with average balances of only about $75,000? Spend down 4 percent of that every year and see how far it takes you. Sure, much of this might be the fault of workers who didn't put enough money into their 401(k)s and IRAs. But half of all workers aren't even in a 401(k). Unless we force employees and employers to beef up 401(k) participation, the private retirement industry does not have much chance of becoming a meaningful retirement support for most Americans. And if we're going to force people to boost their involvement in private plans, why not just mandate another layer of Social Security instead? Ask just about any retiree what carried him or her through the recession and the answer will be Social Security, not a 401(k).

Healthcare Spending. Between 2000 and 2010, consumer prices in general rose 25 percent. Prices for medical care, on the other hand, rose by 48 percent—nearly twice as much. What group is the heaviest user of healthcare? Seniors, of course. And while Social Security and its COLA have helped support senior incomes, the real purchasing power of Social Security benefits has declined because of healthcare spending. The poverty rate for people age 65 and older was only about 9 percent last year, the lowest of any major demographic group. Factoring in healthcare expenses, however, nearly doubles the effective poverty rate to 1 in 6 older Americans.

[See 10 Steps to Fine-Tune Your Retirement Plan.]

Healthcare Quality. Medicare plans, like 401(k)s, often suffer from poor consumer choices in purchasing plans and then under use of the plans once they're in place. The health reform law expanded an already impressive list of free preventive and wellness medical procedures, including an annual physical exam. Yet many Medicare beneficiaries don't take advantage of these free services. And relatively few seniors switch Medicare insurance plans each year during open enrollment, even though experts say they could reduce their costs and improve the quality of their care by being better shoppers. How do we get older people to take better care of themselves, particularly at a time of shrinking dollars available for healthcare? Many observers point to a lot of good things in the health reform law that could help achieve quality improvement and cost containment goals. Yet many Americans oppose the law, it faces serious legal challenges, and is in Republican crosshairs for repeal.

Long-Term Care. The only U.S. "plan" to deal with long-term care expenses remains spending down your assets to pay for care and then going on Medicaid when you're just about bankrupt. How's that going to work when the volume of people needing care is double what it is today and the Medicaid program has been stripped down because it's already bankrupting us at the state and federal level? Yet every survey of the topic concludes that roughly two-thirds of elderly persons will need extended care at some point in their lives, and that we cannot afford this care, which can easily top $100,000 for a year in a nursing home in a pricey metro area. Fewer than 10 percent of older people have private long-term care insurance, which is expensive and can be hard to get. The bare-bones long-term insurance plan included in the health reform law was recently put in moth balls by the government because it wouldn't have worked. The program probably would have attracted people most likely to need care in the future, which would have required raising premiums so high that few people would have bought the coverage. The response to the cancellation has mostly amounted to cackling "I told you so's" from Obamacare opponents and "let's try harder" reactions from supporters, who pretty much knew all along that the program wouldn't work as designed. Meanwhile, the need and the price tag for a workable solution continue escalating.

Senior Housing. We had a senior housing shortage even before the real estate market tanked, along with the stock market and the economy. Housing is still living on K-rations and there is very little new building of apartments and other group complexes to house seniors. High-end retirement communities still haven't seen enough new consumer demand to justify meaningful expansion. And no one, it seems, either wants to build or live in a nursing home. Making lemonade out of this mess, many senior advocates are boosting the idea of "aging in place" so seniors can stay in their homes as they age. However, once the rhetoric has died down, universal design improvements to housing and the development of senior-friendly communities are few and far between.

Twitter: @PhilMoeller