Aging and America: Demographic Change and Its Consequences for Work and Retirement

In 2012, the National Research Council of the National Academy of Sciences issued a comprehensive report documenting the aging of the U.S. population and analyzing the economic effects this phenomenon may trigger over the next 40 years. The report, Aging and the Macroeconomy: Long-Term Implications of an Older Population, identified two potential policy strategies for mitigating the economic consequences of population aging: 1) enabling people to increase their savings for retirement; and 2) encouraging people to postpone retirement by working longer.1

In November 2013, the TIAA-CREF Institute and the Alfred P. Sloan Foundation sponsored a colloquium of researchers and policy analysts to discuss how to help people save more and work longer.2 The colloquium, Towards a Policy Agenda for an Aging America, began with a panel during which the key findings and implications of the National Academy report were reviewed. A second panel discussion focused on improving the planning and saving behavior of American workers.

Senator Tom Harkin, chair of the Senate Health, Education, Pension and Education Committee, then gave a keynote address, presenting his perspectives on enabling people to save more by improving the U.S. public and private pension system for workers. A final panel focused on research and policy initiatives for longer work. 

Key findings from the colloquium are described below, under the broad themes of saving more and working longer.


1. Creating a more holistic and integrated retirement income system requires defining the relative responsibilities of individuals, employers and government for assuming the risks inherent in financing retirement income, such as investment, interest rate and longevity risks. It also entails addressing the challenges posed by changing labor force participation rates, as well as changing job mobility and retirement patterns. Health and long-term care insurance should also be integrated into the system.

2. The objective of saving for retirement should be to provide an adequate and secure income throughout retirement. This implies leveraging annuity products to insure against outliving accumulated savings.

3. Unlike the 403(b) model in higher education, most private sector 401(k) plans do not offer an annuity payout option, primarily due to fiduciary concerns of plan sponsors. Proposals to address this include a safe harbor provision for in-plan lifetime income options, clarity regarding the fiduciary exposure associated with in-plan lifetime income options, classifying products with a lifetime income component as Qualified Default Investment Alternatives (QDIAs), and allowing 
deferred annuitization through longevity annuities under required minimum distribution rules.

4. Low levels of financial literacy and poor personal financial management practices are barriers to long-term financial security. For example, financial literacy is generally low even among college-educated millennials who are nonetheless confident in their ability to manage day-to-day financial matters. But debt is widespread among this group, as is worry about repaying debt. More fundamentally, their debt is associated with poor financial management, such as expensive credit card practices and tapping into retirement accounts.

5. There are signs of an emerging, bipartisan consensus that pension reform should expand retirement plan coverage across the workforce, maintain or expand tax incentives for retirement savings and plan sponsorship, and promote financial education efforts. In the absence of federal action, various states are proceeding with initiatives to promote retirement income security for the public sector workforce, and private-sector workers as well.


1. Data indicate that labor force participation is already increasing among older workers. But workers with lower education levels remain less likely to continue working due to a combination of health issues and jobs that tend to be more physically demanding.
2. Many workers change jobs after age 50; this may or may not involve a change in occupation. While the new jobs often pay less, they tend to involve less physical labor and less managerial responsibility. Many job changers report increased enjoyment in their work.
3. While there is limited research to date of labor market demand for older workers, existing research indicates significant growth in older worker employment in the service sector, where jobs are characterized by limited physical demands, flexible schedules, opportunities for social interaction and relatively high levels of job satisfaction. In the service sector, an increased demand for older workers has been associated with increased wages, a decreased outflow of older workers, and an increased inflow of older workers from other sectors and out of retirement.
4. Research indicates increased labor force participation among older workers after the passage of state and federal protections against age discrimination in employment. It further indicates that anti-discrimination laws complement the effect of Social Security reforms intended to increase work lives and delay benefit claiming.
5. Strategies to reengineer the workplace for an aging population include flexible work schedules to help individuals balance work with family caregiving responsibilities; continuing education to address changing technology and knowledge requirements; and reorganization of how and where people work to promote knowledge transfer and a new social contract between young and old employees.
6. The federal government has become a leader in the use of phased retirement. Such programs can lengthen work-lives and ease the transition into retirement by allowing older employees to work part-time for pro-rata salary. Beginning in 2014, some 100,000 federal employees are projected to take phased retirement each year, resulting in a $450 million reduction in annual payroll costs. At least 20% of the phased work time will be devoted to mentoring younger workers. 

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This article was written by TIAA CREF, various authors

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