sure on retirement income security may come from policy changes that address the excess of current government promises to pay Social Security, Medicare, and Medicaid over the projected tax revenues available to fund those programs.

In the absence of public policy reforms or new government programs, some households will be able to take steps to mitigate the negative effects that population aging may have on their retirement security. People may elect to work longer, save more, reallocate assets to less risky investments, change retirement consumption plans, or diversify retirement-related risks through the purchase of annuities or other insurance products—for example, long-term care insurance. Yet governments, too, can promote retirement security by adopting a holistic view of retirement policy that ensures that negative impacts from prospective reform of support systems are at least partially offset by policies and programs that strengthen household saving and the workplace-based retirement system.

The committee begins by reviewing data on U.S. saving and wealth patterns and showing that current private and public saving rates by and for workers are probably inadequate to provide a level of future retirement resources similar to that of recent retirees. While such a resource shortfall will result in economic stress on households, governments, and the macroeconomy, these concerns are not insurmountable. Nevertheless, addressing them effectively will require a renewed partnership between households, employers, and the government to ensure that retirement risk burdens are distributed fairly and that future generations of workers have a secure retirement.


To provide context for the rest of the chapter, the committee begins by examining how national and household wealth in the United States, as well as saving rates and retirement adequacy, have changed over the recent past. As will be seen, personal household saving has increased of late, but these patterns are offset by the largest federal budget deficits in decades.

Measuring Household and National Wealth

Gross national wealth (or worth) equals the total value of national assets (financial and nonfinancial) in an economy. Net national wealth, as defined in the Federal Reserve’s Flow of Funds Accounts (2011), is equal to total assets less total liabilities; this metric provides a broad-based measure of resources available to finance future consumption. Figure 7-1 shows the evolution of real (2005 dollars) net worth for the period 1960–2010, and indicates that Americans’ real net worth grew steadily over the past

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