MS. DIANE REHMThanks for joining us. I'm Diane Rehm. The great recession has affected different age groups in different ways. Today, a look at its impact on the generation of those age 55 and above, many of whom are nearing retirement. Joining me here in the studio, Gary Burtless. He's with the Brookings Institution, Richard Johnson of the Urban Institution. From the Philadelphia Post studios, Olivia Mitchell. She's professor at the Wharton School at the University of Pennsylvania. I look forward to hearing your questions and comments, 800-433-8850. Send us your email to drshow@wamu.org. Feel free to join us on Facebook or Twitter. And good morning to all of you.

MR. GARY BURTLESSGood morning.

MS. OLIVIA MITCHELLGood morning.

REHMLet me start with you, Gary Burtless. What are some of the unique problems facing these baby boomers as they consider retirement or are right there?

BURTLESSWell, the two things that matter the most to them are the terrible job market and the drop in the value of their homes and the value of a lot of the assets they hold in their retirement accounts. And that makes this time a very anxious one, a very worrisome time if you are 55 or older and you're still working.

REHMRichard Johnson, how do you see it?

MR. RICHARD JOHNSONI think the big problem for people on the road to retirement is the possibility that they might lose their jobs. We know that the employment rate, the great recession, has hit people of all ages. The latest unemployment rate is 8.9 percent. It's lower for people 55 and older, it's only 6.4 percent. But that's still very high and the real problem for people, when they lose their jobs at 55 or older -- 50 or older, is that takes them so much longer to get a job then it does younger people.

REHMBut I would think that if you're 55, say you're going to decide you're going to wait a little longer rather than to even think about retirement, wouldn't you think, Gary?

BURTLESSWell, especially given the way people's wealth has taken a hit in the last four years, that's right. And in fact, that's what people say when they're asked about their retirement plans. I think among surveys that have asked this question over a number of years, we're currently at a peak in terms of the age that older workers select for when they think they are going to retire. So the financial worries are really affecting the way people think about retirement.

REHMSo what does that do? Does that skew the workplace to an older age?

BURTLESSWell, that would have happened anyway because the size of the baby boom generation is so big. The -- just the sheer number of people 66 and younger is so enormous relative to what historically has been the case in the United States. We -- the generations that followed the baby boomers are smaller so consequently the baby boom looms very large in the workforce.

REHMBut, Gary, I gather that what you've got is a lower unemployment rate within this age group as well?

BURTLESSAbsolutely. People who are older are less likely to be laid off. And as Richard said, when they get laid off, it's very tough for them to find another job, especially if their aspiration is to hold a job as good as the one they held before the layoff occurred and so, consequently, they spend a lot of time finding that next job.

REHMWhy does it take so much longer, Richard, for them to find jobs?

JOHNSONIt really seems to be -- the problem seems to be that employers are reluctant to hire older people. It's not that they're not looking as hard as younger people. We've looked at some data and they're engaged in just as many job search activities as younger people and yet it takes them, you know, 40 percent longer to find a job then it does for people in their 30s and 40s.

JOHNSONAnd I think employers are reluctant just because there's a sense that older workers are more expensive, that they're going to demand higher wages than younger workers and at the same time, their health insurance costs are a little bit higher. The retirement costs can also be a little bit higher. And there's currently this perception out there that they're more expensive.

REHMAnd...

JOHNSONAnd also that there's less time -- there's a concern that if you hire an older person, this person's going to retire in a few years. You're going to spend a lot of money investing in hiring them and training them and then they're going to be gone in five years. Why not go for a 30-year-old who might be there for 20 years?

REHMInteresting. And turning to you, Olivia Mitchell. What about health care costs? Don't they figure into a company's decision to hire an older worker?

MITCHELLWell, it's absolutely true that health care costs do rise particularly for people, say, 55 and up. On the other hand, it's also the case that health care costs are fairly high for women during the child bearing age. So there's a lot of cross subsidization going on within the workplace. One thing employers have done to try to cap the rise of health care costs is set up health savings accounts where they'll put a specific amount of money in and then it's up to the employee to shop around for health care insurance and pay the bills.

REHMBut there are an awful lot of people, especially those within this baby boom generation, who perhaps have not saved as much as they should've saved for retirement, Gary.

BURTLESSWell, there are always about a quarter of -- any group of workers, when they reach old age, who haven't accumulated much at all in practical terms. It's not so clear that that's the wrong decision on their part. We do have a social safety net that, for the aged population, is really stronger than is the social safety net for people who are younger. And so if you have very low wages throughout your career, it might make sense to let social security and Medicare take care of most of your needs when you get past retirement age. But for the broad middle class, that's not enough usually and they should be saving more.

REHMRichard?

JOHNSONAnd certainly what's really different about the boomers than previous generations is that fewer of them have the traditional defined benefit pension plan. So it used to be the case that you would go to work and retirement wealth would automatically accumulate on the job if you had a job that had a pension and when you retired, you would get this pension based on how much you earned and how long you were there.

JOHNSONYou didn't have to do anything. Today, you can still accumulate pension wealth on a job through a 401K plan, but you have to make a decision as to how much you're going to put into these plans. You have to invest them wisely. You have to resist the temptation to withdraw funds. If you leave jobs with -- borrow from the funds over time, you have to resist that temptation. So it just puts a lot more of the burden on the workers than it used to.

REHMAnd Olivia, the financial crisis we've seen has also put a burden on those 401K plans.

MITCHELLWell, indeed. The 401K plans, which were approximately 70 percent invested in stock, took a big hit during the stock market debacle, of course, so did the defined benefit plans. And so that's why we see many employers that have those plans either freezing them or terminating them because they simply can't afford to throw in the money needed to keep the plans afloat. So retirement planning has really taken a big hit.

REHMWhat about social security, Gary? How much does it really help people in retirement?

BURTLESSWell, if you've had low wages throughout your career, social security is really likely to keep your level of standard of living constant after you retire. But as you move up the wage ladder, if you have middle class wages, then you have to supplement what social security is going to provide you with something else. And there is, of course, uncertainty about how long social security benefits can remain as protected as they have been over the last 30 or 40 years. A lot of people worry that in the future we may have a different political view about the sustainability of these benefits.

REHMRichard?

JOHNSONSocial security accounts for 90 percent or more of income for about 1/3 of people 65 and older.

REHMNinety percent.

JOHNSONNinety percent for 1/3. On...

REHMWow.

JOHNSON...average, it replaces about 42 percent of your pre-retirement earnings. So it's important. And there is a real concern about its future viability. You know, we might have to cut -- raise taxes, cut benefits a little bit to keep the program going.

REHMAnd then there's that question about whether to begin receiving your social security at an earlier rather than later age. What are your thoughts on that?

JOHNSONWell, you can begin collecting right now at age 62. If you wait longer, though, you're going to get higher monthly benefits. That reflects the fact that you're going to get fewer benefits if you wait, so each monthly payment is going to be a little bit bigger. And by waiting, you can really increase your social security benefits. So today, if you're 62 today and you begin collecting at 62, you'll receive only 75 percent, as much as you would receive if you waited until age 66.

REHMBut...

JOHNSONSo it can make a big difference by waiting.

REHMBut isn't there also...

MITCHELLDiane, could I add something?

REHM...a question of having to live longer to make up what you wouldn't have gotten between 62 and 66, Gary?

BURTLESSIf you're a worry wart, I think it makes sense to delay collecting the social security pension as long as you can, especially if you are concerned that you may run out of money when you're 75 or 80. Because probably the most secure part of your income flow when you're past 65, is going to be the social security check. It rises in line with inflation. The government is not going to default on an obligation to somebody who's 80 or 85 years old.

REHMGary Burtless, he's senior fellow in economic studies at the Brookings Institution. I see our lines are filled. Feel free to send us an email, a tweet or joins us on Facebook.

REHMAnd of course, we've talked about the economic aspects of those in the baby boom generation who are thinking about retirement or at least thinking they might have an opportunity to retire. What about the psychological stress, Olivia, of being a part of that baby boom generation and thinking about the economics attached to it?

MITCHELLWell, it's very clear from recent polls, including one from the Allstate National Journal survey, that we are talking about the anxious generation. That is, I'm a boomer, most of my friends are boomers and I think all of us have finally recognized that we're not going to be looking at our parents' retirement. Social security, Medicare, all these programs are facing much bigger problems than our parents' did. Our home values have declined, our 401Ks are fairly limited. And healthcare costs just seem to be quite, quite astoundingly high.

MITCHELLSo the level of us -- I wouldn't call us near retirees, but boomers, the level of our confidence has declined substantially compared to our parents' level of self assuredness and retirement confidence.

REHMAnd what does that reduced level of confidence mean in terms of one's outlook?

MITCHELLWell, I think the most important degree of freedom that many people have -- not everybody, but many people, is that they will need to keep on working and delay claiming social security. As was noted a moment ago, if you delay claiming than the eventual benefit you get will be a lot higher the rest of your life. So that's one relatively easy way to adjust for people that are still in relatively good health.

MITCHELLAlternatively, working part time. A lot of boomers are thinking about un-retiring or trying to start a new company or working in a new career even and so all these are different flavors of retirement than we saw a generation ago.

REHMSo thinking about working longer, Richard.

JOHNSONIt is an important option for a lot of people and it can really recoup any losses you've had in your 401K plans if you never had a pension. For example, if you retire at 68 and collect your social security at 68 instead of 62, it will raise your social security benefits by 54 percent. So let's say instead of getting $1,000 a month you're going to get $1500 a month. That is equivalent to a lot of pretty generous pensions. So just doing that, working those extra six years can really make an enormous difference.

JOHNSONAnd a lot of people are able to change jobs late in life. So, for example, about 50 percent of people change jobs after age 50 and about a quarter of them move into whole new occupations. So it is possible to almost reinvent yourself late in your working life and pursue that job that you maybe always wanted to and just didn't have enough savings when you were younger to start a new business. Now that you're in your 50s, maybe you've accumulated enough of a nest egg to do something you really enjoy.

REHMThat seems pretty optimistic, though.

JOHNSONIt's not for everyone, but...

REHMYeah.

JOHNSON...it happens a lot. And it certainly is possible.

BURTLESSI think the most important option to exercise if you -- if it's open to you is to remain in the job that you have. And my reading of the evidence is that is one of the trends that we've seen over the last 20 years, there has been a gradual increase in the age at which people are leaving work. And a lot of that is explained by people delaying the age at which they leave their career jobs. And as Richard said, people also change jobs. They have bridge jobs. They have jobs that are less demanding than their main career job. But there's a number of ways that people have increased the age at which they leave the workforce.

REHMAnd what does that mean for the workforce, Olivia? Does it mean that perhaps younger people are feeling somewhat resentful of older people who are deciding, for economic and psychological reasons, to stay on longer?

MITCHELLWell, I think that there is some sense of the myth that if the younger workers -- that the younger workers need to have the jobs that the older workers might be keeping. But in fact, that's been fairly well disputed with a lot of different evidence. I think one of the best sources of evidence is that when the women went into the labor force after having all of us baby boom babies, labor force participation went up 87 percent by women. And yet the whole level of employment in the economy still went up by 40 percent.

MITCHELLSo the economy is very flexible. It's very resilient. We can take advantage of the skills of older workers. But obviously what we also need is a resilient national economy and good fiscal and monetary policy to get us back into a healthy situation.

BURTLESSAnother point is that older workers aren't the only ones who think that they may want to delay their work-- their departure from work. If you look at these surveys that ask younger workers what they envision for the future, there's also been a jump in the age at which they think they will leave the workforce. So I would think there'd be a little bit of sympathy among people who are younger who also have this vision already that they'll be leaving the workforce later than their grandparents did.

REHMIs there...

MITCHELLThere is one other point, if I could just jump in...

REHMSure.

MITCHELL...which is if you look at the countries that have encouraged earlier retirement, some of the European countries come to mind. The cost of encouraging early retirement is high tax rates on the young because you have to pay all these pension and healthcare benefits for people who are 55 who -- after all, that's not very old. Let's be clear. And so conversely, countries that have encouraged later retirement and continued work don't need to burden the young so much and therefore they have more youth employment.

REHMRichard.

JOHNSONThere's also a very important distributional issue that we should probably mention, which is that not everyone, of course, can work longer. And it really raises questions about what do we do then? If we're expecting people to work longer, what about the person who develops a health problem? What about the person with less education for whom employment prospects are much worse at older ages?

REHMOr what about the person who's done a physical job for all of his or her life and can no longer continue?

JOHNSONThat's right. And so there's a real question is that what kinds of programs can we create to help this vulnerable population? What some countries have done, in Europe for example, is to give some special preferences, some disability preferences to people 55 and older, 62 and older, people who are just not quite old enough to qualify for retirement benefits, but making it easier for them to get disability.

JOHNSONThe problem with that, though, is that sometimes these disability programs then morph into an early retirement program. So it's really hard to identify those people who really can't work. It's just that it's a subjective process and it's very expensive to administer a program like that.

REHMHere is an email from Constance in Silver Spring. She says, "When you're talking about the end of baby boomers' careers, I assume you're kidding. Very few of us can afford to retire. We're going to hold on as long as we can. Those of us without good jobs are looking for survival jobs. So don't look for the predicted wave of baby boomer retirements anytime soon because for many of us, the alternative to working is life on the streets."

BURTLESSWell, among people who are 65, and that's the oldest baby boomers, only about 43 percent of men and a somewhat smaller share of women, maybe a third of women are still actively in the labor force. So clearly, a lot of the oldest baby boomers have indeed left the workforce. The age at which people are leaving is edging up, but it is not -- retirement is not going to disappear any time soon, even for the baby boom generation. The oldest baby boomers relative to younger generations have reached their current age probably with better health and with more wealth than earlier generations had on average.

BURTLESSAnd so I don't think that it is reasonable to think that we're going to go back to our great grandparents' era and just never retire.

REHMOlivia, here is an email from James in Kenmore, Wash. He says, "I'm in my early 50s and already I'm feeling some huge stress about my job prospects. It's as if I'm being told that I've reached my job obsolescence. Is it really possible to reinvent oneself these days?"

MITCHELLIt's a very, very interesting question with huge ramifications. I remember when I -- when the computers first came out, I went to my boss and said, you know, I'm a really fast typist. Can you buy me a computer? And he looked at me and he said, young lady, I've dictated a 100,000 quality words per year for my entire professional life. Learn how to give dictation. So I went out and taught myself, you know, the original Microsoft version of Word and the rest is history.

MITCHELLSo I think we have to realize that we need to keep retraining ourselves, keep investing in our skills. It's not enough to finish high school or even go to college. You have to keep up with the curve and technology is changing so quickly. We can't just give up when we're 40 or 50. We have to say, I've going to have to work 'til I'm 70. Let me go retrain and build new skills so I have something in the labor market that people are willing to pay me to do.

REHMRichard.

JOHNSONAnd of course, the problem is that employers, many of them have this impression that older workers are not going to be as up-to-date as younger workers. And so really the burden falls on young -- on older folks to really demonstrate that they have those skills because there is the impression that they don't.

REHMNow listen to this from Rebecca in Brattleboro, Vt. who says, "I'm 56, employed in private higher education. I'm the primary earner in my household and provide health insurance, as my husband is self-employed. We have a child struggling to afford college and I look out for my elderly mother who lives nearby. Though our jobless rate in Vermont is relatively low, I live in terror of losing my job to economic stress on higher ed. and non-profits in general. I should probably quit listening to shows like yours this hour, as they are so scary and depressing." Olivia.

MITCHELLWell, you know, telling the truth, it may be depressing, but that doesn't mean we shouldn't tell it. In other words I don't want people to be paralyzed and think, oh well, there's nothing I can do. Let's just carry on as though life was as in the past. I think what's more important is to look at what we can do. So working longer, that's one piece of it. Retraining, investing in our physical and mental health, I think, is really critical. You have to, you know, say to yourself, okay. New Year's resolution, time to quit smoking, time to lose weight. This is going to be an investment in the next 30 or 40 years of my life and I need to do this.

MITCHELLDiversify your portfolio. Don’t put all your money into one house. We saw how that hurt people going -- looking backward. And cutting costs, you know, maybe you don't need that extra cup of coffee from the expensive coffee shop every day. Maybe you can hold your car for 12 years instead of leasing it for four? There are many, many ways that we can, in fact, save, but we have to put our mind to it.

REHMOlivia Mitchell. She's at the Wharton School at the University of Pennsylvania and you're listening to "The Diane Rehm Show." We'll open the phones now, 800-433-8850. First to Petersburg, Mich. Good morning, Matthew. Thanks for joining us.

MATTHEWHey, Diane. Thanks for having me on your show. What a pleasure it is to speak to you.

REHMThank you.

MATTHEWYou know, I'm a 53-year-old guy and kind of nervous. I've never called in before so (unintelligible) ...

REHMWell, I'm glad to have you with us.

MATTHEWYeah, thanks. Hear me on this. When I was a graduate in '76 back in -- you know, 1976, I took a $5-an-hour job at Cambridge Blue Cross and Blue Shield. It had full benefits. And I left that job for one that paid $5.25 and it came with a pension. So, I mean, you know, 35 years later, we're looking at some pretty stark realities. What it is, is your panel has talked about how people -- you know, older workers can't find work.

MATTHEWWell, I'm here to tell you that, you know, (unintelligible) out to China. And I just bought a pack of hinges at the hardware store and it's made in China. And I’m installing the hinges with a Dewalt drill that's made in China. And, you know, if we keep selling ourselves out, there's nothing left. And try to reinvent ourselves at our age is a joke because who's got the effort and the energy to even do that nowadays?

REHMWhat do you think, Richard?

JOHNSONWell, I mean, the caller's right that we look at earnings for a man over the past 30 years they've been declining -- at best, they've been stagnating. And a big part of the problem is increased globalization. A lot of jobs are going overseas, or at least there's more foreign competition. And that seems to depress wages for at least low-skilled men.

JOHNSONI think a lot of the discussion when we're talking about the retirement prospects of the boomers, though, is somewhat overly pessimistic because we forget about some really good news that's happening. And in particular, women's increased labor force participation, their increased earnings, a lot of women are now earning retirement benefits under their own name. They're accumulating pension wealth under their own name. And that's really helping to improve household income for married couples in retirement. And that's a very positive development.

REHMAll right. And a caller in Charlotte, N.C. Good morning, John.

JOHNMorning. I just -- and my question was to Richard about social security. But first, I guess since you've just commented on it, I'm unemployed right now looking for a job, but -- and I'm optimistic that I'll find something. But my wife has a great job right now...

REHMGood.

JOHN...and she has a pension.

REHMGood.

JOHNAnd so our household's in good shape. But my question was about -- I think it was Richard that said, wait to draw on social security until you turn 68. And what I -- I did the math when I got my most recent statement. And what I found was if I started waiting until 68, I would not have dollar for dollar the same amount if I started drawing at 62 until I was 78 years old. And so it seemed to make sense to me to drawing on social security as soon as possible. Because, again, if I started drawing at 62, I would have -- you know, I could invest that money maybe in a, you know, 401K or whatever, self-directed IRA and earn money on it as opposed to waiting until 68 and not having the same exact amount until I was 78 years old.

REHMAll right. Gary and Richard both.

BURTLESSWell, that's why I emphasized if you're a worrywart. If you're a worrywart, you think that I might live to be 95. And long before I reach 95, I'm going to use up all my savings. And my other sources of income are going to dry up. In that case, social security is going to be a good source of retirement income.

REHMAll right. I'm sure...

BURTLESSAnd the later that you draw it the better.

REHM...I'm sure we can talk more about this after we take a short break. I look forward to hearing from you.

REHMAnd welcome back. Here's a Tweet from Rojajani who says, "My parents are in their 50s, lost jobs four years ago. I pay their expenses. They do not qualify for Medicaid or Medicare. They worked 20 years. I see people who never worked have free government insurance and food stamps. Punishment for working hard?" Olivia.

MITCHELLThat's a real tough one. I mean, I think in the broad scheme of things, we have to realize that we're going to live longer and longer and you can't expect to live to 100 and only work for a third of your life or a quarter of your life. So the issue about safety net programs and people taking advantage of them is one thing. But the fact is that if we're going to live to be 100, we're gonna have to work 'til we're 70 or 80 years old on average. And I think that's the direction we're heading.

REHMAll right. To Centreville, Md. Good morning, Ed.

EDDiane, thanks for having me on your show.

REHMSurely.

EDThere's been any interesting points made about what is happening to the baby boomers and that includes things like living longer, that includes things like losing the equity in their home as a retirement resource. I think that one of the areas I'd like to hear your guests comment on is the almost avalanche movement of corporations from defined benefits, pensions to 401Ks, and most importantly the abysmal performance that 401Ks have shown as a retirement mechanism.

EDPeople feel lucky to make two percent on their investments today. And if you do the math and figure out what you need to live frugally but longer, 401Ks have been just probably one of the biggest disasters to hit the baby boomers. And they're the first generation, I think, that is going to have to rely on things like 401Ks primarily.

REHMAll right. Olivia, do you want to comment?

MITCHELLSo I would disagree rather strenuously, sir, with all due respect. And I agree we're in an environment where if you're making two percent on your savings, this is a bad world to be in. You're gonna have to save 40 percent of your income if you want to come up with a nest egg that will pay you half of your pre-retirement pay. And so it's just a bad capital market. But on the other hand, I would say that we have to realize only one out of ten employees that ever started working under defined benefit plan coverage, that an employer ever gets a benefit from that employer.

MITCHELLSo the fact that defined benefit coverage has gone down, I think, is actually fairly egalitarian. There are a lot more people that are gonna be reaching retirement age with their money in a 401K plan because they are more inclusive because you can take them with you as you move from job to job. The crux of the problem, though, is contributing enough and investing it smartly. And that's where we have to do our work.

REHMGary.

BURTLESSI think Olivia is referring to the fact that a lot of people who started work at a traditional employer with a traditional plan never worked long enough to really qualify for a very good pension. And that is a risk that I think many people who bemoan the loss of traditional pensions forget lots of people in the old regime worked for many years and didn't quite work long enough to get really the golden ring that they were expecting. Yes, that kind of pension has a lot of security for the people who qualify for the full pension, but Olivia and I and many other researchers who've looked into this recognize that a lot of people start to work for those employers and never got the golden ring.

REHMSo if your pension kicked in after 30 years and you worked 39 and a half, what'll happen?

BURTLESSWell, it's more complicated than that. Suffice it to say that you often have to work until you reach 55 to really get the best kind of a prize and many people had careers that were interrupted at the company before they reached that critical age.

REHMI see. Richard.

JOHNSONAnd the good news is that 401Ks are really improving, so many employers now are offering automatic enrollment to their employees. The problem used to be that people wouldn't even bother to sign up for these plans and so they'd miss out on the matching and they wouldn't accumulate any money for retirement. But now a lot of employers automatically sign up people and now they're also introducing auto-escalation, it's called, so that the amount of that you contribute will automatically increase as you get older, so really to encourage people to invest more.

REHMAll right. To Dallas, Texas. Good morning, Mercedes. You're on the air.

MERCEDESGood morning, Diane. Thank you so much for taking my call.

REHMYou're welcome.

MERCEDESI'm listening to all of the different theories and prospects of the guests on your show about early retirement, the pitfalls. I have come through a devastating time in my life as so many other Americans have. I faced an unexpected illness. I lost everything...

REHMOh, I'm so sorry.

MERCEDES...in Hurricane Katrina. And I was virtually homeless for a long period of my life. And when I did relocate to Dallas, Texas, it was a beginning of a new life for me, only to discover that I had stage four cancer. I was totally unaware. That hit me out of the blue. I was forced to take an early retirement at age 62. I knew the ramifications of that, but I needed to find an immediate way to get medical care...

REHMSure.

MERCEDES...to live, to subsist. My previous employer, if that -- that was the only viable job I had in my entire job. In the '80s, everything went bust. And while the rest of the country was talking about recovery, that particular area in Louisiana never recovered. There were no viable employers coming to the location. And due to political corruption which was tolerated for many, many decades, no one was encouraged to start new companies, new businesses...

REHMYes.

MERCEDES...because of the intense political corruption.

REHMAll right. Mercedes, I'm so sorry for the excruciating situation you find yourself in. And, Olivia Mitchell, as we look at this, there are people across the country who are in perhaps not as dire as Mercedes' situation, but are in that place they call hopeless, that simply the idea of even finding an employer willing to hire them is impossible.

MITCHELLWell, I'm very, very sympathetic and this is why I do call it the age of diminished expectations. I think that boomers are not going to look ahead at the golden age of the past. I hope that our children are in better circumstances than we are, though many of them seeing what we're going through have thrown in the towel and said, well, why should I save my pennies? If I put in the stock market, I'll lose it. If I put it in the bank, I won't make any money. And this is why one of my big efforts is to try to focus on financial literacy. Because until people understand that they need to save, they need to insure, they need to take care of themselves, it's gonna be very, very difficult.

MITCHELLWe know that about 18 percent of the baby boomers, only 18 percent of the baby boomers, understand compound interest. These people have made credit card decisions all their lives. They've taken out mortgages, borrowed to buy cars, borrowed for school, and no wonder they're in financial straits because we haven't done our job training people to think about saving and investment.

REHMThat's interesting considering this posting on Facebook from Brian, who says, "I think your guests need to revise their opinions on whether the baby boomers created their own problems." He goes on to say, "They are a greedy generation. They've enjoyed low taxes, high salary demands over the years. Why have they not been saving for retirement? As a 32-year-old business professional, I cannot wait for the baby boomers to leave corporate America. Their greed and inability to evolve is affecting business as we know it." Gary.

BURTLESSWell, it is a good question. Why haven't the baby boomers been saving? Although I would point out that that is also true of the generation that's older than the baby boomers and the generation that's younger than the baby boomers. And a reasonable explanation is that for much of the last 25 years until 2007, the capital markets of the world were doing the saving for many Americans. Their houses were becoming more valuable every year. The stock market had an unprecedented rise from 1982 to 2000. And that just put a lot of wealth in the pockets of not only baby boomers, people older and younger than the baby boom. And so they didn't feel the need to save as much.

BURTLESSWith regard to any particular generation's greed, I'm a little skeptical of any paintbrush that puts an entire generation as being guilty of some grave sin. I think that there was greed before the baby boomers were born and there's going to be greed after the...

REHMIndeed.

BURTLESS...baby boomers have left the stage.

REHMMike in Colony, Texas emails us saying, "Your guests keep saying we'll have to work longer, but there just are not jobs to work at. What suggestions do they have for those who cannot find a job to keep until they are 70?" Richard.

JOHNSONWell, if you are not able to find a job and you've looked through all of your connections -- and one of the advantages older people have is they tend to have a better network than younger people. It can help them get jobs. If that's really not possible, the options if you're already approaching 60, if you're already in your 60s, are quite limited. There's not much really to do. You just have to I think fall back on your savings. And I think it highlights the importance of the safety net. Right now the safety net has really kind of withered over time and highlights the importance of maybe raising minimum benefits for Social Security or other types of things.

REHMWhat options can boomers look at to make themselves more marketable, Olivia, if they do lose their jobs?

MITCHELLWell, I mean, one of the things that we think a lot about is retraining and skills and computers. And most of the jobs that older people have are in health and education and services. So anything that would enhance ones edge in that area would certainly help. Another factor that I think has contributed to the persistence of high employment is the fact that we have really as a nation subsidized home purchases for so long. And now that housing is spread across more and more of the older population, they're unwilling to leave if they can't get their money out of their house, which they probably can't, given that housing prices are so low. But I think that's helped contribute to pockets of employment.

MITCHELLIn fact, the right way to go about it is to move, in many cases, to an area where there is growth, where there are jobs. That may be dislocating, but it may be the only option.

REHMAnd you're listening to "The Diane Rehm Show." Gary.

BURTLESSWe don't have any cures for the difficulty in finding a job. And that is true if you're 22, 42 or 62. But the 62-year-old has one thing going for him or her that the people who are younger do not. And that is, if they cannot find work and they exhaust their unemployment benefits, they can file for Social Security early retirement benefits and that is not a resource available to younger people.

REHMTo Fort Bragg, N.C. Chris, you're on the air.

CHRISHi, Diane. Thank you for taking my call.

REHMSurely.

CHRISWell, what I'd like to ask is, first, politicians are sometimes talking now about letting the younger workers out of Social Security and so that makes me wonder, you know, what that would do to the system as it is. And also the other thing that maybe is kind of silly, but based on these higher costs of living and sort of the difficulties in finding a job, I sort of wonder if we might be forced to go back to sort of how we were maybe 100 years ago where families relied more on each other, where mom and dad and grandma and grandpa and all the kids lived together and pool resources.

REHMThat's already happening, isn't it, Olivia?

MITCHELLWell, indeed. I mean, the good news is that the evidence shows that the more you have family and community to rely on, the easier it is to age in place, the less likely you'll have to move into a nursing home when you're young and so on. The difficulty, though, is that more and more baby boomers are reaching retirement age with very complex family stories, divorced, remarried, re-divorced, kids in different parts of the country and so on. And so it's gonna be less likely to rely on family and, I think, therefore more necessary to rely on next door neighbors, communities. I shovel my neighbor's walk and she picks up my papers when I'm not home. That kind of thing makes it possible for us to stay where we are longer.

REHMRichard.

JOHNSONAnd, of course, many of the boomers, as your caller a few moments ago mentioned, it's the sandwich generation. People who are both caring for elderly parents and also caring for young children and that creates a lot of stress for boomers.

REHMBut going to Chris' direct point about Social Security, is it going to be here for the younger generation by the time they reach retirement age? Gary.

BURTLESSWell, I think it will. It's a political calculation, much more than an economic calculation. At every future point in time we have to ask our self, where is the majority of the voter population that is going to support dismantling Social Security as a mandatory program for everyone young and old? And it's hard for me to see the coalition that's going to support that kind of unraveling. It would be worse of all for the baby boom generation. They have contributed to Social Security...

REHMOf course they have.

BURTLESS...throughout their life. And at this stage, few of them have the resources to save enough to replace Social Security.

REHMAnd especially when all you'd have to do to correct the Social Security mess is to lift the cap on earnings. That's my thought for the day. Gary Burtless of The Brookings Institution, Richard Johnson of the Urban Institute and Olivia Mitchell of The Wharton School at the University of Pennsylvania. Thanks for listening all. I'm Diane Rehm.