The Best Life

In our dreams, perhaps, we may imagine that we live to a ripe old age, suffer few illnesses along the way, and end our lives with loved ones at our side after a brief and painless decline. That's not how most lives really end, of course. And with millions of us looking at lifespans that will take us well into our 90s, it's important to recognize that the odds of living "the good life" are much greater for those who have a workable plan for meeting their old-age health and financial needs.

While having enough money is important to achieving comfort in old age, it's not the end-all requirement. What's needed even more than financial resources is a willingness to deal realistically with what old age really means. As aging experts and older people themselves know all too well, even the most successful long life includes emotional, physical, and financial stresses and reversals. Leading the list, in no particular order:

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Helping older Americans make sound money decisions and protecting them from financial predators needs to become a top-tier objective of seniors' groups and government agencies charged with looking out for the welfare of the nation's growing elderly population. This is easier said than done, as was emphasized in a report last week from the Government Accountability Office (GAO) on elder financial abuse.

"According to experts, the illegal or improper use of older adults' funds, property, or assets is reaching epidemic proportions in this country," GAO official Kay Brown said in prepared testimony to the Senate Special Committee on Aging. "The money older adults lose in these cases is rarely recovered and this loss can undermine both the health of older adults and their ability to support and care for themselves." Tragically, much of the abuse is committed by relatives and caregivers—the very people older Americans trust to help them in their later years.

In an extensive study of how four states try to protect older citizens from financial abuse, the GAO regularly found that good intentions were outweighed by meager resources and poor coordination of efforts among a maze of state, local, and federal agencies. "Officials told us that older adults need more information about what constitutes elder financial exploitation and how to avoid it, but social services and law enforcement agencies do not always have the resources to promote public awareness in this area," Brown said.

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Variable annuities, often called mutual funds with an insurance wrapper, are going through some tough times. The products have been a salesman's dream. They pay high sales commissions and have lots of sexy (in financial terms, that is) bells and whistles that can be pitched to consumers. Because annuity gains are not taxed until withdrawn, they appeal to tax-averse investors, a group that should pretty much include all investors.

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Now that the post-election entitlements fights are back in the spotlight, raising the Social Security retirement age will return to center stage as one of the common prescriptions for closing the program's long-term funding gap. Increasing or entirely lifting the ceiling on taxable wages—set at $113,700 in 2013—is another frequently mentioned proposal. Further down on the list are measures to change the annual cost-of-living adjustment for Social Security recipients, restrict payments to high-income beneficiaries, and a slew of benefit tweaks that could have a meaningful cumulative impact on program finances.

Unlike the government's other big safety-net programs—Medicare and Medicaid—Social Security is not facing imminent funding problems. With no changes at all, the program projects that it will pay all benefits for more than 20 years and would then be able to continue paying out roughly three-quarters of benefits. Another misconception about Social Security is that it is floating in red ink. Actually, the program had a surplus of about $2.7 trillion in 2012. This cushion will grow further before being sapped by rising benefit payments triggered by millions of retiring baby boomers.

At first glance, raising the retirement age seems like a straightforward change that simply recognizes the demographic realities of aging. People are living longer than ever and are physically able to continue working into their 60s and even 70s. The economy will need more older workers, because retiring boomers are being followed by a much smaller generation of workers. Lastly, people will need to keep working more years for financial reasons—to recover from the recession and to fund retirements that will last a long time.

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