[Senate Hearing 111-49]
[From the U.S. Government Publishing Office]



                                                         S. Hrg. 111-49
 
         BOOMER BUST? SECURING RETIREMENT IN A VOLATILE ECONOMY

=======================================================================

                                HEARING

                               before the

                       SPECIAL COMMITTEE ON AGING
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             WASHINGTON, DC

                               __________

                           FEBRUARY 25, 2009

                               __________

                            Serial No. 111-1

         Printed for the use of the Special Committee on Aging



  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html


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                       SPECIAL COMMITTEE ON AGING

                     HERB KOHL, Wisconsin, Chairman
RON WYDEN, Oregon                    MEL MARTINEZ, Florida
BLANCHE L. LINCOLN, Arkansas         RICHARD SHELBY, Alabama
EVAN BAYH, Indiana                   SUSAN COLLINS, Maine
BILL NELSON, Florida                 BOB CORKER, Tennessee
ROBERT P. CASEY, Jr, Pennsylvania    ORRIN HATCH, Utah
CLAIRE McCASKILL, Missouri           SAM BROWNBACK, Kansas
SHELDON WHITEHOUSE, Rhode Island     LINDSEY GRAHAM, South Carolina
MARK UDALL, Colorado
KIRSTEN GILLIBRAND, New York
MICHAEL BENNET, Colorado
ARLEN SPECTER, Pennsylvania
                 Debra Whitman, Majority Staff Director
             Michael Bassett, Ranking Member Staff Director

                                  (ii)


                            C O N T E N T S

                              ----------                              
                                                                   Page
Opening Statement of Senator Herb Kohl...........................     1
Statement of Senator Mel Martinez................................     2
Statement of Senator Robert P. Casey, Jr.........................     6
Statement of Senator Mark Udall..................................     6
Statement of Senator Blanche Lincoln.............................     7

                                Panel I

Statement of Jeanine Cook, Baby Boomer, Myrtle Beach, SC.........     8
Statement of Dallas L. Salisbury, President and CEO, Employee 
  Benefits Research Institute, Washington, DC....................    12
Statement of Dean Baker, Co-Director, Center for Economic and 
  Policy Research, Washington, DC................................    45
Statement of Ignacio Salazar, President and CEO, Ser-Jobs for 
  Progress, Washington, DC.......................................    51
Statement of Barbara B. Kennelly, President and CEO, National 
  Committee to Preserve Social Security and Medicare, Washington, 
  DC.............................................................    55
Statement of Deena Katz, CFP, Associate Professor, Texas Tech 
  University, and Chairman, Evensky & Katz, Coral Gables, FL.....    62

                                APPENDIX

Written Testimony submitted by Thomas M. Shapiro, Ph.D., 
  Director, Institute on Assets and Social Policy Pokross 
  Profressor of Law and Social Policy, Brandeis University.......    89
Statement by Mellody Hobson, President, Ariel Investments, LLC 
  and Chairman Ariel Mutual Funds Board of Trustees..............    90
Statement submitted by Women's Institute for a Secure Retirement 
  (WISER)........................................................    92
Written Testimony submitted by Richard W. Johnson, Senior Fellow, 
  The Urban Institute............................................    96
Statement from Matthew D. Hutcheson, Independent Pension 
  Fiduciary......................................................   105
Statement from the American Benefits Council.....................   115
Information submitted by Joseph C. Nagengast, Target Date 
  Analytics......................................................   135
Information submitted by Institute on Assets and Social Policy...   151
The Ariel-Schwab Black Paper.....................................   176

                                 (iii)



         BOOMER BUST? SECURING RETIREMENT IN A VOLATILE ECONOMY

                              ----------                              --



                      WEDNESDAY, FEBRUARY 25, 2009

                                       U.S. Senate,
                                Special Committee on Aging,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:35 a.m. in 
room SD-106, Dirksen Senate Office Building, Hon. Herb Kohl, 
Chairman of the Committee, presiding.
    Present: Senators Kohl [presiding], Lincoln, Casey, 
Whitehouse, Udall, Gillibrand, Martinez and Specter.
    Index: Senators Kohl, Martinez, Casey, Udall, and Lincoln.

             OPENING STATEMENT OF SENATOR HERB KOHL

    The Chairman. Good morning to everyone. Thank you for being 
here, first and foremost. I would like to extend a warm welcome 
to Senator Mel Martinez, the Aging Committee's new ranking 
member, hailing from the great State of Florida. He is no 
stranger to the constituency we serve, and the issues we 
confront.
    I'm so pleased to join together with Ranking Member Mel 
Martinez in leading this Committee, and I'm confident that he 
and his staff will contribute greatly to the Committee's 
agenda.
    With the country aging at a rate never seen before, the 
issues that come before this Committee are timely, urgent and 
ever-changing. Just two years ago this month, we held a hearing 
to examine how the onslaught of baby boomer retirees would 
affect our, then robust, economy.
    But what a difference two years can make. Today we will 
turn that issue on its head as we examine how the now flailing 
economy is affecting baby boomers.
    For the millions of Americans who thought they were on the 
precipice of retirement, a dark cloud has rolled in and 
obscured the golden years they were just beginning to see over 
the horizon.
    This morning, we will hear from a woman whose struggles 
typifies those that many boomers are now experiencing. She is 
not alone. Over the past year, 401K plans and other defined 
contribution participants have experienced devastating losses.
    In these hard times, American companies have also had to 
cut back benefits. Thousands of American employers, large and 
small, have stopped providing 401K plans, 401K matching 
contributions to their employees. With the volatility in the 
stock market, many Americans are left wondering whether they 
should continue investing in their 401K at all.
    The answer is yes, they should continue to save for their 
retirement, but perhaps with updated strategies, and more 
reliable investments. That is why, with more and more Americans 
relying on 401Ks and other defined contribution plans as their 
primary source for retirement savings, we need to make sure 
their savings are well protected with strong oversight and 
regulation.
    In the past, this Committee has called for the disclosure 
of 401K fees to employers and participants and a ban on ill-
conceived products like the 401K debit card.
    Today, we will take a close look at 401K target day funds, 
which are designed to gradually shifts to more conservative 
investments, as workers approach their retirement.
    A Committee investigation of investment funds designed for 
people planning to retire in 2010 has found that there's a wide 
variety of stock exposure. The results of excessive risk can be 
devastating for those on the brink of retirement. One 2010 fund 
lost 41 percent in 2008.
    Despite their growing popularity, there are absolutely no 
regulations regarding the composition of these funds. I've sent 
letters to Secretary Linda, Holly Solis, and U.S. Securities 
and Exchange Commission Chairman, Mary Shapiro, asking them to 
consider regulations to better define target date funds. 
Depending upon their response, I may consider legislation 
options, as well.
    Today's hearing will also focus on the housing downturn, 
and its affects on seniors and retirees, so many Americans who 
were counting on the value of their home to provide a secure 
retirement, are now at a loss and wondering what to do.
    The result is that older Americans are forced to consider 
all their options. For many of them, the economic downturn will 
mean working longer. One of our witnesses today will describe 
the labor market for older workers, and the challenges they 
face.
    To confront those challenges, I'm introducing several 
pieces of legislation this week that would make it easier for 
older Americans to continue working past retirement age.
    Finally, experts will share with the Committee how boomers 
should move forward with a revised plan to shore up their 
retirement savings. Now, more than in recent decades, older 
Americans will need to rely on our bedrock government programs 
like social security and Medicare, and many may find some 
relief from provisions passed in the recent stimulus package.
    None of us can say when we will see the end of this 
economic downturn. The best we can do is to reassess, 
reallocate, and recommit to finding stability in a volatile 
economy.
    We thank the witnesses for being with us today, and we now 
turn to Ranking Member Martinez for his statement.

               STATEMENT OF SENATOR MEL MARTINEZ

    Senator Martinez. Mr. Chairman, thank you so very much, and 
thank you for your very kind welcome to the Committee. I really 
have looked forward to working with you. I have been a very 
interested member of the Committee, and now as a--in a position 
of ranking member--it's a real honor to work with you, and a 
pleasure, and I know there's so much that working together, we 
can accomplish for the good of the American people, 
particularly those--the aging population of our country.
    I want to thank our panelists for coming today to join us 
on this very important topic of the issues impacting America's 
baby boomer and retiree generation. One of the greatest 
concerns of these Americans is the current financial crisis, 
and what it meant for their future. From losses in the stock 
market to declining home values, those focused on retirement 
are right to be concerned about their financial future.
    According to the Employee Benefit Research Institute, 
Americans aged 55 to 64, who have been enrolled in a program 
for 20 years or more, saw the value of their 401K retirement 
account decline by an average of 20 percent this year.
    One consequence of the worsening economy, is that an 
increasing number of Americans have had to put retirement on 
hold. According to a recent AARP study, an estimated 70 percent 
of employee 62 and older plan to continue working. Numbers from 
the Bureau of Labor Statistics also suggest this trend. The 
number of Americans 55 and older with full-time jobs increased 
from 15.5 million in 2005, to almost 18 million in 2008.
    Another concern among baby boomers and retirees is the 
state of the housing market. For many Americans, a home is the 
largest investment a family will make. As widespread 
foreclosures continue to take a direct toll on families, the 
value of nearby homes is also negatively affected. This is a 
huge concern for seniors looking to downsize their homes, and 
use the proceeds of a home sale to help with their retirement.
    Every American should have the opportunity to live 
comfortably after retirement. Through some financial planning, 
aging Americans can better plan for their future, by learning 
ways to save enough to enjoy retirement. I have talked to a 
number of these individuals in my home State of Florida, where 
an estimated 17 percent of the residents are 65 and older, 
compared to 12 percent of the nation, as a whole.
    Among the top concerns for financial security--preparing to 
live on a fixed income, paying healthcare and hospital bills, 
and finding affordable housing during retirement. I look 
forward to working with Chairman Kohl to develop practical 
solutions to help aging Americans weather the current storm, 
and prepare for some of the challenges that lie ahead.
    I also look forward to hearing from our experts joining us 
today, here. One of our experts will discuss the importance of 
entitlement reform, which I believe is necessary to ensure the 
availability of programs vital to seniors. Programs such as 
Medicare, Medicaid, and Social Security could be rendered 
insolvent, if Congress fails to act.
    To address this problem, I support the Conrad-Gregg bill 
that would help Congress and the President find the political 
will to address the nation's long-term fiscal imbalances. The 
bill would establish a task force that would recommend changes 
to current law related to spending and taxes, especially on 
entitlement programs.
    The task force will consist of equal number of an equal 
number of Republicans and Democrats, and two members from the 
Administration. This effort will ensure bipartisan solutions to 
entitlement reform, and long-term fiscal stability.
    The plan the task force sends to Congress will require a 
super-majority for passage, meaning that we would truly reach a 
bipartisan solution to one of the most vexing issues facing our 
nation today. Decisions on entitlement solvency have been 
delayed for far too long.
    I want to thank the panel for being here today, and for 
joining us to lend your expertise to these serious problems 
that we face. I know that from your information that you will 
share, we will be better informed, and better able to guide 
legislation that will need to be looking at the entirety of the 
landscape that we face today, which is so different than what 
we have had in year's past. Oh, thank you for being here, I 
look forward to hearing from you.
    [The prepared statement of Senator Martinez follows:]

               Prepared Statement of Senator Mel Martinez

    Thank you Chairman Kohl. It gives me great pleasure to take 
part in my first Aging Committee Hearing as Ranking Member. I 
would like to thank our panelists for joining us today to 
discuss several issues impacting America's Baby Boomers and 
retirees.
    Among the greatest concerns of these Americans is the 
current financial crisis and what it means for their future. 
From losses in the stock market to declining home values, those 
focused on retirement are right to be concerned about their 
financial future. According to the Employee Benefit Research 
Institute, Americans age 55 to 64 who have been enrolled in a 
program for 20 years or more saw the value of their 401k 
retirement accounts decline by an average of 20 percent last 
year.
    One consequence of the worsening economy is that an 
increasing number of Americans have had to put retirement on 
hold. According to a recent AARP study, an estimated 70 percent 
of employees 62 and older plan to continue working.
    Numbers from the Bureau of Labor Statistics also support 
this trend. The number of Americans 55 and older with full-time 
jobs increased from 15.5 million in 2005 to 17.9 million in 
2008.
    Another concern among Baby Boomers and retirees is the 
state of the housing market. For many Americans, a home is the 
largest investment a family will make. As widespread 
foreclosures continue to take a direct toll on families, the 
value of nearby homes is also negatively affected. This is a 
huge concern for seniors looking to downsize their homes, and 
use the proceeds of a home sale to help with retirement.
    Every American should have the opportunity to live a 
comfortable life after retirement. Through sound financial 
planning, aging Americans can better plan for their future by 
learning ways to save enough and enjoy retirement. I have 
talked to a number of these individuals in my home state of 
Florida, where an estimated 17 percent of the residents are 65 
and older, compared to 12 percent of the nation as a whole. 
Among their top concerns is financial security--preparing to 
live on a fixed income, paying health care and hospital bills, 
and finding affordable housing during retirement.
    I look forward to working with Chairman Kohl to develop 
practical solutions to help aging Americans weather the current 
storm and prepare for some of the challenges that lie ahead.
    I also look forward to hearing from our experts joining us 
here today. One of our experts will discuss the importance of 
entitlement reform, which I believe is necessary to ensure the 
availability of program vital to seniors. Programs such as 
Medicare, Medicaid, and Social Security could be rendered 
insolvent if Congress fails to act.
    To address this problem, I support the Conrad-Gregg bill 
that would help Congress and the President find the political 
will to address the nation's long-term fiscal imbalances. The 
bill would establish a task force that will recommend changes 
to current law related to spending and taxes, especially on 
entitlement programs.
    The task force will consist of equal Republicans and 
Democrats, and two members from the Administration. This effort 
will ensure a bipartisan solution to entitlement reform and 
long-term fiscal stability.
    The plan the task force sends to Congress would require a 
supermajority for passage meaning we would truly reach a 
bipartisan solution to one of the most vexing issues facing our 
nation today. Decisions on entitlement solvency have been 
delayed for that too long. This bill will force Congress to 
vote on a bipartisan plan to make sure that future generations 
do not bear an incredible burden on debt.
    So I want to thank our panel of experts for joining us 
today, and I look forward to hearing your thoughts on how we 
might better prepare this critical group of Americans for the 
challenges presented by today's turbulent economy.

    The Chairman. Thank you very much, Senator Martinez.
    We're very pleased to welcome our panel today. Our first 
witness will be Jeanine Cook.
    Mrs. Cook has worked as a business agent for SEIU Local 47, 
in Cleveland, OH, and for the United Way of Lake County. She 
was active in a variety of charity organizations in the 
Cleveland area, before recently moving to Myrtle Beach, SC. She 
will testify about the challenges boomers are facing as they 
transition toward retirement.
    Our second witness will be Dallas Salisbury, the CEO and 
President of the Employee Benefit Research Institute. Mr. 
Salisbury has written and lectured extensively on economic 
security topics, winning several awards for his professional 
excellence. He has served on the ERISA Advisory Council, and 
the PBGC Advisory Committee, the U.S. Advisory Panel on 
Medicare Education, as well as the Board of Directors of the 
National Academy of Social Insurance.
    Also joining us today is Dean Baker. Mr. Baker is the co-
director of the Center for Economic and Policy Research. His 
analysis economic issues is frequently cited in major media 
outlets, and he was one of the leading economists warning of a 
housing bubble. Today, he is releasing a new report analyzing 
the effects of the housing downturn on baby boomers.
    Next, we will be hearing from Ignacio Salazar. Mr. Salazar 
is the head of SER--Jobs for Progress, an organization that 
trains low-income, older Americans in over 18 States, including 
my own State of Wisconsin. He will share with us the challenges 
and opportunities for those who may want to or need to continue 
working.
    He's a previous President of the Detroit, MI affiliate of 
SER, and has had leadership positions with several Detroit non-
profits.
    Barbara Kennelly is our next witness. She is currently the 
President and CEO of the National Committee to Preserve Social 
Security and Medicare. She has spent 25 years serving the 
citizens of Connecticut at local, State, and Federal levels, 
including 17 years as a member of the U.S. Congress.
    We welcome you all here today, we look forward to your 
testimony, and I would like to ask Senator Martinez to 
introduce our last witness.
    Senator Martinez. Thank you very much, Mr. Chairman.
    I would like to say a few words about Deena Katz who is an 
Associate Professor in the Personal Financial Planning Division 
at the Texas Tech University in Lovett, TX. Deena is an 
internationally recognized financial advisor and practice 
management expert, the author of six books on financial 
planning and practice management topics, and a frequent guest 
on local and national network programs for CBS, ABC and PBS.
    Deena, thank you for being with us today.
    The Chairman. Thank you.
    Before we commence our testimony, I'd like to ask Senator 
Casey to make a few comments, if he wishes.

           STATEMENT OF SENATOR ROBERT P. CASEY, JR.

    Senator Casey. Mr. Chairman, thank you very much, I 
appreciate you calling this hearing, and appreciate the 
presence of the new ranking member, Senator Martinez.
    I won't be here for the entire hearing, and I wanted to 
make sure that it was stated on the record. I'll be here for a 
limited period of time, but I want to thank the witnesses for 
your presence here today, for the commitment that you bring to 
all of these issues that come under, I guess, a broad umbrella 
of retirement security, especially at this time in our nation's 
history.
    I know that in the State of Pennsylvania, where we have the 
second-highest percentage of people over the age of 65, other 
than the ranking member's home State, I know how worried people 
are. I have some sense of the anxiety that they feel, and this 
issue is critically important--not only for our State, but for 
the country.
    We have an obligation in the Congress, in both parties, to 
do everything we can to provide some peace of mind that comes 
with retirement security for those who fought our wars, or 
worked in our factories, or taught our children, or gave us 
life and love, and today's testimony that you will provide--and 
the passion and scholarship and experience you bring to that 
testimony--will inform us and will keep us focused on making 
sure that we're doing everything possible, especially at a time 
of this trauma--economic trauma--for our families, that we stay 
focused on the urgent question of retirement security.
    So, we're grateful for your presence and for your work 
here, and we will make sure even if we're not here for the 
whole hearing that we review, and try to incorporate the 
testimony in our work. Thank you very much.
    The Chairman. Thank you, Senator Casey.
    Senator Udall.

                STATEMENT OF SENATOR MARK UDALL

    Senator Udall. Thank you, Mr. Chairman, I'll be brief. I, 
too, want to let it be known that I'm particularly honored to 
be a member of your Committee, and the ranking member, as well. 
I want to associate myself with the fine words of you and 
Senator Martinez, and Senator Casey. I don't think I can 
improve on them.
    I do have a statement, I would like to ask unanimous 
consent that I can include in the record. Again, I look forward 
to working with you, Mr. Chairman, to understand and then act 
in ways that are appropriate to ensure retirement security, and 
be an active and involved member of this Committee.
    So, thank you.
    [The prepared statement of Senator Udall follows:]

                Prepared Statement of Senator Mark Udall

    First, I would like to thank Chairman Kohl and Ranking 
Member Martinez for holding this hearing today. I am pleased to 
have the opportunity to serve as a member of the Special 
Committee on Aging. With millions of baby boomers reaching 
retirement age, issues facing older Americans continue to be 
important to the people in my home state of Colorado and across 
the country. I look forward to bridging the divide and working 
with the members of the Committee on both sides of the aisle to 
address policies that will improve the lives of older 
Americans.
    The state of our nation's economy is at the forefront of 
people's minds. I have heard from many Coloradans greatly 
concerned about the economic crisis facing all of us. The 
volatility and uncertainty of these distressed economic times 
have left people fearful of losing their jobs, their homes and 
their life savings. Older Americans, who worked hard and 
planned for the future, are faced with the reality of 
diminishing funds for retirement. Increasingly, they are being 
forced to reenter the workforce--into a growingly difficult job 
market--to make ends meet.
    Additionally, the baby boom generation is quickly 
approaching retirement age, and in the coming years, millions 
of Americans will begin receiving Social Security funds and 
drawing on their pensions and retirement savings. In recent 
months, as the stock market has plummeted, these boomers have 
watched their nest eggs shrink, and as housing prices tumbled, 
they have experienced decreasing equity in their homes. Due to 
these financial constraints, they are faced with tough choices, 
such as delaying retirement. Many are seeking guidance on the 
best ways to protect their pensions, manage their 401(k)s and 
ensure that they are financially secure when they reach 
retirement.
    This hearing is timely, and I look forward to the testimony 
of the witnesses today. I hope to learn not only more about the 
scope of the issue, but I am seeking solutions to share with 
Coloradans affected by these challenges.

    The Chairman. Thank you, Senator Udall.
    Senator Lincoln.

              STATEMENT OF SENATOR BLANCHE LINCOLN

    Senator Lincoln. Mr. Chairman, thank you once again--as 
always--bringing up such great issues for us to focus on, and 
we appreciate so much--we appreciate the panel being here to 
share your wisdom and background, in terms of retirement 
security.
    I noticed, at dinner the other night, my husband looked at 
my kids and said, ``Ya'll got to get to basketball practice, 
because we may need a scholarship.'' When you look at what's 
happened to people's savings in so many ways--whether it's for 
college, or retirement, or anything else--people are 
frightened, and there's lots to be done. We're all going to be 
working hard to make sure we turn our economy around, so all of 
those things do prove out to be a good and positive thing. 
We're looking forward to having your suggestions of how we can 
ensure the confidence that Americans need in their retirement 
security.
    So, thank you, Mr. Chairman, and thanks to all of you all. 
We appreciate it.
    The Chairman. Thank you, Senator Lincoln.
    So, we will now turn to Jeanine Cook, and for your 
statements, if you would be so kind as to keep them to 5 
minutes.
    Jeanine Cook.

    STATEMENT OF JEANINE COOK, BABY BOOMER, MYRTLE BEACH, SC

    Ms. Cook. Thank you.
    Chairman Kohl, Ranking Member Martinez, and distinguished 
member of the Committee, my name is Jeanine Cook, and I would 
like to tell my story. It's a very personal story, and bear 
with me.
    I am 58 years old, and have been married for 36 years. My 
husband Robert and I lived in our home in Ohio for 33 of those 
years. My husband retired last July at age 61, he has severe 
heart damage; half of his heart is functioning. He also is an 
insulin diabetic.
    Robert served in the United States Marine Corps for 8 
years, then he worked for the Gould Corporation, which closed, 
and he went to work for CEI, which is now First Energy, and 
Paines Fellow in East Lake, OH, as an Operating Engineer for a 
fossil fuel plant. This job requires a lot of physical labor, 
as well, which he was unable to do.
    Our house was fully paid, but we ended up having to take 
out a home equity line on our home a few years ago to help our 
children, and family members, hurt by the recession in Ohio. We 
thought the hardship was--the one we were experiencing--would 
be only temporary.
    Early this year, we ended up defaulting on the payments for 
that home equity line, and our home went into foreclosure. At 
home, when I open the local newspaper, there were five pages of 
foreclosures, and it's a large paper, our News Herald. 
Neighbors names were in, but it was absolutely humiliating to 
see my own name.
    My husband and I decided that the only thing that we could 
do to bring our payments current was to use his retirement fund 
he received from working--we took it out as a lump sum, even 
though he had to retire early, at 61, we received 5 percent 
less, and we had no other avenue in which to use. We even have 
to pay taxes on that money.
    Our son lost his job 6 months ago, he ended up moving into 
our home with us, in Ohio. Then our daughter, and 5-year-old 
granddaughter needed to move in because her husband walked out 
on her.
    While we planned to sell our home in Ohio when we retired, 
we cannot sell our home, because our children would have no 
place to live.
    With the current housing market, we were told that our home 
was worth 30 to 40 percent less than it was a few years ago, 
and this was our nest egg. Yet, we cannot sell our home, 
because our children would be homeless.
    We had to get away because the stress was eating me alive. 
So, we moved in with my sister, Mary, and her husband. They 
retired in Murrells Inlet, SC, which is just south of Myrtle 
Beach.
    We took about $175,000 out of the retirement lump sum to 
buy a small home, because we could not live with my sister 
forever. Now we have about $50,000 left in the account, until 
my husband reaches 62 years of age, and that won't be until 
next July, when he begins to draw Social Security out of that.
    We have to keep our health insurance, which has doubled 
since my husband retired. We pay about $425 a month. We both 
have serious medical conditions. In addition to Rob's heart 
disease and diabetes, I suffer from depression, I have a 
genetic blood disorder, and I'm in Stage 3 kidney failure. I am 
also a diabetic.
    I have had six surgeries in the last 6 years. I filed for 
Social Security Disability, and was denied, and I plan to 
appeal that decision.
    My problem is, once the $50,000 is gone, we have nothing 
else to live on but the Social Security income, and I still 
have four years to go before I retire.
    This is not how I thought we would live during our golden 
years. We thought our retirement was secure. We played by the 
rules, we both worked very hard, we paid our taxes, we did 
everything right. But there's too many Americans in our 
position. You save for a rainy day, and it's pouring. It's 
pouring out there, and it isn't getting better.
    We need some relief. We are all--all we do is worry. What 
will our children look forward to? What will their future, and 
our grandchildren's future be like? Is this what they have to 
look forward to?
    In closing, I would like to thank you for the opportunity 
you gave me today to testify and I would be pleased to answer 
any questions you may have.
    [The prepared statement of Ms. Cook follows:]

    [GRAPHIC] [TIFF OMITTED] 50872.001
    
    [GRAPHIC] [TIFF OMITTED] 50872.002
    
    The Chairman. Thank you, Ms. Cook.
    Mr. Salisbury.

   STATEMENT OF DALLAS SALISBURY, PRESIDENT & CEO, EMPLOYEE 
          BENEFITS RESEARCH INSTITUTE, WASHINGTON, DC

    Mr. Salisbury. Chairman Kohl, Senator Martinez, member of 
the Committee, it's a pleasure to be here. I will focus my 
comments on some new research that we have put out on the total 
system.
    Supplementation of Social Security has been--it has been 
stressed--left a voluntary effort. Just released survey data 
from the Federal Reserve show dramatic increases in family 
asset levels since 1989, as a result of participation in 
voluntary programs.
    The most recent data suggest today that from this voluntary 
system about 17 percent of all private workers, or about 20 
million, are active participants in defined benefit plans, and 
56 percent--or about 66 million workers--are active 
participants in a defined contribution plan.
    About 36 million individuals are also separated 
participants or retirees who are receiving income from these 
programs.
    In addition, in the voluntary system, small employers can 
sponsor plans such as Individual Retirement Accounts, and an 
estimated 50 million individuals are now in such programs at 
some level.
    The Pension Protection Act which the Congress enacted in 
August 2006, sought to increase the use of these voluntary 
programs through auto-enrollment and default investment in 
order to increase diversification. Record-keeping data suggest 
that auto-enrollment since the passage of PPA has increased 
dramatically, and in some programs participation has gone from 
50 percent to in excess of 80 percent as a result of those 
provisions.
    Related to portfolios, EBRI data showed that at year-end 
2007, 13 percent of participants had no money in equities, 
while 43.4 percent had 80 percent or more in equities, in other 
words, another objective change from PPA. Data show widespread 
adoption of defaults in the life cycle and target date funds 
that provide for automatic diversification, and ongoing 
rebalancing.
    Of those offered target date funds in the most recent year, 
36.9 percent had at least some portion of their accounts in 
those funds at the end of 2007.
    Among those identified as auto-enrollees, approximately 80 
percent of those investing in target date funds had all of 
their assets in those funds, which is the intent of the way 
that they are designed.
    Among participants between the ages of 56 and 65 who had 
been in the average target date fund at the end of 2007, 
approximately 40 percent would have had at least 20 percent 
decrease in their equity concentrations, again, leading to the 
greater diversification, was an objective of PPA.
    Based on simulations we've looked at with a survey 
population for 2000 to 2006, if all participants in 401K plans 
had invested in target date funds, at the median, balances 
would have been larger than they were, in fact, based on 
individually selected allocations--again, meeting the objective 
of PPA.
    Compared to actual participation in 401K plans, we found 
that with the use of target date funds, all four age cohorts 
that we analyzed would have had larger balances had they been 
in target date funds. When the most conservative target date 
funds were compared to actual participation, 3 of 4 of the 
cohorts would have had better returns; only those over the age 
of 45 would have seen relative losses.
    Our February Issue Brief just released, presents 
calculations on how long it might take for individual 
participants to make up for the significant equity market 
losses that have taken place since the market high in the fall 
of 2007. Looking at a 5 percent equity rate of return 
assumption, those with the longest tenure would need about 2 to 
5 years in order to recover.
    If equity rate of return, instead, ends up being a zero 
rate of return for the next 5 years, on average, the recovery 
would take 2.5 years, at the median, and for those at the 
extreme, 9 to 10 years. This is both from investment returns 
and new contributions going into the fund.
    To conclude, voluntary defined benefit and defined 
contribution plans in the private sector provide current 
retirement income to millions of retirees, and hold assets for 
million of workers and retirees. Recent public policy changes 
are increasing the number of participants, and the 
diversification of those accounts.
    Mr. Chairman, member of the Committee, I commend you for 
exploring thee topics, offer our help in the future, and thank 
you for the opportunity to appear today.
    [The prepared statement of Mr. Salisbury follows:]
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    The Chairman. Thank you very much, Mr. Salisbury.
    Mr. Baker.

 STATEMENT OF DEAN BAKER, CO-DIRECTOR, CENTER FOR ECONOMIC AND 
                POLICY RESEARCH, WASHINGTON, DC

    Mr. Baker. I want to thank you, Chairman Kohl and Ranking 
Member Martinez for inviting me to testify.
    I want to take my time to talk primarily about this 
financial situation of the baby boom cohorts in the wake of the 
collapse of the housing bubble and the recent decline in the 
stock market.
    Then I also would like to take at least a couple of moments 
to talk about what I see as some of the main policy 
implications of this collapse which I think have not been fully 
appreciated.
    My analysis--we released a paper today, based on analysis 
of the survey, Federal Reserve Board's Survey of Consumer 
Finance from 2004. I should say they just released the data 
from 2007, we haven't fully analyzed it, yet, but I can tell 
you that basically, we got the same results. Although this is 
somewhat dated, nothing substantive, I don't think, would 
change.
    Our analysis shows that there's a huge decline in the 
wealth of the baby boom cohorts, primarily because of a 
decline, first and foremost, in their home. I think it--we 
often fail to appreciate the extent to which housing equity is, 
in fact, the primary form of wealth for most middle income 
people. Even if middle income people may not perceive housing 
wealth as being a source of retirement income it, in fact, is 
in very fundamental ways, first and foremost because people 
anticipate not having a mortgage to pay off through their 
retirement years, so that's based on the fact of accumulated 
equity.
    Second, people often anticipate moving during their 
retirement years to a home that may be more suited for their 
retirement, as opposed to the home that they raised their 
children in, and third, because of emergency situations, 
healthcare or other unfortunate situations as Ms. Cook had just 
described to us.
    So, the equity in people's homes, for middle income people, 
that is their major source of wealth in retirement. The sharp 
drop in housing prices over the last two--two and a half--
years, has in effect, decimated the wealth that baby boomers 
have managed to accumulate in their working years.
    So, just to give some quick numbers to sort of summarize 
the circumstance, if we look at the median wealth for younger 
baby boomers--those aged between 45 and 54--that fell by 45 
percent from what it was in 2004 to what we project for 2009. 
So that the median household would have just over $82,000 in 
wealth. This, again, is the median--$82,000 in wealth would 
translate to less than half of the purchase price of the median 
home. In other words, if they took all of their wealth, all of 
their assets, everything they had accumulated, they would be 
able to pay for less than half the price of a typical home.
    Alternatively, if we think of it the other way, they took 
all of the equity out of their home, and they were looked by 
annuity at age 65, that would get you an annuity of about 
$7,000 a year, less than $600 a month in income. Again, this is 
the median. If we got to the second quintile, people between 
the 20th percentile and 40th percentile, the wealth for that 
group--the average wealth for that group--is $23,200.
    Even the fourth quintile--relatively well-off, elderly, 
people between 60th and 80th percentile--their wealth would 
simply be $215,000--enough for an annuity of $17,000. Again, 
not a very good income; not a very good supplement to Social 
Security, for people who were relatively affluent in the scheme 
of things.
    For older baby boomers who had a comparable situation, the 
decline of wealth for this group--age 55 to 64--was 38 percent 
that gave them a median wealth of $142,000. Enough, if they 
took their whole accumulation to purchase 80 percent of the 
median house price, or alternatively, to get an annuity of 
about $11,000 a year.
    What this means is that most baby boomers--the vast 
majority of baby boomers--would be almost entirely dependent on 
Social Security and Medicare. I should also point out, another 
number we looked at, we said, ``How many people--what percent 
of the people in these age groups would actually need to bring 
money to a closing?'' They wouldn't have enough to pay off 
their mortgage, pay the closing costs--it was 30 percent of the 
younger-aged cohort, 15 percent of the older-aged cohorts. In 
other words, these people would have literally nothing to put 
down as a down payment for a home in retirement.
    Now, just very quickly, a point on new generational equity 
that, for whatever reason, I don't think has been fully 
appreciated. The loss in wealth that we've seen, due to the 
collapse of the housing bubble, and the stock market collapse, 
is an intergenerational transfer.
    What we've seen was a loss in the order of $15 trillion of 
wealth, which was overwhelmingly held by older people--young 
people don't have wealth. This is, in effect, a huge loss to 
the older generations, it's in effect a gain to the younger 
generations, they will be able to buy homes at 30 to 40 percent 
below the prices they anticipated just 2 years ago, and they'll 
be able to buy our nation's capital stock on the stock market 
for half the price you would have paid just one and a half 
years ago.
    When we have discussions of intergenerational equity, and 
we've just had a transfer of wealth on the order of $15 
trillion, from those who are older to those who are younger, 
it's a little hard for me to see that we're doing some 
injustice to those who are younger. I hope that Congress will 
take that into consideration when it thinks about policy for 
Social Security and Medicare in the future.
    Thank you.
    [The prepared statement of Mr. Baker follows:]
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    The Chairman. Thank you very much, Mr. Baker.
    Mr. Salazar.

  STATEMENT OF IGNACIO SALAZAR, PRESIDENT & CEO, SER-JOBS FOR 
                    PROGRESS, WASHINGTON, DC

    Mr. Salazar. Mr. Chairman, and members of the Senate 
Special Committee on Aging, I am pleased to have the 
opportunity to testify before you today. The training, and 
retraining, of the elder worker is not a political issue, but a 
people issue, and the employment and training needs of the 
older workforce must remain a priority for this Congress and 
this new Administration.
    For over 44 years, SER-Jobs for Progress, National, and its 
network of partners, have worked to ensure that workforce 
development needs throughout our communities are met. Currently 
SER National, its affiliate network, provides services in the 
areas of education, employment and training, as well as 
services focused on economic development, business growth, and 
job creation.
    The SER Network remains steadfast in our continued efforts 
to cultivate America's greatest resource--its people. The SER 
Network consists of 35 affiliates operating more than 200 
offices in 19 States, Puerto Rico, and the District of 
Columbia, serving over 100 million people annually.
    Additionally, SER National manages the training and 
employment needs of over 3,500 mature workers, 55 or older, in 
the Senior Community Service Employment Program, SCSEP, funded 
by the United States Department of Labor. In its 5th year of 
operation, SCSEP is administered by SER sub-grantees in 
Wisconsin, Florida, California, Colorado, Illinois, Kansas, 
Rhode Island, and Texas.
    Today there is a new crisis in the American workforce. This 
conflict unfolding before us in the 21st workplace is being 
defined by a series of increasing generational collisions that 
are affecting American productivity. In similar fashion, 
whether diversity movements have partially paralyzed the labor 
force--whether racial, religious, or gender related--
generational conflicts at work are causing dysfunctional 
results, like reduced profitability, loss of valuable 
employees, poor customer service, and wasted human potential.
    The former flow of power, authority and responsibility from 
older to younger employees has been disrupted because of 
significant economic downturn, changes in life expectancy, 
increases in the average individual period of productivity, and 
demographic trends of the American workforce.
    In addition, changes in lifestyles, the distribution of 
highly desirable technological skills, and the possession of a 
knowledge base necessary for global competitiveness have 
creating a jarring upheaval to the natural flow of career 
progression. The pecking order is eroding, and so is the social 
and physical separation of generations in the workplace. Upward 
mobility in the job setting is now facilitated by rapid access 
to information, and the ability to disseminate such information 
in efficient fashion. The gold standard of a senior, 
experienced applicant is no longer as valuable as in the past.
    Experience alone is no longer an indicator or predictor of 
success. The above factors are leading to an increase in the 
number of older workers being forced out of careers with no 
viable retraining mechanism currently in place. The economic 
downturn has created an overwhelming demand for Federal and 
State employment and training programs within the one-stop 
system.
    Programs offered through the Workforce Investment Act, in 
partnership with Wagner Peyser Services were never designed to 
serve the older worker demographic. Traditional WIA services 
tend to focus on services such as youth programs, young adult 
training, and dislocated worker training, leaving little or no 
resources available for the harder-to-serve older worker.
    In reality, the increasing number of one-stop customers, 
coupled with the specialized training needs of the older 
workers, make it apparent that the one-stop system is ill-
equipped to meet the employment and training needs of the elder 
worker.
    In 2006, the Older Americans Act, Title V Program, or 
SCSEP, was amended to allow for workforce skills training. This 
minor change in this legislation has made a world of change in 
our SCSEP participants.
    With renewed hope and an enhanced skill set, our older 
worker participants are finding better employment 
opportunities, and are returning to the workforce with 
increasing success. We would suggest that funding be 
appropriated to providing workforce skills training to the 
older worker population who are currently ineligible, or just 
outside the SCSEP program.
    We feel strongly that short-term training focused on core 
skill areas of language acquisition, with a limited English 
speaker, financial literacy, critical 21st Century technology 
skills, and mature worker career readiness training, can create 
the pillars for success for the retraining of the elder worker.
    On behalf of SER-Job for Progress, and the participants we 
serve, I would like to thank the Committee, and the Chairman 
for the opportunity to present these recommendations as we move 
forward in our joint mission of preparing America's workforce 
for the future.
    Thank you.
    [The prepared statement of Mr. Salazar follows:]
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    The Chairman. Thank you, Mr. Salazar.
    Ms. Kennelly.

 STATEMENT OF BARBARA B. KENNELLY, PRESIDENT AND CEO, NATIONAL 
COMMITTEE TO PRESERVE SOCIAL SECURITY AND MEDICARE, WASHINGTON, 
                               DC

    Ms. Kennelly. I greatly appreciate the opportunity to come 
before you today and testify, regarding the current economic 
crisis, and its impact on retirement security, and I thank 
Senator Martinez for taking this additional duty on.
    As President of the National Committee to Preserve Social 
Security and Medicare, I represent over 3 million seniors who 
understand the importance of Social Security and Medicare, and 
share a passion to see these critical programs preserved and 
strengthened.
    Mr. Chairman, it's particularly appropriate to include 
Social Security in your hearing on the economic crisis today 
because the program was borne out of economic circumstances 
somewhat like we're living in today.
    Today, Social Security provides modest benefits--the 
average benefit is only $13,800. But these benefits are 
crucial. A full two-thirds of the elderly receive more than 
one-half of their income from Social Security and one in five 
have no other income but Social Security.
    If you don't count Social Security today, almost one-half 
of those over age 65 would have incomes below the poverty line, 
just about the same poverty rate as before the enactment of 
Social Security.
    Many people don't realize that Social Security is also our 
nation's largest disability program, and our largest children's 
program. Social Security is a rock in the chaotic financial 
world we live in today. Unlike what you've just heard about the 
condition of private retirement savings, Social Security checks 
keep coming, every month, like clockwork.
    The Social Security Administration did not miss a step 
after Hurricane Katrina and Rita, and the first benefit checks 
went out to the families of those who perished in 9/11 within 2 
weeks of that catastrophic situation. Through wars, national 
disasters, or financial calamity, Social Security checks 
provide stability and cash to those who have lost everything 
else.
    Some economists have been pushing for cuts in Social 
Security benefits as a way of addressing a long-term budget 
deficit. I'm here to tell you, this would be an extraordinarily 
bad idea. Benefits are modest to begin with, and benefits for 
future retirees are already being reduced as a result of a 
phase-in of an increase in retirement age.
    Seniors spend significant portions of their income on 
healthcare. Even with Medicare, and if current projections hold 
true, future retirees could see one-half of their Social 
Security check absorbed by healthcare out-of-pocket cost by 
2025. Skyrocketing healthcare costs are the true economic 
crisis. Future retirees also face a traditional pension system 
that is significantly eroded, plummeting housing values and 
individual savings that have evaporated. They will also need to 
stretch their retirement savings over a longer period of time 
as they will live longer than the generations before them. Our 
children will clearly need a dependable, solid Social Security 
benefit just as much as today's retirees.
    Mr. Chairman, I would like to conclude by thanking this 
Committee for its support of including seniors in the American 
Recovery and Reinvestment Act. The $250 check that was included 
in the legislation will be much appreciated, and should provide 
a stimulative effect, as seniors historically spend over 90 
percent of their income.
    The funds included for the Social Security Administration 
are desperately needed to address the additional disability 
claims that always accompany bad economic times, especially at 
a time when the agency is already straining to clear our 
extensive disability backlog. Funds for programs funded through 
the Older Americans Act will help meet an ever-increasing need.
    I thank you very much for looking at Social Security as a 
basic need; something that people can rely on. For the first 
time, seniors seem to be in better position than some others, 
and I thank you, Mr. Chairman, for appreciating that.
    [The prepared statement of Ms. Kennelly follows:]
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    The Chairman. Thank you very much, Ms. Kennelly.
    Ms. Katz.

 STATEMENT OF DEENA KATZ, CFP, ASSOCIATE PROFESSOR, TEXAS TECH 
   UNIVERSITY, AND CHAIRMAN, EVENSKY & KATZ, CORAL GABLES, FL

    Ms. Katz. Thank you, Mr. Chairman.
    Thank you, Ranking Member Martinez and other distinguished 
member of this Committee for providing me the opportunity to 
address the critical issue from the perspective of the 
financial planning professional.
    I'm a certified financial planner, and a Professor of 
Personal Financial Planning at Texas Tech University, as well 
as Chairman of Evensky & Katz, a fee-only firm in Florida, and 
a member of the Board of Directors of Financial Planning 
Association. But I am attending this hearing on my own cost as 
a concerned professional.
    You've heard many statistics here today, the following are 
the only ones I will use. There are 77 million baby boomers. 
According to research, one boomer will turn 59.5 every 7 
seconds between now and 2025. We need to put all of these 
statistics into context, and that's what I'm going to do.
    Boomers have been big consumers, known for wearing and 
driving all of our assets, rather than saving or investing 
them. We've made a massive use of credit, and its over-reliance 
on credit has threatened our future security. We haven't done a 
very good job of teaching our children to be fiscally 
responsible, otherwise why would they wind up back in our spare 
bedroom, between jobs, with three kids and a dog?
    Many of us are caring for our aging parents, either 
physically, financially, or both. This drains our already 
limited retirement resources. As we've heard, the housing 
crisis resulted in a serious drop in boomer home values.
    Additionally, the economic typhoon of the last year has 
seriously damaged boomer portfolios. Boomers are now moving 
into their financial de-cumulation phase, which is not just 
about withdrawing money, it's about timing and strategies, and 
frankly about how best you can make the peanut butter and the 
jelly last until the end of the sandwich.
    But it's also about making lifestyle changes that come with 
the next phase choices. Boomers have an unrealistic view of 
their own mortality; many say they don't intend to live to 
their nineties, but mortality tables suggest otherwise.
    The good news is that we're living longer, the bad news is 
we're living longer, and we need to figure out how to pay for 
it. To address their investment issues, many retirees search 
for a safe retirement portfolio, 100 percent bonds to generate 
income or replicate paychecks. This confuses certainty and 
safety. Payment of bonds is certain, but it' certainly not 
safe, especially in terms of purchasing power. The fact is, 
boomers don't need income at retirement, we need an income 
stream that grows regularly with the inflation rate.
    The use of target date funds to solve this has an inherent 
problem, I believe. Target date funds should not be age-
specific, but risk specific.
    Boomers want to stay vital and active. We will work. But it 
will be a positive action, not a forced reaction to lack of 
resources, even if that's true.
    Truthfully, I'm not comfortable with the word retirement--
few boomers are. As a country, we need to keep a positive spin, 
encourage our boomers to plan for their next phase with the 
independent advice of a financial planner who will holistically 
examine their lives, not just their investment issues.
    As professional advisors, we tell our boomer clients, 
``Don't focus on how much you were worth yesterday, begin your 
planning with a realistic appraisal of your financial position 
today. Plan your future without simple solutions, and don't 
adopt rules of thumb. Continue to invest in your 401K, even if 
your employer is no longer making matching contributions. 
Utilize any available catch-up provisions that may allow you 
more money to put away for the future.
    ``You have no control over investment markets, but you do 
have a significant control over expenses and taxes. All you can 
really count on is what you've earned after expenses, after 
taxes, and net of inflation. Seek competent financial planning 
assistance. Insist that your advisor acknowledge, in writing, 
his fiduciary responsibility to you.'' My suggestions for this 
legislative body include, use the prestige and visibility of 
the Federal Government to remind the financial services 
industry of its responsibilities to its clients. Ensure all 
financial advice offered to investors be based on fiduciary 
principles, and hold all professionals who provide advice to 
retirees to that fiduciary standard.
    When developing plans and solutions for us, remember, we 
are boomers, and not senior citizens. Encourage the offering of 
financial education for retirees, but focus on financial 
planning as a process, and not one that promotes product-
centric solutions.
    Do not restrict our ability to continue to participate in 
an active way in our economy. Revisit legislation that makes it 
difficult or impossible for us to continue working into our 
seventies and eighties.
    Mr. Chairman, Ranking Member Martinez, I thank you for 
addressing this topic. As you well know, the financial services 
industry represents billion of dollars of economic clout. Wall 
Street can well afford to provide professional, sophisticated 
representation for its interests before Congress.
    My professional affiliations are with organizations that 
identify more closely with the public's interests, and not 
those of Wall Street. That's why--along with my academic and 
professional colleagues and the investing public--are pleased 
that you, the true representatives of public interest, are 
taking the time to consider these issues related to securing 
our good retirement in the volatile economic times. I'm 
confident that your collective wisdom will result in actions 
that will benefit us all.
    Once again, I thank you, I will respond to any questions 
you have.
    [The prepared statement of Ms. Katz follows:]
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    The Chairman. Thank you very much, Mrs. Katz.
    We turn now to Senator Martinez for questions.
    Senator Martinez. Mr. Chairman, thank you very, very much. 
I want to thank you for convening this hearing, and I'm pleased 
that I had a part in it as well, because I think this is a very 
timely and important topic, and one that I think cuts across 
Republican, Democrat, Floridian, or Ohioan--this is really an 
American issue that has hit at the real core, and at the heart 
of what is happening to our country today.
    Ms. Cook, I'd just like to begin with you, and first of all 
to--my heart goes out to you for all of the concerns and 
problems that you and your family have had. I am most intrigued 
as to whether or not you have pursued your Social Security 
Disability appeal, because there's a timeframe for that, and I 
do think that you may have a very valid case, there, so I want 
to make sure you don't lose your--I used to be a lawyer, you 
know? I can't help myself but want to be lawyering here for 
you.
    Ms. Cook. Thank you, I appreciate that.
    Yes, in fact, I am appealing the decision. But I was told 
that this is rule of thumb, everybody's denied.
    Senator Martinez. Right. Are you having--do you have some 
help in doing this? I mean, are you--
    Ms. Cook. Yes, I have a--I have a counsel, yes sir. Thank 
you.
    Senator Martinez. OK, very good.
    Beyond that, I hope that all of your different issues sort 
themselves out, but I think your problems are emblematic of 
what our generation is going through. So, I think it's very, 
very opportune that you would be here with us today, and thank 
you for sharing your personal problems with us, and with the 
nation. I think it's important that we hear stories like yours, 
so that we might better deal with the problems of so many 
others who are here, not speaking directly, but speaking 
through you. So, thank you.
    Ms. Cook. Thank you. I really think that I'm here speaking 
for a lot of the seniors that are out there. Thank you.
    Senator Martinez. You know, I'm not accustomed to thinking 
of myself as a senior, I think of myself as a boomer, but 
anyway, I think that the two may be about to--
    Ms. Cook. I think so.
    Senator Martinez [continuing]. Coincide here, pretty good.
    Mr. Baker, I want to talk to you about housing, and your 
thoughts on the housing situation. I thought--I was very 
intrigued by your analysis that there is a wealth transfer 
taking place, here, I really hadn't thought of it in those 
terms, and I'm not sure I fully agree with you, but I think 
it's an interesting thought that perhaps there is a wealth 
transfer taking place.
    What I wanted to ask is, since you were one of those who 
were forecasting a bubble while many of us were being convinced 
by so many others that that wouldn't happen, what is your 
forecast now as to how we might evolve out of the current 
depression in housing prices, into a more normal market?
    Mr. Baker. Well, Senator, first let me just say that if I 
got you to re-think your view of housing, my trip here was very 
much worthwhile. But, in terms of where we're going, I'm very 
concerned that, basically was, looking at--with the housing 
bubble and how I recognized it--was that we'd had a long 
pattern where house prices had just more or less kept even with 
the rate of inflation. We had a sharp divergence from that, 
beginning in the mid-nineties, and it peaked in 2006 with house 
prices more than 70 percent above the overall trend level.
    Now, we're about to fall back at the current rate of house 
price decline, we'll be back at the trend level, probably at 
about the middle of this year. House prices are now falling 
extremely rapidly--more than 20 percent at an annual rate, in 
most recent data.
    My concern is that we'll overshoot. So, instead of just 
getting back to where we might think house prices should be--
and not that we know exactly where that is, but roughly where 
they should be--house prices will continue to fall, which is 
going to dampen the economy, and further drag on the economy, 
certainly further drag on the situation of baby boomers as they 
prepare for retirement, and could cause the downtrend to last 
much, much longer than would otherwise be the case.
    My concern--I don't think you want to get extensively in 
housing policy--my concern is that there's been a failure to 
focus on trying to shore up prices where you can do it, where 
the bubble has already deflated, as opposed to, in effect, 
throwing good money after bad, trying to shore up prices 
everywhere, including markets where the bubble has not yet 
fully deflated.
    Senator Martinez. So, your view is that it should be more 
targeted assistance?
    Mr. Baker. Exactly. So, you have many markets where you 
could say that there either was not a bubble, or whatever was 
there has since deflated. There, I think, it makes sense to try 
to do what we can to shore up prices. Other markets where you 
still have a long way to go, you're just throwing your money 
away.
    Senator Martinez. So, a targeted approach?
    Mr. Baker. Exactly.
    Senator Martinez. To where to help, as opposed to helping 
everywhere in the country?
    Mr. Baker. Exactly.
    Senator Martinez. That's politically difficult to do.
    Mr. Baker. I understand.
    Senator Martinez. Yeah.
    Mr. Baker. I'm just an economist.
    Senator Martinez. I understand. [Laughter.]
    Mr. Salazar, I'm so pleased to see you again, and I'm again 
very proud of the work that you're doing. I just wanted to ask 
whether you could share with us, beyond what you told us during 
your testimony, any strategies that you think could be 
employed.
    As we look at what Mr. Baker said, and that wealth transfer 
taking place, the obvious need, as others have testified, for 
folks to be dependent, really almost solely on their Social 
Security, extending the work life may become a total necessity. 
Have you confronted issues that we, perhaps, ought to be 
addressing from a legislative standpoint, while allowing folks 
to continue to work longer, without receiving penalties until 
their Social Security entitlement, benefits, and things of that 
nature?
    Mr. Salazar. That would be an obvious benefit, of course, 
Senator.
    The areas that we focused on, in trying to promote changes, 
have centered around the area of retraining individuals. We 
have the opportunity to work with individuals who fall at 125 
percent of the poverty level. So, for example, the poverty 
level for an individual--a single individual--is $10,000. 
Anyone making less than $12,500 is eligible for our program.
    They come to us with many barriers. Obviously, with age we 
have some challenges ahead of us, and some of those are lack of 
finances, obviously, but lack of training, and retraining, to 
go into an adequate job. Transportation is an issue, supportive 
services is an issue. We're working with individuals who were 
trained in a different economy, and this is a different kind of 
world that we live in today that we need to prepare them for. 
So those are the kind of things that we're centered around, is 
providing those kinds of supports, so they can be self-
sufficient.
    I was looking last night at some of the kinds of things 
that we do with individuals who, in our program, working 
probably up to 20 hours per week at minimum wage, making the 
transition, and I was looking at Milwaukee as an example. 
There, individuals going through our program, where they were 
provided the opportunity to have supports, to have retraining, 
to prepare them to do something differently, were drivers.
    There was an individual, George Taylor, who was with J.C. 
Triplett Moving, he's a driver today, making $11 an hour. James 
Jones at Arbor Gardens, in Milwaukee, making $11 an hour. We 
have Jane Jankowki, Milwaukee Security Detention Facility, who 
is a Program Assistant there, making $13 an hour, and Adolfo 
Villaral, who's with Raul's Construction, who is making $12 per 
hour. These are individuals who were making the minimum wage, 
before, of $6.55, who have been given the opportunity to go out 
and get full-time employment so they have additional income.
    What we provide is up to, usually, between 15 to 20 hours 
per week, and it's a short-term program. It used to be long-
term for individuals, and that was changed. If that's changed, 
we need to prepare them to be successful, once they're exited 
the program because of a term limitation, in terms of how long 
they can be in the program. But, to provide support for 
individuals to continue their life in a productive way is what 
we're attempting to do with those kinds of supports.
    Senator Martinez. Mr. Chairman, my time is up.
    Thank you.
    The Chairman. Thank you, Senator Martinez.
    Senator Gillibrand.
    Senator Gillibrand. Thank you, Mr. Chairman, for holding 
this hearing. This could not be more timely.
    Thank you, all of you, for coming to testify before our 
Committee.
    I've spent the last few weeks traveling around New York 
State. When I've met with my seniors, their concerns are 
overwhelming. They're very worried about being able to afford 
their retirement. They are very worried about their savings--
should they have any--that they've declined so rapidly, that 
they feel enormous economic insecurity, and financial 
insecurity.
    I want to talk a little bit about some of the issues that 
you've brought up on the 401Ks. I understand the issues that 
you've raised about the target date and the need for 
regulation. So, I'd like to hear what kind of regulation you 
think would be most effective.
    Second, some of the seniors I've spoken to have said that 
their 401Ks have required draw-downs. I know that's something 
that we were looking at through the Fed, to adjust that, that 
they don't have to draw down. Because if their portfolio has 
been declined by over 30 percent, now is not the time, 
necessarily, to draw down, when those stock prices are so 
reduced.
    Third, I wanted to talk a little bit about commercials that 
you see on television where you have these organizations that 
are offering services that say, ``If you have a paid settlement 
or an annuity, it's your money, get your cash now.'' Those are 
very appealing ads to many members of my community, because 
they have such a financial need, currently, and they're willing 
to cash in those annuities or those paid settlements, but those 
companies are taking an enormous cut into the value of those 
annuities. In some respects, they may well be inappropriate, or 
really taking advantage of our seniors. So I want your thoughts 
on that.
    Then the last issue on the financial issues is, we had a 
hearing in my former district in upstate New York that 
Congresswoman Carolyn Maloney, who's the subcommittee 
chairwoman on the Financial Services Committee on the House 
side, about seniors being taken advantage of through credit 
card advertisements.
    I heard the worst stories of seniors who were, you know, 
encouraged to take out a credit card, and they would buy, you 
know, a television for maybe $300. Then because they couldn't 
make the payments regularly enough, or fell behind, those 
payments, and the requirements--because of the fees--they would 
be paying over $1,000 in fees, for one $300 purchase.
    So, I have very grave concerns about that, and we did pass 
some legislation to begin to address it, but I'd like your 
thoughts on whether that legislation has taken care of that 
problem, or if that problem still exists. To whomever wants to 
take those questions.
    Mr. Salisbury. I'd start, Senator, on a couple of your 
points, not all of them.
    On the issue of commercials and settlement agencies, that 
is something that has been out there, and to your point, has 
proven attractive to individuals. I just use an example from 
the retirement income system more broadly, defined benefit 
pension plans, those like Federal employees receive that only 
pay life income annuities', they do not offer single-sum 
distributions.
    Over half of private defined benefit plans now offer 
single-sum distributions as an alternative to annuity income, 
and when that offer is given, on average, 95 percent choose the 
single sum distribution, only 5 percent choose the life income 
annuity.
    If one looks at the most recent trend in defined benefit 
plans, it was announced last week that Coca-Cola had followed 
this, shifting from a so-called ``traditional'' defined benefit 
plan to a hybrid cash balance plan, that now accounts for about 
30 percent of the private defined benefit plans that are 
covered by the Pension Benefit Guaranty Corporation. Almost all 
of those plans offer single-sum distributions, and out of those 
plans, again, more than 95 percent of participants take the 
single sum; only less than 5 percent take a life-income 
annuity.
    Finally, if you look at it vis-a-vis 401K plans, only about 
20 percent of defined contribution plans even offer an annuity 
option, but like the Federal Thrift Plan, where they do have 
extensive numbers, less than 1 percent of those given the 
choice of a life-income annuity or a single-sum distribution 
take the life-income annuity.
    So, the settlement issue, and why people are driven there, 
is very symptomatic of designs and behavior in most of the 
population, regardless of age. So, I think your regulatory 
issue on that is the need to make sure there is not fraud, and 
there's proper pricing.
    But as long as that market is there, what we know from 
retiree behavior, coming out of the retirement system, if you 
give people a way to take all of the money right now, as 
opposed to spreading it over a lifetime, what we know from the 
hard research, is that will most always do that.
    It goes back to Social Security, why it is an annuity-only, 
COLA annuity. During the debates of the past, if individuals 
out of Social Security were given the ability, the choice, the 
data says they would take the single sum.
    Senator Gillibrand. Mr. Chairman, may I just ask one 
follow-up on that line?
    If you were going to propose regulation, what would it be, 
and would you ever recommend there be an alternative--some kind 
of not-for-profit organization, or some kind of government-led 
organization, that is in the seniors' interest, and can offer 
very little overhead fee for that payout? Some competition, as 
it were, in the market of being able to give those funds in a 
lump sum? Would you recommend that? I'd like your thoughts.
    Mr. Salisbury. Well, there is regulation in that area, 
there is competition in that area. The regulation tends to be 
somewhat limited. I think that, again, it may need to be 
increased vis-a-vis fraud in advertising.
    On the retirement side, I think this is an issue--I first 
testified before this Committee and the late Senator John Heinz 
on this topic in 1981, of annuities versus single-sum 
distributions. That becomes, frankly, you either mandate 
annuitization if you want people to have life income security 
or they will not make that choice.
    Senator Gillibrand. I guess I want you to address the 
current practice. If these companies are taking 20 percent or 
30 percent of the value of that annuity in exchange for the 
lump-sum cash payment, do you think there should be competition 
in the system that might only take 2 percent or 3 percent as a 
fair overhead of the transaction cost?
    Mr. Salisbury. Ideally, absolutely, yes.
    Ms. Kennelly. Senator? Senator?
    The Chairman. Ms. Kennelly.
    Ms. Kennelly. I can remember when I first went to Congress, 
employees had defined benefit pension plans. Then came the 401K 
plans, and I remember being on Ways and Means, and addressing 
the issues raised by those changes. When you talk about 
annuities, they're not necessarily wise choices for everyone.
    The reason I'm sitting here today is we have one solid 
rock, and that's Social Security. The beauty of Social Security 
is you can't out-live it, and it's adjusted for inflation. So, 
we should have all of these private products, no doubt about 
it, if you want as a supplement. But the main thing is to keep 
the rock, Social Security.
    The Chairman. Ms. Katz.
    Ms. Katz. All of the things that you've asked about have 
really one common thread, and that is that our seniors at--
frankly, the American public--are not really well-educated 
about their financial lives. So when they get desperate, they 
make the wrong choices. Leaving an annuity or an income stream 
for a lump sum is appealing because they have some control over 
it, but they don't know what to do with it.
    So, when we talk about legislation, I think we need to talk 
about the inherent issue, is most people are not educated to 
their own financial life. They do not know how to handle a lump 
sum. We've made proposals to even make changes to Social 
Security, which is a serious issue, of letting people handle 
their own situation. So, we're just creating more and more 
opportunity for them to make bigger mistakes.
    We need to tighten up all of those things with legislation, 
so that they cannot make these mistakes, and we need to educate 
them, starting at a much earlier age then when they start 
retirement years.
    Senator Gillibrand. Many folks believe you should start 
educating children in the earliest years, so that they 
understand what financial health is, at a very young age.
    Ms. Katz. Absolutely.
    Mr. Baker. Just very quickly, I think the situation you're 
describing--because there's both the issue about people 
getting--replacing annuity with a lump sum, but also, I think 
the question you specifically asked about the fees involved. I 
think there of a situation that's very analogous to what we 
just saw with the mortgage chaos the last few years, is that 
it's very easy for a sophisticated person to come in there, and 
take advantage of someone who's not engaged in these 
transactions on a daily basis, and I think there, there really 
is a role for the government to regulate this, to make it very 
difficult--we're not going to make it illegal for someone to 
take their annuity and take a lump sum, but I think it's 
important to say that we have standardized contracts, and make 
it very difficult for someone to go outside that, so it's an 
unfriendly legal environment for those who might try and take 
advantage of people that way.
    One other point, just very quickly, the issue of draw-downs 
from retirement funds I think has been misrepresented. I was 
testifying yesterday and the gentleman from the Investment 
Institute agreed with me on this, that there are very few 
people who reach age 70 and have their whole fund invested in 
equities.
    So, the idea that someone's going to have to sell their 
stock and lock in a really big loss, that's almost 
inconceivable. I mean, there may be a few people in that 
situation, but almost everyone's going to have enough money in 
their account at that age, in a money fund or a bond fund that 
they could make their withdrawal from that.
    Now there's a separate issue, do you want to force 
withdrawals? That's a separate issue that Congress should 
reasonably consider. But the idea that you're forcing someone 
to lock in a loss, that really isn't a plausible scenario.
    Senator Gillibrand. What's your opinion with regard to the 
last point you just made? About forcing people to draw down or 
not?
    Mr. Baker. Well, there is an issue, you may change the 
timing on that, given increased life expectancies. I mean, I 
wouldn't consider that a top priority, but obviously as we go 
through the years, and we project, and certainly, hopefully 
will see increasing life expectancy, we may want to change the 
timing on that, that' a reasonable thing, certainly, for 
Congress to consider.
    The Chairman. Thank you very much.
    Ms. Kennelly, listening to you talk about Social Security 
this morning, I am led to wonder whether or not you were a 
strong supporter of President Bush's thoughts about privatizing 
Social Security?
    No?
    Ms. Kennelly. Senator, you know I wasn't. [Laughter.]
    The Chairman. But, you talk about it, in terms of how 
important it is, and maybe all of you, how important Social 
Security and Medicare is.
    You know, President Obama is talking about the need to 
reform the entitlements, and I--while he hasn't been specific, 
he hasn't talked about expanding the benefit, he's talking 
about the hard choices that we have to look forward to. What 
are some of your thoughts on that?
    Ms. Kennelly. Well, Senator, I--look, I've been around a 
long time, and I know that we have a long-term problem with 
Social Security. I was on the Ways and Means Committee in 1983 
when we reformed it the last time. We took some very hard 
votes. You know, I voted to increase the payroll tax, increase 
the retirement age. I wonder how I got reelected. But the fact 
of the matter is Social Security still is the basic retirement 
system for the United States of America.
    What I really have great worries about, is this idea of a 
fast-track Commission to look at entitlements.
    Now, last night the President made it very clear that the 
real crisis we have in this country is healthcare. But is there 
a long-term gap in Social Security? Yes. We have a shortfall. 
But I would hate to see a Commission produce legislation that 
is on fast track with no amendments, permitted. I think the 
Committees--Ways and Means, Finance--they've got the expertise 
to do a reform bill through regular order. You could have the 
debates, and the public could understand what we have to do.
    Do we have to make sacrifices? Of course we do. But, there 
isn't a lot of room to cut Social Security. When you think 
about it, Senator, two-thirds of those people who collect 
Social Security--that's half their income, half their income. 
For twenty percent--20 percent--Social Security is all they've 
got. I saw a statistic recently, African-Americans--40 percent 
of those collecting Social Security--that's all they've got.
    But I think we have to understand, the very reasons that 
Franklin Deleanor Roosevelt created Social Security are still 
there. When you get old, the paycheck stops. That's it. Jeanine 
was talking about helping her children--life can get tough. But 
if you have Social Security, at least you have something. Any 
nation worth its salt has a Social Security program that's much 
more robust than the one we have.
    So I would urge the President to be very careful. He's got 
to do healthcare reform, it's going to be the toughest thing 
elected officials are going to have to deal with. But, you 
know, be careful with Social Security, because it's the basis 
of our retirement system.
    The Chairman. How so is the Medicare benefit any less 
important to seniors than a Social Security benefit? Aren't 
they on a par, almost?
    Ms. Kennelly. Well, of course they are. But the point is 
that--
    The Chairman. No, I'm bringing this up by way of asking 
your opinion on that entitlement program, in terms of its cost, 
and the President's discussion about having to reform that 
program, as well as Social Security.
    Ms. Kennelly. No, you've heard how passionate I am about 
Social Security, because I feel it's a necessity. Medicare is 
in crisis, there's no doubt about it, just like the whole 
healthcare system is in crisis.
    What I'm scared to death, about Senator, is that we're 
going to try to look just at Medicare, not at the whole 
healthcare system. Right now, the only ones that have a 
universal healthcare system are those 65 and older. We've got 
to keep that in place.
    I came from Hartford, CT. I can remember when those 
insurance companies didn't want to touch people over 65. But 
once you put them in a pool, and spread the risk, it was OK.
    So, I'm delighted to hear the President and his people want 
to look at healthcare, because they've got to look at it 
together--Medicare, and the whole healthcare system. Because I 
will tell you something, Senator--if they can fix healthcare, 
then half the cost of Medicare will disappear. We'll be OK 
because what's left of the long-term funding problems will be 
easier to fix.
    The Chairman. Any comments from the rest of the panel on 
Medicare and Social Security?
    Mr. Baker.
    Mr. Baker. Yeah, just very quickly--I would say in the case 
of Medicare--and I was very happy to see that President Obama, 
I think, has said exactly this, that the problem with Medicare 
is the problem with healthcare. That our healthcare costs on a 
per-person basis are about twice those for other nations--
Canada, Germany, whoever you throw in there--and they're 
projected to keep growing, relative to the rest of the world. 
This is a problem for the economy as a whole.
    One of the reasons General Motors is coming to us--coming 
to the government for help is its healthcare costs. They did a 
back of the envelope calculation, if we had the same per-person 
healthcare costs as Canada--everything else exactly the same, 
but just paid the same per-person healthcare costs--General 
Motors, over the last 10 years, would have $22 billion more 
than it does today.
    Healthcare is going to devastate our economy, even if we 
got rid of Medicare and Social Security. So, the priority has 
to be to fix healthcare. If we fix healthcare--not to say 
Medicare won't be an issue--but it will be a much more minor 
issue, it will be a workable issue. If we don't fix healthcare, 
there's nothing we can do to fix Medicare.
    The Chairman. Mr. Salisbury.
    Mr. Salisbury. Senator, I'd add a point on that, which is 
that with the dramatic decline in what private employers have 
provided as supplemental medical coverage for individual 
populations, Medicare becomes even more important with the 
accounting standards that have just gone into place for State 
and local governments for retiree medical benefits. For the 
very first time they're having to deal with the long-term costs 
of the commitments that they have made. We expect that you will 
begin to see State and local governments back away from the 
retiree medical promises that they've made in the past, for at 
least new hires and those not yet retired, even if they honor 
those promises for current public sector retirees.
    As you know, in the last budget that President Bush 
submitted to this Congress he had proposed for even Federal 
workers that the eligibility for retiree medical upon Federal 
retirement be based on tenures of work immediately before 
retiring, as opposed to the current provision of 5 years. Were 
that to be done in the context of this, that would affect the 
Federal workforce.
    So, essentially what we're seeing through the voluntary 
system is a cutting back in a way that essentially, with each 
and every year, is making Medicare even more important to a 
larger proportion of the seniors in our population.
    If you then take a point that the Congresswoman made, which 
is so compelling to me, that the Part B and Part D expenses of 
Medicare, which currently absorb about 19 percent of the 
average Social Security beneficiary's Social Security income, 
one currently projected to go to 50 percent of the average 
Social Security income by 2025. That frankly is using a health 
inflation assumption that is about 40 percent less than what is 
actually occurring in the economy.
    So, our estimate is that if health costs are not somehow 
brought under control by 2025, the proportion is likely to be 
closer to 70 percent, as opposed to 20 percent.
    As someone whose mother at 93 is now dependent for all of 
her income on Social Security and the size of the payment she 
is making for health insurance. The concept of the Medicare 
payment proportion of her Social Security income continuing to 
climb is concerning.
    There will be inter-family transfers to make sure Mom's 
fine, but for the overall population, to reemphasize Deena's 
point, figuring out a way to bend the cost curve on future 
medical expense is absolutely essential to the long-term 
security of Social Security, and for Social Security income to 
be enough for anyone--even at the very high replacement 
levels--meaning lower income individuals. If you don't solve 
the health cost problem, then Social Security will have more 
and more retirees facing poverty-level income in retirement.
    The Chairman. How important is it to do everything we can, 
legislatively, and offering inducements to employers, as well 
as individual retirees to continue in the workforce after age 
65?
    Mr. Salisbury. I personally think that it is essential--one 
of the points that was made by Deena is that in our surveys, 
individuals--she hadn't mentioned our surveys, but I will--what 
we know is that individuals dramatically underestimate how long 
they will live today.
    My mom and dad were born in the teens, meaning 1913, and 
1916. My father lived to one month short of age 94, and my 
mother is 93 and doing quite well from a health perspective. 
That means I should expect to live to 105 to 108. Most 
individuals today believe that even if they retire in their 
early sixties, they will only be alive for 20 years. Which 
means everybody assumes they won't make it to average life 
expectancy.
    Why don't they take a life income annuity? Because they 
think a cash sum distribution is a better deal, because I'm 
going to die young. You then add all of this together, working 
an extra 2 or 3 or 4 years, and with the current economy, my 
wife has told me to plan on at least 5 to 6. I'm turning 60, so 
I've said, ``OK, I'll go to 66, and that's full Social Security 
eligibility.''
    But, I think for everybody, if one has the ability to keep 
working, physically, the easiest way to deal with what would 
otherwise be an adequate retirement income is to work an extra 
few years, either full-time or part-time, and the easiest way 
to make sure one can deal with health insurance provision and 
avoid catastrophic health problems is to keep working until at 
least age 65, when Medicare becomes available.
    Mr. Baker. If I can just very quickly throw in a point on 
that, that again, this points out the urgency of healthcare, 
that obviously if employers are providing healthcare insurance, 
it makes them very reluctant to take on an older employee, 
because they know that's a very large bill.
    So, again, if Congress could pass legislation that will 
bring healthcare costs more down to reasonable levels, then the 
prospect of hiring an older employee will be less burdensome to 
employers.
    The Chairman. Ms. Katz.
    Ms. Kennelly. Mr. Chairman, as you know, you and I--we are 
the models of working longer, and older. But, you have to 
remember something. I said in my testimony that the average 
payment for Social Security is $13,800--it's very moderate. 
What we always have to remember, and you have to remember as 
you address this question, is that if, in fact, you raise the 
retirement age for Social Security, you are effectively cutting 
benefits--especially in an economy where jobs are scarce.
    The Chairman. Ms. Katz.
    Ms. Katz. I think we need to explore, also, partial 
retirement benefits, so that people can work on a part-time 
basis, or even full-time, and still have access to some of 
their benefits.
    Boomers, as I pointed out before, want to stay vital and 
active in the workforce. The fact is, if we all quit, we 
wouldn't have enough people to replace us, anyway. So, we need 
to take a very positive view on working, we need to take a look 
at those arbitrary restrictions on mandatory retirement. I 
mean, 65 was an arbitrary number to begin with. So, we need to 
take a good long look at this.
    Coupled with giving employers some benefits for supporting 
that healthcare, will also help prop up a lot of the problems 
that we're having.
    The Chairman. You want to say something, Mel?
    Senator Martinez. I was going to ask--yes, thank you.
    Ms. Katz, I was going to ask whether--in your financial 
planning--you take a different approach with, you know, the 
baby boom generation, I guess, spans from those of us at the 
beginning of it, at 46 to mid-sixties, I guess, right? Are 
there different challenges in trying to prepare for retirement, 
obviously, depending on the age of the people within that 
timeframe?
    Ms. Katz. Well, there are, simply because their resources 
are being strained from so many different levels. So, one of 
the things we do is to encourage people to work longer. But, 
there are not--there's not a lot of flexibility in making those 
plans, and I think that's where legislation can help.
    Most boomers that I see are making a life transition. They 
are willing to accept working in a less lucrative business, to 
be able to have more personal satisfaction, that's the nature 
of boomers moving into the next phase of their life, that's why 
we don't relate to the word retirement.
    So, as a result, we're going to see people working in a lot 
of other areas that they haven't been working in before, for 
less money, changing their lifestyle, downsizing, which is why 
we call it ``decumulation,'' it's not distribution, it's 
``decumulating'' in a whole lifestyle.
    So, we're talking more about lifestyle choices, and fitting 
those into needs and circumstances with boomers than we ever 
did with the past generation.
    Senator Martinez. Thank you.
    The Chairman. Go ahead, Mr. Salazar.
    Mr. Salazar. In our experience in providing financial 
education to the SCSEP population that we work with, we found 
that it makes a huge difference in their lives. I mean, we 
encounter so many individuals that are un-banked--that don't 
have any kind of a relationship with a financial institution, 
and then become very vulnerable to predators out there. There's 
just a huge market that we encounter that have never opened up 
an account, anywhere.
    The kinds of things that they learned and the situations 
that they relate to you, is shocking at times. But it makes a 
huge difference in preparing them, to once they're making an 
income, to be able to keep that income and pay for the--for the 
things that they have that are necessities in their life, as 
opposed to giving it away to somebody who's just trying to take 
advantage of them.
    The Chairman. Yes.
    As you point out, Ms. Katz, there is a real need for older 
people to stay in the workforce. It's not that we have to find 
a way to keep them there even though we don't need them there--
the opposite is true. That employers need their experience, and 
their wisdom, and their willingness to work in a more flexible, 
part-time arrangement to run their business. All of the 
predictions about the future indicate that this is going to be 
true, isn't it?
    Ms. Katz. Absolutely. I mean, we don't have enough people 
in the workforce under retirement age to replace us. So, I 
think that's going to be a very big issue.
    Having legislation dealing with older workers' rights, and 
opportunities will be very vital in the future. We can't go 
away, and second, we don't want to go away. We want to stay 
active.
    The Chairman. Yes.
    Ms. Katz. That's part of why we need to encourage a whole 
shift in what we have been looking for in the past.
    The Chairman. There's a big mental satisfaction in keeping 
people in the workforce beyond 65, to them, isn't there?
    Ms. Katz. Well, you know what? As planners, we had started 
out saying, ``You can't retire. You're going to have to work 
longer.'' Boomers would say back to us, ``We don't want to 
retire. We want to stay in this. We want to contribute, we have 
a knowledge base that can't be replaced.'' So you is us. But 
give us that opportunity to be used.
    So, what they're doing is putting a positive spin on 
something they have to do anyway, and that's work longer 
because we need the resources. But now, we're working longer 
because we really want to stay in the economic community. We 
want to participate.
    The Chairman. Very good.
    Mr. Salisbury. Senator, and even for those that may not be 
so thoroughly motivated, this is America Saves Week, and we 
released yesterday a survey that we had done with the Consumer 
Federation of America, tied to America Saves Week.
    One of the things that that new survey data showed, which 
was just collected 2 weeks ago, is that the proportion of 
individuals who--as a result of the current economic 
situation--say that they now intend to work significantly 
longer, has gone up significantly.
    If one's looking for some potential silver linings out of 
the current situation that we're facing, is it does appear to 
be serving as somewhat of a sledgehammer against many people's 
realities as to really thinking through what their savings 
levels are, how much they need in the future, and whether they 
can actually afford to retire. I think that the good news of 
that is that as our data has always suggested, a large 
proportion of those that retire have done it, literally, 
without having made any calculation of what their income or 
expenses would be.
    They hit eligibility, somebody said, ``Oh, you're eligible 
to retire. Oh, that means I must be able to do it.'' They have 
done it. The current situation is causing people, from the 
survey data and behavioral data, to at least stop, think, plan, 
far more thoroughly. So, I think that is in and of itself going 
to lead to later retirement ages, and to far more thorough 
planning by individuals, relative to their exit from the 
workforce.
    Since Mr. Bernanke said yesterday that we're likely to be 
in a recession through the balance of 2009, the data suggest 
that that extended period is going to cause tens of millions of 
older Americans to very thoroughly reevaluate what their plans 
were, and boomers--if you will, Senator--and that that is 
likely to change patterns dramatically from what some might 
have thought as recently as a year or two ago.
    The Chairman. Ms. Katz.
    Ms. Katz. The big problem is, we give people the 
opportunity to retire, but we don't give them the tools to make 
the decision intelligently. I'm surprised that, in the Stimulus 
Package, we didn't include some kind of financial planning 
support for people, because it's really what we're talking 
about here, at every age. They do not have the tools to make 
good decisions about their retirement, so the forced working is 
a result of not planning very well earlier, as well as a lot of 
economic downturn that we've suffered in the last couple of 
years.
    So, legislatively, I would like to see us provide more 
financial literacy programs, more education, more tools to 
retirees, more encouragement to seek intelligent, non-biased, 
fee advice to be able to make those decisions. More people 
make--spend more time on what kind of refrigerator to buy--then 
what they're going to do with their retirement.
    The Chairman. Well, that's great. This has been a wonderful 
panel, I guess I'm moved to say that hearings like this where 
the Senators learn an awful lot by listening to the panelists 
don't occur every day, but it's occurred today. You brought a 
lot of information and wisdom to the table, and I think a lot 
of it's going to be translated in action in the months to come.
    So, I thank you so much for being here and we thank you all 
for being here.
    We are adjourned.
    [Whereupon, at 12 p.m., the hearing was adjourned.]
                            A P P E N D I X

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