In the 21st century, older Americans are expected to make up a larger share of the U.S. population, live longer, and spend more years in retirement than previous generations. The share of the U.S. population age 65 and older is projected to increase from 12.4 percent in 2000 to 19.6 percent in 2030 and continue to grow through 2050. In part this is due to increases in life expectancy. The average number of years that men who reach age 65 are expected to live is projected to increase from just over 13 in 1970 to 17 by 2020. Women have experienced a similar rise—from 17 years in 1970 to a projected 20 years by 2020. While life expectancy has increased, labor force participation rates of older Americans only began to increase slightly in recent years. As a result, individuals are generally spending more years in retirement. In addition to these factors, fertility rates at about the replacement level are contributing to the increasing share of the elderly population and a slowing in the growth of the labor force. Also contributing to the slowing in the growth of the labor force is the leveling off of women’s labor force participation rate. While women’s share of the labor force increased dramatically between 1950 and 2000— from 30 percent to 47 percent—their share of the labor force is projected to remain at around 48 percent over the next 50 years. By 2025 labor force growth is expected to be less than a fifth of what it is today. The aging of the baby boom generation, increased life expectancy, and fertility rates at about the replacement level are expected to significantly increase the elderly dependency ratio—the estimated number of people aged 65 and over in relation to the number of people of aged 15 to 64. In 1950, there was one person age 65 or over for every eight people aged 15 to 64. The ratio increased to one to five in 2000 and is projected to further increase to one person aged 65 and over for every three people aged 15 to 64 by 2050. As a result, there will be fewer younger workers to support a growing number of Social Security and Medicare beneficiaries. The aging of the population also has potential implications for the nation’s economy. If labor force growth continues to slow as projected, fewer workers will be available to produce goods and services. Without a major increase in productivity or higher than projected immigration, low labor force growth will lead to slower growth in the economy and slower growth of federal revenues. These circumstances in turn will accentuate the overall pressure on the federal budget, which will be encumbered with increased claims for benefits for seniors such as Medicare and Social Security, while relatively fewer workers are paying into the benefits systems. As Americans live longer and spend more years in retirement, several factors contribute to the growing insecurity of retirement income. With greater life expectancies, individuals need to finance more years of retirement; however, many workers claim their Social Security benefits prior to reaching the full retirement age, which results in lower monthly payments. Not only do individuals need to make their money last longer; they also bear greater risk and responsibility for their retirement savings than in the past. About half of U.S. workers do not have a pension plan through their employer, and those who do are less likely than in the past to be covered by defined benefit (DB) plans. The shift from traditional DB plans to defined contribution (DC) plans places greater responsibility on workers to make voluntary contributions and make prudent investment decisions. It also increases the importance of workers preserving such savings for retirement. Moreover, rising health care costs have also made health insurance and anticipated medical expenses increasingly important issues for older Americans. A long-term decline in the percentage of employers offering retiree health coverage has leveled off in recent years, but retirees face an increasing share of costs, eligibility restrictions, and benefit changes that contribute to an overall erosion in the value and availability of coverage. Finally, it is clear that Social Security, Medicare, and Medicaid are unsustainable in their present form. When the needed reforms to these programs are made, one result will be that millions of individuals will have to assume increased responsibility for their economic security in retirement. These trends suggest that more and more Americans will find they have inadequate resources to finance retirement. For many, continued work past traditional retirement age may be the solution. We, along with others, have highlighted the need to engage and retain older workers to address some of these challenges associated with an aging workforce. In 2001, we recommended that the Secretary of Labor form a broad interagency task force to develop regulatory and legislative proposals addressing the issues raised by the aging of the labor force and to serve as a clearinghouse of information about employer programs to extend the work life of older workers. After strong encouragement from this Committee, this task force, which includes representatives from the Departments of Labor (Labor), Commerce, and Education, along with the Social Security Administration, began meeting in 2006 and plans to focus on three areas: employer response to the aging of the workforce; individual opportunities for employment in later years; and legal and regulatory issues regarding work and retirement. The task force intends to release a report on its findings and strategies in summer 2007. In 2003, we recommended that Labor review the Workforce Investment Act performance measure regarding earnings to ensure that this measure does not provide a disincentive for serving employed workers, some of whom might be older workers. Labor has partially addressed this issue, but the potential for existing measures to have unintended consequences remains. In 2005, we held a series of focus groups with workers and retirees to better understand the factors that influence the timing of retirement. We found that health problems and layoffs were common reasons to retire and that few focus group members saw opportunities to gradually or partially retire. Workers also cited what they perceived as their own limited skills and employers’ age discrimination as barriers to continued employment. As part of this work, we also participated in a roundtable discussion with employers to learn what they were doing to hire and retain older workers. While these employers generally agreed that flexibility was the key feature necessary to recruit and retain older workers, few of them had developed programs to put this belief into practice. Building on this body of work, we convened this forum on older workers to address these issues. According to participants at our forum, some of the key obstacles that hinder continued work at older ages include: first, employer perceptions about the cost of employing older workers; second, employee perceptions about the costs and benefits of continued work; and third, changes in industry and job skill requirements, which may hinder older workers from remaining employed or finding suitable new employment. First, many employers cite both compensation—including the rising cost of health insurance—and training costs as obstacles to hiring and retaining older workers. In addition, forum participants reported that many employers have not learned to place a high value on their experienced workers, instead gearing their succession planning toward replacing older workers with younger ones. Forum participants also cited negative stereotypes surrounding older workers that include the belief that such workers produce lower-quality work than their younger counterparts, and less work overall. Also, many employers believe that older workers are resistant to change. Finally, but not least, it was suggested that some employers are hesitant to hire older workers for fear of age discrimination lawsuits. While many employers express an interest in recruiting older workers, our prior work has found that few develop programs to do so. At the same time that there is some resistance among employers to hiring older workers, there are also strong incentives for workers to retire. Participants noted that a “culture of retirement” exists in this country which encourages workers to claim retirement benefits and stop working as early as possible. The availability of Social Security at age 62 and high effective tax rates on earnings between age 62 and Social Security’s full retirement age may discourage some workers from continuing to work once they start claiming benefits. Workers who receive Social Security benefits but have not yet reached the full retirement age will have their benefits reduced by one dollar for every two or three dollars that they earn above a set threshold due to the Social Security earnings test. As a result, workers who have claimed Social Security benefits at 62 may not feel that it is worthwhile to continue working. Also, the structure of traditional DB pension plans may encourage retirement because pension laws have prohibited working for the same employer while receiving benefits. While the Pension Protection Act of 2006 does contain a provision that allows plans the option of providing some benefits to participants who remain in the workforce at age 62 and beyond, it is too soon to determine what the impact of this policy change will be. In addition to these financial incentives, jobs that are physically demanding or have inflexible schedules that compete with family caregiving needs also provide strong disincentives to continued work. For some, the incentive to retire lies in the lack of suitable job opportunities. Some employers are reluctant to offer flexible work arrangements such as part-time work to existing employees. In addition, layoffs due to changes in the economy, along with the lack of skills needed to compete in the global economy, are also challenges facing older workers. Forum participants reported that employers who downsize may lay off older workers sooner than younger workers, in part because older industries tend to have a disproportionate number of older workers in their labor force. Positions of some low-skill older workers also may have been automated, eliminated, or outsourced. At the same time, displaced older workers may lack the necessary training to make a career change. Our past work has found that when older workers lose a job, they are less likely than younger workers to find other employment. We, along with others, have previously reported on the importance of flexibility in recruiting and retaining older workers. In order to effectively engage older workers, forum participants suggested implementing new recruiting approaches, workplace flexibility, the right mix of benefits and incentives, financial literary education, and consistent performance management systems. Moreover, participants warned against designing a “one-size-fits-all” approach, noting the significant differences among employers and employees. Employers have found innovative recruiting techniques to identify and recruit older workers.