Markets & Finance

The Candidates Face the Baby Boomers


The President elected in November, 2008, will take office at a critical moment for national policy decisions that affect your retirement

During the next President's term, baby boomers will begin to retire in earnest. The U.S. Census has predicted that between 2000 and 2010, the number of Americans age 45 to 64 will increase from 62.4 million to 81 million; and those age 65 to 84, from 30.7 million to 34.1 million.

As Americans retire in greater numbers, without some new policy decisions to reverse current trends, the fiscal health of Social Security and Medicare are likely to decline. The costs of chronic and nursing home care increasingly will exceed the ability of the middle class to pay for them, and as the first of the 401(k) generation retire, more and more boomers will confront the reality that they have not saved enough for the retirement they've dreamed about. (For a good overview, see America's Fiscal Future and Retirement Security, by the Government Accountability Office.)

So what do the Presidential candidates have to say about retirement issues? To find out, I scanned eight candidates' position papers and statements and attempted—sometimes without success—to get more information from their campaign staffs. The candidates were the five Republicans and three Democrats who have pretty consistently garnered support of 10% or more in national polls: Democrats Senator Hillary Clinton (N.Y.), former Senator John Edwards (N.C.), and Senator Barack Obama (Ill.); and Republicans, former New York Mayor Rudy Giuliani, former Arkansas Governor Mike Huckabee, Senator John McCain (Ariz.), former Massachusetts Governor Mitt Romney, and former Senator Fred Thompson (Tenn.).

Social Security at the Forefront

Each of the candidates has made some public statement on Social Security and Medicare reform, and several have proposed measures to improve long-term care options and financing. Beyond those issues, the three Democrats have proposed multi-issue retirement platforms. Edwards' 11-point Declaration of Independence for Older Americans includes proposals to address elder abuse and promote creation of "livable communities" for retirees. Obama's Helping America's Seniors includes proposals to encourage retirees to volunteer and protects seniors against financial fraud. Clinton has also released what amounts to a retirement agenda, although her proposals are not bundled into one document.

Social Security, which is expected to start paying out more than it receives in 2017, has attracted the most attention, but few new proposals. Most of the candidates support a "bipartisan process" to seek solutions, and some, including Edwards and McCain, specifically endorse creation of a commission such as the one headed by Alan Greenspan in 1981 to come up with suggestions for reform. Giuliani, Romney, and McCain endorse private accounts, while the three Democrats oppose them. Thompson has outlined a plan to let workers contribute 2% of their wages into private investment accounts and receive a 2.5% employer match.

Huckabee claims his proposal to replace the current income and tax system, including the payroll tax, with a 23% sales tax would solve the financing problem. For people with other resources "who don't need Social Security for the long term," he also suggests the government offer "the option of a one-time buyout, or the opportunity to purchase an annuity" with their Social Security funds, which he says would relieve the long-term pressure on the system. Thompson and some other Republicans want to base future Social Security benefits on the inflation rate rather than on wages, and Thompson has acknowledged the effect of doing this would be to lower benefits for future retirees. Edwards and Obama advocate shoring up Social Security by raising the ceiling on the worker income subject to payroll tax. For 2008, the limit is $102,000.

Medicare Fund in Danger

Considering the potential limitations of Social Security in the future, some candidates have suggested other ways to beef up Americans' retirement income and savings. Obama would exempt seniors with up to $50,000 in income from income tax, arguing that it would improve their quality of life by relieving them of tax preparation, as well as by providing extra cash. The Democrats say they'll scrutinize and probably reform bankruptcy laws to make sure employers don't evade pension obligations.

Clinton's proposals include new laws that would prohibit companies from cutting employee pensions "when they sell off subsidiaries," and creating "American retirement accounts," similar to 401(k)s, with federal matching of up to $1,000 in contributions for families making up to $60,000 and a 50% match for families earning between $60,000 and $100,000.

The Medicare hospital trust fund, predicted to spend more than it receives starting in 2013, is in more immediate danger than Social Security. Cutting health-care costs and emphasizing preventive and chronic care show up as goals in pretty much everyone's position papers. Several of these candidates have released broad health-care reform plans (BusinessWeek.com, 12/14/07) they hope would bring down all medical costs, but few have made specific proposals for Medicare reforms.

A Long Look at Long-Term Care

McCain would change the program's payment systems to "compensate providers for diagnosis, prevention, and care coordination" and offer beneficiaries the choice of a public prescription drug plan as well as the private ones now offered. The three Democrats want to allow the federal government to negotiate prescription drug prices with pharmaceutical companies, and Edwards wants to restrict the companies' direct advertising to consumers.

As boomers retire, long-term care of older and frail Americans also looms as a challenge. Clinton's $5 billion per year long-term care agenda, the most comprehensive offered by a candidate, would provide a $3,000 tax credit to caregivers and double the funding of current caregiver support programs. She would also create consumer advocates to fight long-term-care insurance abuses and help improve nursing home quality, and she would fund recruitment and training of personnel.

My survey suggests that at this point in the campaign, retirement issues rank far from the top of the candidates' agendas. Once the primaries are over and the nominees have been chosen, perhaps a nationally televised debate on retirement would spark more focus and momentum. After all, the Census Bureau reports that in 2006, one-third of all registered voters were in the 45- to 64-year-old age group, and when voters 65 and older are added in, the total rises to fully 50%.


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