to be modest. This is not to minimize the impact on particular government programs, which will be large.

The living standard of older people depends in part on their prior saving and asset accumulation. Research reviewed by the committee suggests that between one-fifth and two-thirds of the older population have undersaved for retirement, and the committee expects that the elderly will face greater economic difficulties in retirement than they have in the past, a prospect worsened by their poor financial literacy.

While population aging is likely to result in a larger fraction of national output being spent on consumption by older persons, this does not pose an insurmountable challenge provided that sensible policies are implemented with enough lead time to allow companies and households to respond. The ultimate national response will likely involve some combination of major structural changes to Social Security, Medicare, and Medicaid, higher savings rates during working years, and longer working lives. The committee called attention to the cost of delaying our response to population aging. The longer our nation delays making changes to the benefit and tax structures associated with entitlement programs for older individuals, the larger will be the “legacy liability” that will be passed to future generations. The larger this liability, the larger the increase in taxes on future generations of workers, or the reduction in benefits for future generations of retirees, that will be required to restore fiscal balance. Decisions must be made now on how to craft a balanced response.

It became clear during the work of this committee that there are many topics for which more knowledge would help inform the decision-making process. This report offers recommendations for further research in four areas: demographic and health measurement and projections; capacity to work and longer working life; changes in consumption and saving; and modeling efforts and data needs.

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