1. The Four Pillars of Retirement Security Social Security Pensions & Savings Earnings Health Insurance

2. Social Security Pensions/Annuities Public Assistance Assets Misc. Other Wages Source: March 2004 Current Population survey Percent of retirement income from all sources

3. Social Security: Cash Flow Estimated OASDI and Cost Rates, 2001-50 [as a % of taxable payroll] 8 9 10 11 12 13 14 15 16 17 18 19 20012005201020152020202520302035204020452050 Year Percent of Taxable Payroll 2018

4. Social Security: Projected Trust Fund Assets $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 20012005201020152020202520302035204020452050 Year Billions of Dollars Assets at end of year, including interest 2042 2028 We are here (in current dollars)

5. Significant Savings Required at All Income Levels to Maintain Standard of Living in Retirement Pre-Retirement Family Income $50,000$80,000$120,000 Income at 70% replacement level$35,000$56,000 $84,000 Income from Social Security (at Full Retirement Age)$20,436$26,820 $35,364 Income needed from savings and investments$14,564$29,180 $48,636 Principal needed at retirement to generate above income (if withdrawn at 4% per year) $364,000$729,500$1,215,900 Extra needed for average medical costs per couple $300,000 TOTAL savings needed for a secure retirement $664,100$1,029,500$1,515,900

6. Defined-Benefit Pensions Disappearing Source: Alicia H. Munnell, Kevin E. Cahill, and Natalia A. Jivan, An Issue In Brief, Number 13, Center for Retirement Research at Boston College, September 2003. % of Wage & Salary Workers Covered by Plan Type, 1981-2001

7. Median Amounts in Retirement Accounts by Age Group, 2001 and 2004 Source: Brian K. Bucks, Arthur B. Kennickell, and Kevin B. Moore, “Recent Changes in U.S. Family Finances: Evidence from the 2001 and 2004 Survey of Consumer Finances,” Federal Reserve Bulletin, January, 2006. (in thousands of 2004 dollars)

8. I in 4 people between 45-54 are taking money out of 401(k)s, IRAs

9. Personal Saving Rates Have Declined Steadily for Two Decades Source: Federal Reserve Board, Flow of Funds Accounts, Table F10, Derivation of Measures of Personal Saving, various years. Trends in Personal Saving Rates, 1985-2006

10. Boomers’ Net Worth Median Net Worth Source: AARP Public Policy Institute research 2004 figures, include home equity; Boomer ages 42-60 currently

11. Older Americans are Working Longer Source: U.S. Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey, 1985-2005, accessed at http://data.bls.gov/PDQ/outside.jsp?survey=ln. Labor Force Participation Rates for Persons Aged 55 and Older, by Age Group, 1985-2005

12. Options to Strengthen Social Security...

13. Raise payroll tax ½ percentage point24% Include newly-hired State/Local workers9% Raise max. wages subject to Soc Sec tax43% Gradually raise age of full benefit to 70 38% Increase calculation period to 38 years16% Index benefits for “average longevity”25% Reduce benefits for new retirees ( by 5%) 26% Diversify 15% of Trust Fund investments16% “Superlative” index the COLA calculation14% Raise the earliest eligibility age10%

14. Social Security Poll Results Reform OptionsWould ConsiderFAVOR Increase wage cap to $150,00081%71% Increase FICA ½ percent72%59% Lower benefit formula 10% for higher income only 67%56% Invest small portion (15%) of Trust Fund 54%40% Raise retirement age to 7047%33% Index benefits for average longevity46%30% 5% benefit cut for NEW retirees43%28% Convert from wage-indexing to modified price-indexing 37%26% PUBLIC OPEN TO ADEQUATE ADJUSTMENTS

15. Social Security Poll Results RepublicanDemocrat Reform Options FAVORConsiderFAVORConsider Increase wage cap to $150,00072%83%72%80% Increase FICA ½ percent57%68%62%76% Lower benefit formula 10% for higher income only 53%64%59%69% Invest portion (15%) of Trust Fund50%63%34%50% Raise retirement age to 7037%52%32%44% Index benefits for avg. longevity32%49%30%44% 5% benefit cut for NEW retirees25%43%29%45% Convert from wage-indexing to modified price-indexing 25%36%27%38% NO LARGE DIFFERENCES BY PARTY

16. Social Security Poll Results Retirement Savings AccountsFAVOR Employers should be required to offer payroll deductions to an IRA 79% All workers should be enrolled in and contribute to a 401(k) plan, unless they opt out 75% Favor individual retirement savings accounts that supplement Social Security, with contributions from both employee and employer 71% PUBLIC FAVORS SUPPLEMENTAL SAVINGS

18. Medicare Reform

19. Source: MedPAC analysis of the Medicare Current Beneficiary Survey, Cost and Use file, 2004 People on Medicare By Income

20. (% "not a problem") (% “always") (% "not a problem") (% “responding “9“ or “10”) CAHPS Health Plan Survey Comparison 2006 Source: 2006 CAHPS Health Plan Survey Chartbook Medicare Medicare beats Commercial Plans in Patient Satisfaction last 5 years

23. Rise in Health Care Costs per capita Source: Health Affairs, Trends, Health Spending Projections, February 2007 Projected

24. NOTES:

25. Costs for Total Medicare Program Billions Overall Medicare Costs Projection Source: CMS, National Health Accounts

26. Costs for National Health Expenditures Billions Overall Medicare Costs compared to Overall Health Costs Source: CMS, National Health Accounts Costs for Total Medicare Program Projection

28. Analysis of Cost Growth over 4 years Source: National Health Expenditures Accounts: Definitions, Sources, and Methods used in the NHEA 2004, CMS General Inflation Medical Inflation above general inflation Population Growth Intensity, Volume, Technological Change & other residual factors Factors in Healthcare Cost Growth 2000-04

29. Annual Malpractice Premiums compared to total HC Expenditures Source: In 2005, total National Health Expenditures were $1.988 trillion, CMS. The 2005 amount spent on malpractice insurance was $12 billion, according to NAIC $1.988 TRILLION in Health Care Expenditures $12 billion in Malpractice Premiums

30. Malpractice Premiums as a Percent of Physician Gross Income Source: www.cms.hhs.gov/MedicareProgramRatesStats/downloads/mktbskt-economic-index.pdf 2006, 2005 datawww.cms.hhs.gov/MedicareProgramRates Percent of Physician Income 2005

31. Effect of Excess HC Cost Growth

32. NOTES:

33. 4 Health Sectors with Biggest 10-year Cost Increases, 1995 through 2004 Source: Calculations by PPI AARP using Centers for Medicare & Medicaid Services, Office of the Actuary, CY 1960-2004 National Health Expenditure Data Hospitals Rx Drugs Physician & ClinicalServices Administration & Net Cost of Private Ins 27% 21% 15% 9%

36. Percent of Population 100% 20 40 60 80 20%40%60%80%100% 0% 3% of costs for 50% of people 22% of costs for 1% of people % Health Care Dollars Spent Good Chronic Care Management Key to a Large Segment of Cost SOURCE: Conwell & Cohen, Agency for Healthcare Research and Quality, Statistical Brief #73, March 2005

37. Shared responsibility is necessary BusinessGovernment Individuals

38. 2004 Election Analysis –About 43% of the total vote was cast by 50+ –About 17% was cast by Americans 65+ –About 17% was cast by Americans under-30