Trostel’s Report on Retirement Savings in Maine is Available
A final report by Margaret Chase Smith Policy Center and School of Economics Professor Philip Trostel on “The Fiscal Implications of Inadequate Saving for Retirement” is now available. This study estimates the future costs to taxpayers from new retirees in Maine and in the United States.
According to AARP Maine, one-third of Mainers 65+ rely entirely on Social Security, an average annual income of $14,000, and the typical working household in Maine has only $3,000 saved for retirement. The lack of personal saving for retirement means many of the costs of retirement for are covered through government spending, by transfer payments such as Medicaid, Supplemental Nutrition Assistance Program, various types of cash assistance, energy assistance, housing subsidies, and Supplemental Security Income.
Trostel’s study looks at the fiscal costs (to federal/state/local governments) of “new retirees” (people turning 65 in coming years) by calculating transfer payments (cash and in-kind) to this population. He estimates that in Maine, public-assistance spending on the retirement-age population for 2016 was $164 million, with about $28 million of the fiscal cost financed within the state. Continuing demographic change (i.e., baby boomers reaching retirement age) will cause these costs to rise substantially.
The fiscal cost from the retirement-age population does not have to grow to such a magnitude, however. Increasing retirement income through greater pre-retirement savings can substantially reduce taxpayer contributions for public assistance. Trostel estimates that, nationally, an additional $1,000 in retirement income for every retiree would lead to $3.9 billion in fiscal savings by 2032. An additional $1,000 in retirement income per retiree in Maine would create $15.6 million in fiscal savings in 2032. Results emphasized in the report are for Maine and the United States, and projections are for the 15 years from 2018 through 2032.