Younger generations need to save more, professor says

By John Estus

Published: April 20, 2008

Experts on aging widely agree that people need to start saving more money if they're going to make it through retirement.

It's important for the baby boomer generation, which is quickly approaching retirement age, but it's even more crucial for their children.

"They've got to be prepared to save more at a younger age on a sustained basis,” said Kent Olson, an Oklahoma State University economics professor who studies aging. "What I don't think any of them realize is the magnitude of what they're unprepared for.”

The big reason young people will likely need to save more has a lot to do with three terms that usually put most of them to sleep: Social Security, Medicare and Medicaid.

The bottom line is it's going to cost a lot more to grow old in the future, and those three programs aren't going to offer the help they do now unless reforms are made, Olson said.

"I come from the generation where we started saving at 45 and 50 years old, and we felt pretty good about that,” Olson said. "They're going to have to start earlier than my generation did, and they're going to have to save more. I don't think there's any two ways about it.”

U.S. Census Bureau data clearly shows the nation's elderly population is growing. It's simply going to take more money to keep the elderly healthy under the current retirement structure, Olson said.

That means the students Olson is teaching at OSU this semester and in years to come will have to pay higher income taxes to support their elders, the professor said.

By the time younger generations reach retirement age, Social Security benefits will be fewer and will cost taxpayers more unless changes are made to the venerable program.

Health care costs for the Medicare and Medicaid programs will go up dramatically, the U.S. Center for Retirement Research at Boston College estimates.

The Social Security trust fund is expected to be exhausted sometime around 2040. That doesn't mean the program goes away, but without changes to the program, Olson predicts its benefits will be cut 25 to 30 percent.

And if the program is fixed, it'll need more tax money to survive, Olson said.

"That turns out to be a pretty big financial hit for these young college students, more than any of them would imagine it would be,” Olson said.

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