Expect more holes in social safety net

The social safety net that protects seniors already is frayed, but expect politicians to try poking some new holes in the mesh during the 2012 campaign season.

Lawmakers and presidential candidates have batted around proposals to privatize Social Security, raise its retirement age or reduce cost-of-living adjustments. Medicare privatization has been pushed in three or four versions; any of the options would slash the value of benefits by changing Medicare from a program of defined benefits to one of defined contribution levels.

Against that backdrop, it's worth stopping and asking: What is the state of older Americans and our system of retirement? Before the debate kicks into high gear on just how much to shred the safety net, let's consider just how much the recession has ravaged the economic security of seniors:

Retirement confidence is low The annual Retirement Confidence Survey from the Employee Benefit Research Institute finds that the confidence of Americans in their ability to afford a comfortable retirement has hit a new low. The percentage of workers who say they're "not at all confident" about having enough money for a comfortable retirement grew from 22 percent in 2010 to 27 percent in 2011, the highest level measured in the study's 21-year history.

Meanwhile, Americans are pushing back their expected retirement ages. For example, 15 percent of Americans now tell the institute they expect to work until age 70, up from 11 percent as recently as 2006.

Assets are inadequate The median level of financial assets in 2007 -- before the market crash -- was about $72,000 for households approaching or entering retirement (age 55 to 64), according to a recent report from the U.S. Government Accountability Office (GAO). Assuming a 4 percent withdrawal rate in retirement, those assets would replace only about 5 percent of annual household income for median-earning families ($55,000), GAO says. Most financial planners agree with that 4 percent withdrawal rule of thumb -- but most also tell their clients that they should aim to replace 80 percent of pre-retirement income.

Forty-four percent of full-time workers in their 50s have neither a defined benefit (DB), nor a defined contribution (DC) pension from their current employer, according to GAO.

For many, Social Security is everything Americans over 65 in the lowest income groups depend on Social Security benefits for 83 percent of total income, GAO found; middle income seniors depend on Social Security for 64 percent of total income.

Joblessness has jumped Unemployment among workers over age 55 has doubled since the recession began, according to GAO. Once older workers do lose their jobs, it takes much longer to find new ones -- if they're able to find employment at all. The U.S. Bureau of Labor Statistics report for October stated that it took 52.9 weeks for workers over age 55 to find new jobs, compared with 37.3 weeks for younger workers.

People are making difficult choices Nearly a quarter of respondents to an AARP survey of Americans over age 50 said that they or someone in their family had exhausted all of their savings during 2007-10, while more than 12 percent stated that they or someone in their family had lost their health insurance. Among this group, nearly half reported that they delayed getting medical or dental care, or delayed or ceased taking medication.

The Government Accountability Office report was produced at the request of the U.S. Senate subcommittee on Primary Health and Aging of the Committee on Health, Education, Labor, and Pensions. At a committee hearing on the report in October, Sen. Al Franken (D-Minn.) asked one of the report's principal researchers what older Americans reeling from the recession could do to rebuild their retirement savings.

"I wish I knew," replied Barbara Bovbjerg, GAO's director of education, workforce and income security issues, according to a transcript of the briefing. "If you're already retired and you're reliant on a 401(k) or an IRA, you're reliant on the financial markets. You are probably really reducing your spending on other things. You're probably making a significant change to the standard of living."

NOTE TO READERS: This is Mark Miller's last column for Tribune Media Services. Starting next week, Jill Schlesinger, editor-at-large for CBS Moneywatch, will be writing about financial issues for readers who are planning to retire or who have already put their careers aside.