future changes well in advance so that people can structure their plans accordingly. Additionally, policies need to be developed that encourage better adaptive behavior on the part of workers and companies.

Aside from transfer programs, many other public programs could help smooth the transition to an aging society. For instance, programs that make the workplace friendlier for older workers might encourage them to stay at work or to take part-time employment (Chapter 5). Much analysis remains to be done to develop financial instruments such as improved reverse mortgages as well as better long-term care and annuity products. And not least, the nation will need to find ways to improve financial literacy for people who increasingly will manage their own retirement finances from the first days of joining the labor force to the later days of deciding how and when to spend money in retirement.

SUMMARY

The main message of this report is that the committee sees population aging as posing serious but not insurmountable challenges for the United States. From an economic point of view, a larger fraction of national output will need to be spent on consumption by the elderly. Yet an aging population also offers many opportunities, as long as sensible policies can be implemented with some lead time to allow companies and households to respond.

The committee has outlined several ways that the nation could adapt and adjust to the changing demographic structure. Encouraging later retirement is one useful route. It is unlikely to be hindered by poor health or disability. Such a trend could be helped through changes in the structure of pension and health programs and through a continued shift toward DC plans.

Additionally, public policies could facilitate greater saving during the working years as well as provide better financial instruments to turn financial and housing assets into income streams that protect people against the vagaries of longevity. Improving the nation’s financial literacy will also be critical in a world where people face a larger number and more complex array of choices about working, saving, and retirement.

Moreover, because of the prospect for a sharply rising federal debt, the nation will need to balance the priorities of different programs as well as provide additional revenue streams devoted to programs for the elderly. There is little doubt that there will need to be major changes in the structure of federal programs, particularly for health.

The committee concludes that our nation must take action soon, rather than simply continuing with the same policies and practices as in the past. Population aging, unlike other aspects of the future, is a certainty, and many



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