A new report by the Milken Institute details the barriers to achieving lifetime financial security, providing actions employers can take to help their employees and prospective residents.
“Shifting the Retirement Paradigm: Moving Toward Lifetime Financial Security” defines lifetime financial security as the ability to pay recurring monthly expenses, afford adequate housing, absorb a financial shock, set short-term and long-term financial goals, create a plan to save for retirement and cover long-term medical costs, and achieve a comfortable and affordable lifestyle.
The Milken Institute stated that society is at a “unique crossroads,” where an aging population and increasing longevity intersect, making improvements to the current retirement system critical.
Planning for long-term care costs
Medical and long-term care costs will be the largest or next-to-largest expense, along with housing costs, over time for most Americans, according to the researchers. Approximately 70% of those who reach age 65 will need some form of long-term care in the future, according to a study by the Urban Institute and the US Department of Health and Human Services.
The Milken Institute report recommends that everyone obtain a long-term care insurance policy or save separately for the care that may be needed. The institute encourages policymakers and government leaders to highlight this key issue, and it urges financial firms to develop innovative products that specifically fund medical and long-term care costs.
Holistic life planning
Cheryl L. Evans, JD, director at the Milken Institute and head of the MI Finance’s LIfetime Financial Security Program, is a proponent of holistic life planning, which encourages everyone to think about the life they want to live and plan accordingly.
The main takeaway from the report, she told McKnight’s Senior Living, is to create a personal plan. Rather than turning away from financing because the goal seems out of reach, Evans encourages individuals to turn toward financing by saving incrementally and reducing costs.
“It starts with looking at the life you want to live and planning,” she said. “Take care of your future self, plan for your future self. You’ll never regret making the choice.”
Ageism in the workplace
One theme of the report centers on extending working life to enhance financial security by addressing ageism and retraining needs.
According to the report, only 24% of workers feel confident that they will be able to retire comfortably, and at least 25% of Americans lack any retirement savings — half do not have access to an employer-sponsored retirement plan.
With an aging population and increasing longevity, many retirement experts believe that more Americans will need to delay traditional retirement and spend more time in the workforce. But researchers found that those assumptions don’t match reality. Although many workers will want or need to work past 60, many can’t due to age, increased caregiving responsibilities, poor health and age discrimination, according to the report.
The AARP works with employers to implement policies and practices focusing on recruiting, retaining and investing in multigenerational workforces. The association also helps experienced workers and those reentering the workforce to locate companies committed to hiring older candidates.
One recommendation in the report is to provide retraining opportunities for older workers to help them transition to new positions. Evans said that the possibilities for gig work, upskilling or retraining have opened up in the last five years. Providing options for older workers, or luring retired workers back into the workforce, is one solution for aging services providers to address the workforce crisis, according to the report.
Although the report concludes that developments in the areas of lifetime financial security and retirement security are encouraging, the researchers said that more work needs to be done by policymakers, employers, financial services firms and individuals themselves.
“There is no magic bullet, but looking at all of these things together, making a holistic plan, and doing so as soon as possible can go a long way,” Evans said.