Sen. Barack Obama has a bad idea for “extending the life of Social Security.” He has proposed applying the Social Security tax to incomes above $250,000, in addition to the current tax on incomes up to $102,000. It’s unfair, he explained, for middle-class earners to pay Social Security tax on “every dime they make” while the very rich pay on “only a very small percentage of their income.” (more…)

There’s good news for fiscal disciplinarians this election year: both Barack Obama and John McCain want to end “wasteful” government spending.

On the surface, their targets dovetail: both pledge to go after pork-barrel spending and government programs they think deserve the hatchet. But on many points, the two senators couldn’t be farther apart and are offering starkly different versions of what “waste” means.

In McCain’s book, “broken” government programs, as well as earmarks and pork-barrel spending — money for lawmakers’ pet projects or funds that benefit certain constituents — qualify as wasteful. He’s put agencies on notice that he’ll take a hard look at their budgets and run them out of town if they’re not performing.

“We’re going to stop the out-of-control spending, we’re going to scrub every agency of government and we’re going to make them justify their existence, and if they can’t, they’re going to go out of existence,” McCain said in an interview on CNBC on Tuesday. The Arizona Republican is proposing a one-year pause in discretionary spending growth to be used for a top-to-bottom review of government outlays.

Obama promises much of the same thing.

“Obama will stop funding wasteful, obsolete federal government programs that make no financial sense,” according to a summary of his fiscal plan on his web site. Like McCain, he also promises to cut pork barrel spending and earmarks.

That’s about where the two senators’ similarities end, however.

War over the war

Obama, for example, is calling for a halt to subsidies for big oil and gas companies and subsidies to private student lenders. McCain is seeking to stop subsidies for ethanol but proposes to lower the tax rate on companies — including Big Oil — to 25% from 35%.

Then there is the Iraq war. The two senators’ biggest foreign policy difference is also perhaps their biggest fiscal policy difference — one that will certainly come up over and over again in the next five months.

That’s because some budget items are simply off-limits for McCain: what he calls “essential military and veterans programs.”

McCain’s campaign literature doesn’t specify what “essential” means. But it’s clear that overall spending on those programs is among the costliest in the U.S. federal budget. In fiscal 2008, defense spending was the No. 1 item by major agency, totaling $479.5 billion. President Bush’s fiscal 2009 request was $515.4 billion. Veterans’ affairs spending, meanwhile, was the fourth-costliest budget item, coming in at $39.4 billion in 2008 and $44.8 billion in 2009. (Most agency spending pales in comparison to outlays on Social Security and Medicare, however. More on that in a moment.)

The war in Iraq is not just a foreign-policy spat. It’s also a spending fight, as Obama made clear this week.

McCain “calls himself a fiscal conservative and on the campaign trail he’s a passionate critic of government spending, and yet he has no problem spending hundreds of billions of dollars on tax breaks for big corporations and a permanent occupation of Iraq — policies that have left our children with a mountain of debt,” Obama said in Raleigh, N.C. on Monday.

Money for the war in Iraq, in other words, qualifies as Obama’s vision of waste, while being McCain’s idea of money well spent.

Entitlements

Health care is also staring both the candidates down as November approaches.

“The real issue on the federal side is [rising] health care costs,” says James Horney, director of federal fiscal policy at the Center on Budget and Policy Priorities.

Take Medicare, the health program whose costs are rapidly rising and which both candidates have pledged to reform. The cost of the Medicare program is set to rise by about $100 billion over the next five years, from $391 billion in 2008 to $500 billion in 2013.

Spending on Social Security, Medicare and Medicaid took up a whopping 41% of the 2009 budget of $3.1 trillion. Outlays on those entitlements dwarf even defense spending, which took up 17% of the 2009 budget. Veterans spending, McCain’s other non-starter budget item, took up just 1.4% of the 2009 budget.

If Obama’s idea of waste is the Iraq war, entitlement spending is McCain’s. He has pledged to overhaul both Social Security and Medicare. The senator wants to supplement the current Social Security system with individual investment accounts and says his proposed health-care reforms will reduce the growth in Medicare spending and protect seniors against rising Medicare premium payments.

Obama, meanwhile, would spend a little more than $100 billion a year to subsidize health insurance — but says he’ll “tackle wasteful spending in the Medicare program.”

With the election still five months off, both candidates appear more comfortable talking in generalities about programs they’d kill off. (Messages left with both campaigns seeking examples of more specifics weren’t immediately returned on Thursday.) But that ought to change as McCain and Obama reach out to voters, says Horney.

“If a candidate wants people to take seriously his or her proposals to cut spending they really need to be specific about what programs they are planning to cut,” he says.

True, on Tuesday, McCain criticized the $300 billion farm bill, saying “Congress refuses to place real limits on farm subsidies.” But that’s about as specific as he got. Obama calls for ending subsidies to oil and gas companies and criticizes the money being poured into Iraq on both fiscal and foreign-policy grounds.

As ideas go, all of these are fine. But voters could use more specifics, as Horney suggests. By appealing to fiscal conservatives, both McCain and Obama stand to reap votes from citizens fed up with big spending in Washington. But they stand to lose them if they threaten to cut the wrong program.

By telling voters how they’ll help them, McCain and Obama must now also tell them whom they’re going to hurt.

There’s good news for fiscal disciplinarians this election year: both Barack Obama and John McCain want to end “wasteful” government spending. But on many points, the two senators couldn’t be further apart and are offering starkly different versions of what “waste” means.

Corrections & Amplifications
Sen. Barack Obama opposes a temporary suspension of the 18.4-cent-a-gallon federal gasoline tax. A June 6 Campaign ‘08 article incorrectly said the gas tax is 18.4%. (WSJ June 19, 2008)

Now comes the real clash.

The prolonged Democratic nominating contest between Sen. Barack Obama and Sen. Hillary Clinton, two people who agree on most everything, magnified small and sometimes insignificant disagreements on policy.

Not so with Sen. Obama and Sen. John McCain. While both men have attracted support from independent voters, the two start from opposing political philosophies on all but a handful of issues.

“I’m a conservative Republican,” Sen. McCain says over and over on the trail, belying his frequent image as a moderate or a maverick. Sen. Obama, he says, is a liberal Democrat. “There will be real differences on the ballot in November,” Sen. Obama said last month, as he laid out some of them. “And that’s what elections should be about.”

The two senators’ positions reflect starkly different world views on foreign policy, economics and social issues. Sen. Obama has suggested a virtual moratorium on new trade agreements; Sen. McCain promotes them as good for America. Sen. Obama would spend $100 billion a year to subsidize health insurance; Sen. McCain would spend $100 billion a year to cut the corporate tax rate.

Many of the big decisions facing the next president already are clear. Almost immediately, he will have to decide what to do with around 140,000 troops that will be stationed in Iraq. With the tax cuts pushed by President Bush expiring in 2010, the next president must grapple with taxes, whether he wants to or not. As many as three of the most liberal Supreme Court justices could leave over the next four years, meaning the next president could preserve the current balance or shift it hard to the right.

Here, a look at the most important policy battlefronts ahead in Campaign 2008.

—

Taxes

Sen. McCain opposed President Bush’s tax cuts, but now says ending them would mean a tax increase. He would make other tax cuts that mostly apply to corporations and upper-income families. Altogether, they could cost more than $500 billion a year under one estimate. Sen. McCain says he’ll cut government spending to pay some of that tab - not including the Bush tax cuts - but hasn’t yet said how.

Sen. Obama aims to “restore fairness” to the tax code, meaning low- and middle-income taxpayers would pay less while upper-income families would pay more. He’d offset tax-cut costs of $85 billion by raising the capital gains tax and closing corporate tax loopholes, but that doesn’t cover the portion of Bush tax cuts he’d extend.

Obama

BUSH TAX CUTS

Extend them only for households earning under $250,000.

ALTERNATIVE MINIMUM TAX

Adjust it to avoid affecting most middle-class taxpayers.

TAX RATES

Raise capital-gains rate to at least 20%, possibly 25%-28%. No change for the corporate rate.

OTHER TAX MEASURES

Give a $500 tax credit to middle-class households earning up to around $150,000, and a 10% tax credit ($500 on average) for mostly lower-income homeowners who don’t itemize. Eliminate income taxes for people over 65 who earn less than $50,000.

McCain

BUSH TAX CUTS

Make the cuts permanent for all households.

ALTERNATIVE MINIMUM TAX

Phase it out completely, even for the wealthy taxpayers it was aimed at.

TAX RATES

Leave the capital-gains rate unchanged at 15%; cut corporate tax rate gradually to 25% from 35%.

OTHER TAX MEASURES

Double the personal exemption for dependents to $7,000, a move aimed at the middle class. Offer taxpayers the choice of a simpler set of tax rules, with two tax rates and a generous standard deduction.

—

Education

Both have ideas for all levels of learning, though Sen. McCain has yet to offer a full education proposal.

Obama

PRESCHOOL

Would spend $10 billion to boost slots and quality at Federal preschool programs for poor kids, especially Early Head Start, and to help make preschool available for all children.

K-12

Wants incentives for school districts to attract and keep good teachers and would give merit pay to the best of them. Cost: $8 billion. Would overhaul the No Child Left Behind program to better measure school progress before punishments are invoked.

HIGHER EDUCATION

Proposes a tuition tax credit of up to $4,000 for students who agree to give 100 hours of community service. Credit begins phasing out at household incomes over $135,000. Cost: $10 billion a year.

McCain

PRESCHOOL

Would raise standards for Head Start teachers; has not said if more money is needed.

K-12

Is more supportive of No Child Left Behind, but would increase school choice by allowing families to pull their tax dollars from public schools and use the money as tuition at charter or private schools.

HIGHER EDUCATION

Has no student-aid plans. Supports more federal funding for university research in targeted areas like energy, and funding to train more students in math and science.

—

IRAQ

Sen. McCain said from the start that the invasion was necessary to remove Saddam Hussein’s weapons and would stabilize the region. He became highly critical of the Pentagon’s occupation plan and argued for the increase in military troops known as the surge; he says it is succeeding. Sen. Obama said during the run-up to the war that Iraq posed no immediate threat. He argues that the troop surge hasn’t gotten the Iraqis closer to governing themselves, and that only U.S. withdrawal will do that.

Obama

EXIT TIMETABLE

Would begin withdrawing immediately, extracting one to two brigades per month until all combat forces are home in summer 2010.

MAINTAINING STABILITY

Says he’d retain a “residual force” to protect the U.S. Embassy and strike al Qaeda bases - a loophole for a potentially substantial contingent of troops to remain. U.S. withdrawal will force Iraqis to make hard decisions and govern more effectively, he says.

LONG-TERMS PLANS

Promises more diplomacy including talks with Iran and Syria, and $2 billion to aid refugees.

McCain

EXIT TIMETABLE

Would retain a large force in Iraq until victory is achieved. He envisions this exit by January 2013, the end of a first term, but doesn’t promise it.

MAINTAINING STABILITY

Says continued presence of U.S. troops will help Iraqis take over their security. Leaving, he says, would more deeply embroil the nation in violent conflict and allow Iran, al Qaeda and other U.S. enemies to gain influence.

LONG-TERMS PLANS

Says U.S. troops could remain for 100 years or longer as long as the nation is stable and peaceful.

—

DIPLOMACY

Some of the harshest back and forth between the candidates over the past few weeks has centered on diplomacy, and whether the president should talk with leaders of enemy nations.

Obama

NEGOTIATING WITH ENEMIES

Has softened his stance, saying he would only meet with Iranian leaders if it advances U.S. interests. But he emphasizes his willingness to talk with U.S. friends and foes alike to increase U.S. diplomatic power.

AMERICA’S ROLE IN THE WORLD

Says he would restore a sense of balance between diplomatic and military force. Withdrawing from Iraq, he says, would allow the U.S. to focus better on hot spots such as Afghanistan and Pakistan, and issues like nuclear proliferation, global warming and poverty and disease.

McCain

NEGOTIATING WITH ENEMIES

Has charged that Obama’s willingness to talk with U.S. foes, particularly Iranian President Mahmoud Ahmadinejad, is dangerous and irresponsible.

AMERICA’S ROLE IN THE WORLD

Indicates a willingness to step back from unilateralism that has sometimes marked the Bush administration. Says the U.S. must be willing to respect alternative views and to reach out to allies. “Our great power does not mean we can do whatever we want, whenever we want,” he said in March.

—

ENERGY

The two men agree on urgent action to address climate change and the nation’s dependence on expensive foreign oil. Both support a “cap-and-trade” system that requires companies that exceed caps on their carbon emissions to buy emission credits from companies that pollute less. But they differ on important details.

Obama

CARBON EMISSIONS GOAL

80% reduction by 2050.

ALTERNATIVES TO OIL

Supports subsidies for solar and wind energy; wants more nuclear power only after storage and safety issues are resolved. He opposes a proposed storage facility at Yucca Mountain in Nevada.

GAS-TAX SUSPENSION

Opposes suspending the 18.4% federal tax for this summer, calling it a political gimmick.

McCain

CARBON EMISSIONS GOAL

60% reduction by 2050.

ALTERNATIVES TO OIL

Says incentives for solar and wind distort the energy market. But he strongly supports incentives for nuclear power, saying the government wrongly stymied its growth. He supports Yucca Mountain.

GAS-TAX SUSPENSION

Supports the one-time suspension, calling it a “little break” for drivers.

—

HEALTH CARE

Both candidates plan strategies to cut costs. Obama wants all Americans to have health insurance, and would increase regulations and spend tax dollars to do it. Health insurance companies would have to sell coverage to anyone who wants it, for instance, even if they are already sick. Sen. McCain wouldn’t likely make a big dent in the number of uninsured, but would decrease regulations to give people more choices. People could buy insurance from out of state, even if it doesn’t comply with their home-state standards.

Obama

PLAN HIGHLIGHTS

– Government sets up a marketplace for health insurance plans, where families choose among private plans or a new government-run option like Medicare.

– Subsidies defray insurance costs for lower-income households and help pay to insure the most expensive patients.

– Parents are required to insure their children; large employers are required to offer insurance or pay into a fund.

COSTS

About $110 billion, says Obama campaign.

McCain

PLAN HIGHLIGHTS

– A new tax credit subsidizes all insurance, replacing the existing tax break that only applies to employer-sponsored insurance.

– Insurance companies sell across state lines, increasing competition - and allowing them to avoid state regulations that increase both costs and consumer protection.

– Subsidies help lower-income patients with pre-existing medical conditions obtain insurance.

COSTS

Preliminary campaign estimate: $7 billion to $10 billion.

—

HOUSING

Until recently, Sen. McCain opposed federal aid to homeowners to stave off a wave of housing foreclosures, but has come to support a modest package. Sen. Obama’s plan is more aggressive - and more expensive.

Obama

FORECLOSURE AID

Supports legislation to reduce and federally insure mortgages for homeowners who owe more than their houses are worth. Would allow bankruptcy courts to modify mortgage terms to help owners keep their homes. Proposes $20 billion in aid to help prevent foreclosures and help hard-hit localities.

LENDING ENFORCEMENT

Calls for increased regulation, including new authority for the Federal Reserve over financial institutions.

McCain

FORECLOSURE AID

Supports a federal insurance program similar to the legislation that Obama likes, but it would cover fewer people and require homeowners, rather than their banks, to apply for the aid. McCain’s projected cost: $3 billion to $10 billion.

LENDING ENFORCEMENT

Has called for a Justice Department investigation into criminal wrongdoing among mortgage lenders, and federal standards for mortgage brokers.

When Tom Hitzges watched the market start to tumble last fall, he got nervous about his nest-egg withdrawals. He had retired as a consumer-products manager for Panasonic six years ago, investing his lump-sum retirement payout with a financial planner whose “philosophy was basically to track the market.” (more…)

It is becoming a fact of life: Working longer is one solution to the retirement income challenge. But that doesn’t mean working forever — just an extra three or four years or so, according to the authors of a new book on the subject.

Instead of retiring at age 63, people should consider retiring at 66 or 67, say Alicia Munnell and Steven Sass of the Center for Retirement Research at Boston College, authors of “Working Longer: The Solution to the Retirement Income Challenge.”

Working just three or four extra years can make all the difference in the world, Sass said in an interview. Delaying retirement directly increases current income; it avoids the reduction in Social Security benefits; it allows people to contribute more to their 401(k) plans; it allows those plans to accumulate more investment income; and it shortens the period of retirement.

Consider, for instance, these estimates made by the Congressional Budget Office: In 2004, a married couple earning average income could reduce the assets needed to enjoy a comfortable retirement from $550,000 if they retire at age 62, to $325,000 if they retire at age 66, to $130,000 if they retire age 70.

Will people do it?

But working longer is easier said than done. And several questions must be answered before one can say for sure that working longer is the silver bullet.

1. Will future generations be healthy enough to work?

According to Sass, Americans are at least at healthy as they were 40 years ago. Plus, today’s jobs are less physically demanding. And if half of the male population was able to work until age 66 in 1960, the same should be true today.

2. Will older men and women want to work longer?

Even though Americans are healthy enough to work until age 66, it’s uncertain whether older people will want to work longer, Sass says. In the main, older people seemingly would want to work longer given the changes in the retirement income system. Social Security is likely to replace less and less income in the future. Traditional pension plans are going the way of the dodo bird. Life expectancy is rising and balances in 401(k) plans balances are meager.

But while those changes in the nation’s retirement income system should increase labor participation, impediments remain. For instance, the majority of workers continue — despite the reduction in benefit — to claim Social Security at age 62, as soon as they become eligible. Plus, there may not be a lot of high-paying jobs for older workers. The upshot is that in the absence of significant changes, some people will want to work longer and some will not.

Women, in contrast to men, may have even more to gain by working longer, according to Sass. They would be better off if they had their own Social Security earnings record and employer pension benefits. What’s more, the continued employment of married women may be the best way to keep their husbands working, thus insuring the largest Social Security benefit for their husband and, potentially, the largest widow benefit for themselves, according to Sass.

But theory and reality can be two different things. In reality, women don’t have a strong attachment to the labor market, they often have few financial incentives to keep working, and they tend to coordinate their retirement with their husbands, who are typically older. So it’s unlikely that all women will want to work longer.

And, even if older men and women wanted to work longer, it’s uncertain whether employers will hire them. In general, employers employ older workers if it’s profitable to do so — if, Sass says, the value of what they produce is greater than what they are paid. According to Sass, productivity tends to remain the same or decline slightly for older workers, while compensation remains level or rises over time. The upshot is that some employers may be, at best, lukewarm about employing older workers.

Raise ‘earliest eligibility’ age

What can be done to make working longer a reality? According to Sass, the most important change is this: The federal government needs to increase the earliest eligibility age under Social Security. Yes, that change would not be without controversy. According to Sass, it does nothing to improve Social Security’s finances and it doesn’t help people who have short life expectancies. But without the increase, most workers — human nature being what it is — will continue to claim benefits at age 62 and to retire early.

There are other changes that would be helpful, as well. Those include Medicare, rather than the employer, being the primary payer of health costs for workers 65 and older; increasing the number of years in the Social Security benefit calculation from 35 years to 40 years; giving workers an incentive to work longer to avoid a cut in benefits; and eliminating payroll taxes for workers age 62 and older.

But workers and employers must also make changes. Workers, for instance, have to recognize that working longer is a fact of life — and then develop a plan and stick to it. They need to commit to a later retirement. And employers need to provide more opportunities for workers to upgrade their skills. Employers also need to adjust their compensation systems and create an orderly severance process.

Working longer may be this nation’s best shot at solving the retirement income challenge. But there is still much work that needs to be done before it becomes a reality.

It is becoming a fact of life: Working longer is one solution to the retirement income challenge. But that doesn’t mean working forever — just an extra three or four years or so, according to the authors of a new book on the subject.

GETTING STARTED

What percentage of surveyed retirees and workers said their retirement is, or will be, better than their parents’ retirement?

Retirees

a. 54%

b. 64%

c. 74%

d. 84%

Workers

a. 59%

b. 69%

c. 79%

d. 89%

ANSWERS: C (current retirees) and A (current workers). Almost three-quarters of current retirees say their life in retirement is better than that of their parents, according to a recent survey by AXA Equitable Life Insurance Co. But about 40% of current workers don’t expect retirement to match up to their parents’ experiences.

Among both segments, “less than half [48% of current retirees and 47% of current workers] believe retirement will be better for their children,” the survey notes.

What percentage of workers report that they and/or their spouse have tried to calculate how much money they will need to have saved by the time they retire?

a. 37%

b. 47%

c. 57%

d. 67%

ANSWER: B. Less than half of surveyed worker say they have tried to determine how much money they will need for a comfortable retirement, according to the Employee Benefit Research Institute. Doing the math, the institute notes, “is particularly effective at changing worker behavior.” Forty-four percent who calculated a goal changed their retirement planning; of those, almost six in 10 (59%) started saving or investing more.

When asked to identify the method they use to determine the savings needed for retirement, the largest percentage of surveyed workers said they:

a. Asked a financial adviser

b. Did their own estimate

c. Used an online calculator

d. Guessed

ANSWER: D. Almost half (43%) of surveyed workers — instead of doing a retirement-needs calculation — guess at how big a nest egg they will need, according to the Employee Benefit Research Institute.

“Eeney, Meeney, Miney . . .”

Surveyed workers said they use the following methods to determine the savings needed for retirement

Guess — 43%

Ask a financial adviser — 19%

Do your own estimate — 19%

Read or hear how much needed — 9%

Use an online calculator — 7%

Fill out a worksheet or form — 4%

Base on current expenses or desired retirement lifestyle — 2%

Other — 4%

Note: Includes multiple responses.

Source: Employee Benefit Research Institute and Mathew Greenwald & Associates Inc., 2008 Retirement Confidence Survey

When asked how much money they think they will need for retirement, the largest percentage of surveyed workers said:

a. Less than $250,000

b. $250,000 to $499,999

c. $500,000 to $999,999

d. $1 million to $1.49 million

e. $1.5 million or more

ANSWER: A. Twenty-five percent of surveyed workers estimate that they will need less than $250,000 for retirement, according to the Employee Benefit Research Institute. The next largest figures: 23% cited a goal of between $500,000 and $999,999, and 16% said between $250,000 and $499,999.

“Overall, the amounts that workers think they need to accumulate for a comfortable retirement appear to be rather low,” the institute said.

Workers age 55 and older are more likely to think they will need $500,000 or less; workers under age 35 are more apt to think they will need $1 million or more.

HEALTH

What age group represented the largest percentage of buyers of long-term-care insurance in 2007?

a. Under 44

b. 45-54

c. 55-64

d. 65-74

e. 75 and older

ANSWER: C. Fifty percent of buyers of long-term care insurance (individual policies, as opposed to group coverage) were age 55 to 64, according to the American Association for Long-Term Care Insurance. That said, one-third of buyers were under age 55, indicating that sales of the product are beginning to skew younger.

In all, about 400,000 individuals purchased long-term care insurance in 2007, either on an individual basis or through their employer.

Long-Term Care

Sales in 2007 of long-term-care insurance* by issue age

Under 35 — 1%

35-44 — 6%

45-54 — 26%

55-64 — 50%

65-74 — 15%

75 or older — 2%

* Individual policies

Source: American Association for Long-Term Care Insurance

How many physicians are certified in geriatric medicine in the U.S.?

a. 6,100

b. 7,100

c. 8,100

d. 9,100

ANSWER: B. About 7,100 doctors specialize in geriatric care, according to a recent report by the National Academy of Sciences. That translates into only one physician for every 5,200 older Americans.

What percentage of surveyed baby boomers gave the correct answer when asked: At what age does Medicare eligibility begin?

a. 26%

b. 36%

c. 46%

d. 56%

ANSWER: B. Only about one-third of surveyed baby boomers knew that eligibility for Medicare begins at age 65, according to a study by the National Association of Insurance Commissioners.

The most popular sports activity among adults age 55 to 64 is:

a. Swimming

b. Fishing

c. Exercise walking

d. Golf

ANSWER: C. Exercise walking, with 11.5 million participants, is far and away the most popular exercise among the 55-to-64 age group, as well as the 65-plus crowd, according to the National Sporting Goods Association. The second most popular activity for both age groups: exercising with equipment (about 5.5 million participants in each age group).

The Sporting Life

Sports activities with the largest number of participants among people age 55 to 64

Exercise walking — 11.49 million

Exercising with equipment — 5.61 million

Fishing — 3.94 million

Swimming — 3.63 million

Camping — 3.07 million

Golf — 2.87 million

Aerobic exercise — 2.80 million

Hiking — 2.64 million

Weightlifting — 2.31 million

Bicycle riding — 2.27 million

Source: National Sporting Goods Association

MONEY

The median value of baby boomers’ inheritances to date is:

a. $48,000

b. $88,000

c. $128,000

d. $168,000

ANSWER: A. The transfer of wealth from the World War II generation “has been less impressive than many predicted, and it likely will not grow much further,” according to a report by Tiburon Strategic Advisors. The reasons: “immediate spending [needs], longer time in retirement, health-care costs [and] taxes.”

What percentage of baby boomers who have received an inheritance have received more than $100,000?

a. 2%

b. 4%

c. 6%

d. 8%

ANSWER: A. According to Tiburon Strategic Advisors, only two out of every 100 baby boomers who have received an inheritance received an amount totaling six figures or better.

What percentage of workers in surveyed 401(k) plans are saving the maximum amount allowed?

a. 7%

b. 17%

c. 27%

d. 37%

ANSWER: A. Fewer than one in 10 workers save enough to come within $500 of their plan maximum or the pretax maximum as defined by the Internal Revenue Service ($15,500 in 2008, or $20,500 for those 50 and older), according to a survey published last month by Financial Engines, an investment advisory firm in Palo Alto, Calif. One-third of 401(k) participants aren’t saving enough to qualify for the full matching contribution from their employer — in effect, giving up “free” money.

Building a Nest Egg — or Not

Among participants in 401(k) plans, the following percentages:

Contribute the maximum allowed — 7%

Contribute less than the maximum but enough to receive the full employer match — 60%

Don’t reach the contribution level for the full employer match — 33%

Source: Financial Engines

Women age 65 and older have a median income that is:

a. 48% of men’s

b. 58% of men’s

c. 68% of men’s

d. 78% of men’s

ANSWER: B. The median income for women in retirement is only about half that of men’s. The reasons: “lower income during their working years, more time out of the work force, and decreased opportunities to earn or vest in a pension during their working years,” according to Cindy Hounsell, executive director of the Women’s Institute for a Secure Retirement.

In 2006, women accounted for 57% of the population age 65-plus, but represented 70% of the older population living in poverty, according to the Census Bureau.

Contrasts in Income

Median income of older women and men by age, 2006

Age Women Men

65-74 $14,079 $26,273

75-plus $13,302 $20,639

Sources: Census Bureau; Women’s Institute for a Secure Retirement

What percentage of affluent baby boomers (with more than $100,000 in investable assets) say they have provided some type of financial support to their adult children — and to their parents?

Have helped adult children

a. 62%

b. 72%

c. 82%

d. 92%

Have helped parents

a. 22%

b. 32%

c. 42%

d. 52%

ANSWERS: D (adult children) and B (parents). More than nine in 10 boomers have helped their adult children with college loans, buying a car, mortgage payments and related needs, according to a report by Ameriprise Financial. And almost one-third of boomers have helped their parents with medical bills, utilities and groceries, among other needs.

Just 6% of boomers said this financial assistance comes from their retirement savings; 50% said they use “day-to-day spending money,” and 41% said they use “regular savings” accounts. That said, many baby boomers “don’t see how tapping day-to-day spending money or savings can slow the rate at which they save for retirement,” the research notes.

What percentage of affluent baby boomers — and what percentage of boomers’ parents — say they talk about money and finances with their families on a regular basis?

Baby boomers

a. 29%

b. 39%

c. 49%

d. 59%

Boomers’ parents

a. 26%

b. 36%

c. 46%

d. 56%

ANSWERS: B (baby boomers) and A (boomers’ parents). Less than half of baby boomers — and only about one-quarter of boomers’ parents — say they regularly discuss financial matters with family members, according to a report by Ameriprise Financial. A “culture of silence” involving personal finances, according to the research, means that “conversations about money across generations aren’t happening as often as they should.”

What percentage of surveyed participants in 401(k) plans said they had no knowledge of the fees and expenses associated with their plans?

a. 63%

b. 73%

c. 83%

d. 93%

ANSWER: C. More than three-quarters of 401(k) participants, according to research by AARP, are unaware of the costs associated with their retirement savings. “Even though they maintain that fees are an important consideration in their investment decisions,” the research notes, “most 401(k) plan participants say they lack basic knowledge concerning them.”

More than half of participants (54%), the survey showed, “do not feel knowledgeable about the impact that fees can have on their retirement savings.”

LIFESTYLES

What percentage of adults age 65 and older voted in the 2004 presidential election and 2006 congressional elections?

2004

a. 59%

b. 69%

c. 79%

d. 89%

2006

a. 51%

b. 61%

c. 71%

d. 81%

ANSWERS: B (in 2004) and B (2006). This age group had the highest rate of voter participation in both years, according to the Census Bureau. The age group with the lowest participation rate: 18- to 20-year-olds (41% in 2004 and 17% in 2006).

Which state has the largest percentage of residents age 65 and older?

a. Arizona

b. California

c. Florida

d. New York

ANSWER: C. Florida (17%) has the highest percentage of residents age 65-plus, according to the Census Bureau, followed by West Virginia (15.5%) and Pennsylvania (15.2%). States with the lowest percentage are Alaska (7%), Utah (8.8%) and Georgia (9.9%).

How many people age 66 and older are enrolled in adult education courses?

a. 1.3 million

b. 3.3 million

c. 5.3 million

d. 7.3 million

ANSWER: D. About 7.3 million people age 66-plus are taking adult education classes, according to the Department of Education. That amounts to about 8% of all such students.

Back to School

Percentages of older adults who are participating in:

Age 55-64 Age 65-plus

Part-time degree/diploma programs 2% 0.3%

Work-related courses 27% 5%

Personal-interest courses 21% 19%

Source: Department of Education

What percentage of surveyed grandparents said they had ever opened a savings or investment account on behalf of a grandchild?

a. 22%

b. 32%

c. 42%

d. 52%

ANSWER: A. Only about one-quarter of grandparents “give for long-term goals or take advantage of investment accounts to improve the potential for their money’s growth,” according to AARP. What’s more, “grandparents who have [opened savings or investment accounts] were most likely to invest in a ‘low-return’ vehicle like a bank savings account.” Few grandparents, AARP added, are aware of investment options that are particularly appropriate for grandchildren, such as a Coverdell Savings Account (21%) or the Uniform Gifts to Minors Act/Uniform Transfers to Minors Act (7%).

When asked how much money they spend on their grandchildren each year, surveyed grandparents said approximately:

a. $300

b. $600

c. $900

d. $1,200

ANSWER: B. According to AARP, the typical grandparent has about four grandchildren, which means that the average spent is about $150 per grandchild. Given that grandparents in the U.S. have a median income of about $46,000, spending on grandchildren amounts to about 1.3% of grandparents’ annual income.

SOCIAL SECURITY

The average monthly Social Security benefit for retired workers is approximately:

Men Women

a. $900 $900

b. $1,000 $1,000

c. $1,100 $1,100

d. $1,200 $1,200

ANSWERS: D (men) and A (women). As of December 2006, the average benefit for retired men was $1,178 a month, compared with $905 for retired women, according to the Social Security Administration. The primary reasons for the gap: “women’s lower earnings and higher incidences of time out of the work force,” according to Cindy Hounsell, executive director of the Women’s Institute for a Secure Retirement.

True or false: Social Security benefits can be subject to income taxes.

ANSWER: True. According to the Social Security Administration: “You will have to pay federal taxes on your benefits if you file a federal tax return as an ‘individual’ and your total income is more than $25,000. If you file a joint return, you will have to pay taxes if you and your spouse have a total income that is more than $32,000.”

Fewer than one-third of current beneficiaries pay taxes on their benefits.

You can find a good discussion of benefits and possible taxes in Social Security Publication No. 951, “Social Security and Equivalent Railroad Retirement Benefits.” (www.irs.gov/publications/p915/index.html)

Which of the following statements are correct? (Multiple responses allowed.) Starting in 2041, Social Security . . .

a. Will be bankrupt

b. Will have exhausted its trust fund

c. Will be able to pay 78% of currently legislated benefits

d. Will be able to pay 88% of currently legislated benefits

ANSWERS: B and C. According to the 2008 Social Security Trustees Report, published in March, the Social Security trust fund will be exhausted in 2041, at which point the agency will be able to pay only about 78% of promised benefits.

That said, the program would not go “bankrupt” or “broke.” Presumably, the federal government will still be collecting taxes in 2041, and a portion of that revenue will be funneled to Social Security — which will continue to issue checks to beneficiaries. But as things stand now, those checks will be worth about 22% less than the projected benefits called for under current rules.

Worries About Social Security

When asked to describe the state of Social Security, surveyed workers said the program is:

Not in trouble — 6%

In some trouble — 24%

In serious trouble — 43%

In crisis — 26%

No answer — 1%

Source: AXA Equitable Retirement Scope

There are many reasons why more and more workers in America wish to continue on the job beyond the conventional retirement age of 65.

Many of them want — or absolutely need — the extra income. They want it not least because increasing numbers of people are living much longer than their forebears, and they require money to support themselves during those extra years. (more…)

What can you do if you’re failing retirement?

That idea, of not making the grade in later life, isn’t one that’s normally found in discussions about aging. Retirement today is supposed to be rewarding, filled with opportunities and certainly less stressful than work. But it isn’t always so.

For any number of reasons — lack of planning, financial duress, caregiving responsibilities, the loss of a spouse — retirees can easily find themselves carving out a dent in the couch or wandering down dead-end paths. As with some jobs, people start asking: “Is this all there is?”

Enter the retirement makeover. In an echo of the home and fashion makeovers that have swept cable TV in recent years, some retirees are seeking help from life coaches, financial planners, career consultants, fitness experts, and even fashion and hair stylists in some cases, to help turn their lives around. Often, the spark comes from looking in the mirror: recognizing that change is needed, and then seizing the chance to make it happen.

There are no retirement-makeover consultants per se. But several groups across the country — including nonprofits in California and New Jersey, as well as two TV networks — are assembling teams of experts to help people reshape their lives in retirement. The resulting makeovers offer some good examples of how even modest steps can lead to significant changes in later life.

If you’re stuck in a rut — or want to avoid one — after leaving the office, consider how these people have shaken up their retirements:

Test Yourself

With so much time suddenly on the horizon, and with so many possible ways to fill it, many retirees find themselves paralyzed by indecision. One way to cut through the clutter is to take tests — the kind often used by college students or younger workers to help determine their professional path — to zero in on your current interests.

A great example is Darleen Maumus, who found herself at loose ends after a triple whammy. Within three years, she retired after three decades as an elementary-school teacher and principal in New Orleans, was widowed, and lost her home in her native city to the flooding that followed Hurricane Katrina in 2005.

Ms. Maumus, who is 66 years old, moved to Paoli, Pa., after the storm to be close to two of her three children. But she quickly found herself overwhelmed by the range of retirement options available around her. “I was shocked by how active people my age are up here,” she says. She enrolled in a lifelong-learning program at Temple University in Philadelphia, but even there she had trouble choosing among dozens of courses.

She found direction through two of the most widely used tests designed to help people understand their career options. The first, the Myers-Briggs Type Indicator, measures personality traits and preferences. The second, the Strong Interest Inventory, assesses personal interests, including preferred styles of working and learning. The test assigns you a “general occupational theme code,” such as “artistic, social or enterprising,” which you can use to help figure out your next steps.

“We work with a lot of people who are retiring from their primary career,” says Michael Segovia, director of business development for CPP Inc., the Mountain View, Calif., company that publishes the two tests and administered them for Ms. Maumus. “This is a time when they can say, ‘What do I really want to do? What are my real interests? What is my personality?’ Let’s put it together and see what we can come up with.”

Ms. Maumus’s assessments, Mr. Segovia says, revealed “an amazing person who is really interested in helping people and making a difference in their lives, along with a strong interest in theater.”

Mr. Segovia also concluded from the test results that Ms. Maumus “is a real energizer — a cheerleader. In talking with her, I thought, ‘If she can find a place where she feels like she’s making a difference in people’s lives as a volunteer, why would they not want to hire her?’”

Ms. Maumus says she did have a strong interest in drama when she was younger, but she let it slide while raising her family and working. After getting her results, she started volunteering with a community theater. “I always enjoyed theater, but until then I had wondered if I was too old to start out in it,” she says.

After she started volunteering, she learned about an opening at the theater. Last month, she landed a part-time job as an assistant house manager (which allows her to see plays at no cost).

You can take the Myers-Briggs test on your own and get an interpretation of the results at mbticomplete.com, for $59.95. The Strong Interest Inventory can be taken only through a career counselor who meets the qualification standards set by CPP. These counselors typically charge $100 to $200 to administer the test; Mr. Segovia also suggests getting a counselor’s help interpreting the results. There are directories of counselors at the “Career Center” on the Web site for the National Career Development Association, ncda.org, and at the site for the National Board for Certified Counselors, nbcc.org.

Grab a Helping Hand

Sometimes in retirement, you can’t change or find solutions to problems on your own. In which case, a coach might help.

That was the answer for two retirees, Barbara Dennis and Nancy Elliott, each of whom was mired in grief. Both got help from a so-called life coach, a professional hand-holder who assists people in navigating transitions in their lives.

When Ms. Dennis, who is 58, learned three years ago that her 27-year-old son had died unexpectedly from a heart problem, she walked out of her office at the Centers for Medicare and Medicaid Services in Baltimore — and never went back. “It was just a major blow, and I thought I should just turn it off,” she says. “Other people started to get back into their lives, but I didn’t.”

Her former sister-in-law, concerned that Ms. Dennis was becoming depressed, suggested that she get a makeover from a TV show called “What’s Next?” which is set to air starting next week on the Retirement Living cable network. Host Sherry Parrish, whose day job is resident-life director at a large Baltimore County retirement community, connected Ms. Dennis with Lisa Whaley, a Woodbridge, Va., life coach. Ms. Whaley uses a simple methodology she calls SPA: “State what it is you want to do, plan it, and then act,” she says. “As simple as it sounds, most people don’t behave that way.”

By getting Ms. Dennis to write down some plans, Ms. Whaley helped her realize that her son “would want me to continue to live,” Ms. Dennis says. “I grew to understand that I could honor him by living.”

With that realization, she set about finding meaningful — and fun — ways to spend her time. She and her husband took up swing and salsa lessons and had such a good time that they made room on their porch for a dance floor. She also started fielding phone calls for a local women’s shelter. And to honor her son, Ms. Dennis is sponsoring two youth basketball teams. The players’ uniforms include his initials and the number from his high-school basketball jersey. She’s writing a memoir about his life as well.

Ms. Elliott, a retired teacher who lives in Fountain Valley, Calif., was widowed in 2005 at age 62 after her husband of 40 years suffered a massive heart attack. She describes his death as a shock that left her “immobilized.”

She, too, credits a life coach, Carol Draper, with a large part of her recovery — helping her to accept her widowhood. As with Ms. Dennis, someone else connected them, in this case an Orange County membership group for older women called WomanSage Inc. that provides “transition makeovers” for local women.

Ms. Draper “moved me to see that I could still be productive, self-supporting, sustaining, and most of all a loving friend to others, and that was all worth living for,” Ms. Elliott says.

By last year, she had bounced back enough to come up with the idea, on her own, of a retreat for herself, modeled after an expensive women’s retreat in Cape Cod, Mass. Ms. Elliott rented a cabin at Crystal Cove State Park in Laguna Beach, Calif., for two nights for $120, and then invited Ms. Draper and a few friends to lunch. “The four of us sat in this beautiful cottage overlooking the ocean, and it was this surreal moment where everything came together,” Ms. Elliott recalls.

“That retreat was very special to me. The makeover team didn’t give me the retreat, and they didn’t suggest it, but through the resources they have, the forces all came together. I had never been away in 40 years without my husband to go to something. This was being away, spending the night, sharing a cottage with another family. This was a big step for me.”

Finding a life coach can be tricky, because they aren’t typically licensed or regulated. That means you need to check references and credentials closely. One source of leads is coachfederation.org. Don’t hesitate to ask for a free initial session to see whether a coach is a good fit for your needs.

Inventory Your Interests

In retirement, it can be easy to wind up on a treadmill of activity that isn’t particularly meaningful. Sometimes you have to take a step back and think about what you really want to do with your time.

That was the case for Larry and Linda Carnuccio, both 64. Before retiring, he was an engineer in West Chester, Pa., and she owned a restaurant in Ocean City, N.J., where they had a second home. When they retired at age 58, they filled their days for five years taking care of Mrs. Carnuccio’s parents. After both parents died, the two retirees found their days still filled with activity, mainly visiting with nearby children and grandchildren.

Last year, Mr. Carnuccio looked up at his wife one morning and asked, “‘We’re busy, but are we doing all we’re supposed to be doing?’” she recalls. The same morning, they happened to be flipping through television channels and noticed a commercial for the “What’s Next?” show, which was seeking retiree applicants. They called up and volunteered.

“We were having trouble getting past the big idea that we wanted to do something new — something that mattered — and coming up with something specific,” Mr. Carnuccio explains.

The couple shared their concerns with the show’s staff. The producers “interviewed us separately, and they interviewed us together. They followed us around and asked us what it was we really would like to do,” Mrs. Carnuccio recalls. Through those interviews, the couple was forced to come up with some concrete answers.

Although the idea of surveying your own interests, and asking yourself some tough questions about the way you’re spending your time, might sound self-evident, people who are running in place often need help sorting through their thoughts. Needless to say, not all of us are going to have TV producers and social-worker hosts as a sounding board, but you can have the same kinds of conversations with friends or family members. Just give them permission to push you and to force you to get specific.

The Carnuccios wound up pursuing activities on two fronts: volunteering at national parks and helping African villagers start small businesses. The catalysts: family vacations to such parks and the couple’s interaction with a home health worker from Ghana. The worker told them about friends who needed help buying their own boat so they could keep a larger share of the money they took in from fishing.

As the Carnuccios learned, many retirees are interested in combining volunteer work with travel and in helping others finance their dreams. Here’s how the pair moved forward:

First, the national parks: A TV producer working with the Carnuccios connected them with the National Park Foundation, a Washington, D.C., nonprofit, which put them in touch with the volunteer coordinator at the Everglades National Park in Florida, where they worked for a week.

“We got there, and I learned so much about the ecology, and so much about the environment,” says Mrs. Carnuccio. “It’s the only place in the world where that particular ecosystem exists. We were out on the water, and were helping identify butterflies. I worked the desk and met people from Australia, Germany — all over the world.

“We’re thinking about next year working at a national park again. I’ve always wanted to work at Yosemite. And now I have a direct contact,” she says.

The easiest way to find a volunteer job at a national park is to go to nps.gov, click on “Getting Involved,” click on “Volunteer,” and then click on “Opportunities.” You can then search by park or by state. If you’d rather inquire by phone, you can call Joy Pietschmann, the National Park Service’s volunteer coordinator, at 202-513-7141.

Last year, 163,000 volunteers provided 5.4 million hours of service — and an estimated 50% of those volunteers are retired, according to a National Park Service spokeswoman.

As for helping the villagers in Ghana, the Carnuccios discovered microfinance, which typically involves making tiny loans to poor people starting modest enterprises. “It’s very easy for me to send a check to someone already doing financing. But I want it to be more intimate, not just, ‘Here’s my money,’” says Mrs. Carnuccio.

The makeover show helped connect the couple with Opportunity International-USA, a nonprofit based in Oak Brook, Ill. Mrs. Carnuccio is working with Opportunity International to create a job in Ghana for her home health worker as a regional loan officer — and to raise $10,000 in donations to get the project off the ground. The first loans would go to fishermen and other local entrepreneurs, Mrs. Carnuccio says. Their repayments and any interest collected would then fund additional loans, she adds.

Don Ingle, the nonprofit’s spokesman, says one way many retirees get involved is by giving $5,000 to join the organization’s board of governors, which is the ticket to travel with the staff to the developing countries where Opportunity International does much of its work. But there are many cheaper ways to get involved, which you can check out at opportunity.org.

If you’re more interested in seeking out a specific borrower to help, he suggests working through another Web site, kiva.org, where you can find would-be borrowers and their stories.

Don’t Be Afraid to Switch Gears

The numbers are heard frequently: About two-thirds of baby boomers tell pollsters that they plan to continue working, in some fashion, in retirement. It sounds good. Staying active as we age promotes both physical and mental well-being. That said, working in later life isn’t for everybody. Some retirees are discovering that the idea of returning to work isn’t all that it’s cracked up to be.

Rich Wacker, 64, lost his job as a mechanic for packaging machinery in Chicago six years ago. He got a retirement buyout and quickly landed another contract job that lasted two years. But when that ended, he realized that similar jobs were drying up. For the next three years, he searched in vain for another full-time opportunity.

Then, last year, he started working with a vocational counselor provided through the “What’s Next?” show. The counselor lined up an interview for him with Manpower Inc., with the idea that the employment-services provider would help him find work. But Mr. Wacker left the interview after being asked to take a mechanical-aptitude test. “I was offended they felt they needed to check my skills,” he says. He also made it clear to the counselor that he didn’t want to work retail, would be choosy about his hours and wouldn’t commute far from his home.

At that point the counselor, Arnold Eppel, director of the Baltimore County Department of Aging, persuaded Mr. Wacker to try volunteering, which would let him control his hours and location. Grudgingly, Mr. Wacker agreed to try answering phones for and visiting with residents at a Chicago retirement community near his home.

To his surprise, the volunteer job turned out to be a good fit. “I feel good because I’ve got someone to talk to, and they feel good because they’ve got someone to talk to them,” he says. “I’d rather do this volunteer work than a part-time job.”

If you’re interested in exploring volunteer opportunities with commitments as short as a single day, contact your local agency on aging, which you can find at eldercare.gov or by calling 800-677-1116. A growing number of these agencies, including the one for Baltimore County, provide local volunteer-matching Web sites through which you can search by ZIP Code or interest.

“We have 189 nonprofits on the list,” Mr. Eppel says, “and I’ve placed close to 1,000 people so far in volunteer matches.”

Having enough money is only half the battle.

Getting close to retirement? Sure, if you’ve socked away a fistful of money or you’re set to receive a handsome pension, you are in good shape.

But you aren’t home free. Here are six other key ingredients for a successful retirement.

Making Plans:

After a long week at the office, most people’s vision of retirement can be summed up in two words: Blissful sloth. Yet that isn’t a prescription for a happy retirement.

“A little vacation sounds good and a long vacation sounds even better,” concedes Eric Sundstrom, a psychology professor at the University of Tennessee. “But golfing every day isn’t a satisfying life. It’s a common story: beach, mountain or golf course for six months — and then boredom.”

The lesson? If you want a great retirement, you need to give it serious thought, preferably starting at least five years before you expect to quit the work force. “You see people who are laid off or fired,” Prof. Sundstrom says. “It’s enough of a shock to get dumped. If you’re minus a plan, you’re compounding the trauma.”

Finding Purpose: Prof. Sundstrom is a founder of My Next Phase, a Web site devoted to helping folks figure out what to do with their retirement. His contention: Retirees need a purpose, something they feel is both enjoyable and important.

“The research is clear: People who don’t have a purpose in life don’t live as long as those who do,” he says.

That purpose might be volunteering at a local museum, getting involved politically, counseling teenagers, going back to college, writing a book or coaching a kids’ sports team.

Sometimes, it is easy to figure out what to do. Sometimes, it takes a heap of introspection. Often, you can find clues by thinking about your past, including what you enjoyed doing as a child and what you like about your job.

“What about your work will you miss the most?” Prof. Sundstrom asks. “Do you enjoy it when you’re working alone or do you like when you’re part of a team? If you can figure out what you find fulfilling about your work, you can carry that forward to the next phase of your life.”

Once you have an idea for what you might do, give it a trial run, suggests Maureen Mohyde, director of corporate gerontology at insurer Hartford Financial.

“I think it’s important to test the waters before you retire,” Ms. Mohyde says. “If you think you will volunteer in retirement, you might try doing it a few days a month now. You may discover that you find it boring. If you plan to spend your time golfing, or fishing, or looking after your grandchildren, there may not be enough intellectual stimulation.”

Staying Sharp: Indeed, you need to replace the intellectual stimulation of work. Learning a language or a musical instrument might provide that. But intellectual stimulation is also a good reason to continue working part-time, even if you don’t need the income.

“For people to be retired for 30 years isn’t a real positive,” argues Margaret Altmix, president of My Plan After 50, a Web site and coaching service. “They tend to get depressed because they’re not productive.”

Keeping Company: Work also provides camaraderie. You lose that when you leave the work force — and you need to find it elsewhere.

“The number one predictor of whether people have a successful retirement is the strength of their social network,” Ms. Altmix says. “When people leave the work force, they leave their social network behind. And then they sometimes leave the state and move elsewhere.”

The implication: Upon retirement, think long and hard before selling the house and moving to, say, Florida or Arizona. If you do that, you will say good-bye not only to colleagues, but also to neighborhood friends and maybe your children.

Talking It Through: As you sketch out your retirement plans, be sure to hash things out with your spouse. You may have scrambled through the past 40 years, raising children, pursuing careers and meeting bleary-eyed at the end of each work day. Now, you will have each other’s company 24 hours a day — and conflict is likely.

In fact, you may each have an unspoken vision of what your retirement should look like, and those visions could clash. “People need to renegotiate their relationship,” Ms. Altmix says. “They need to negotiate how they’ll spend their time and how they’ll spend their money.”

Staying Healthy: Half of all 65-year-old women will live until at least age 85, while half of all 65-year-old men will live until at least age 82. And some, of course, will live far longer, which is why it’s important to have a hefty nest egg.

But if you have saved diligently for retirement, you want to ensure you live long enough — and remain active enough — to enjoy the fruits of your thrift. That means exercising regularly and eating healthily. As an added bonus, a healthy lifestyle should also keep down your medical costs.

“Wellness in retirement may be one of your best financial strategies,” says Hartford’s Ms. Mohyde. “There’s definitely a relationship between health and satisfaction in retirement.”

Likely Republican presidential nominee Sen. John McCain will call for a halt in discretionary spending hikes to conduct across-the-board budget reviews throughout all federal departments, and seek higher premiums from affluent patients who apply for Medicare prescription drug benefits. (more…)

Republican John McCain and Democrats Hillary Clinton and Barack Obama are laboring with understandable vigor to contrast Republican solutions to the ailments of the American health system with Democratic ones. The differences are sharp.But in some key areas, the two sides are inching away from their traditional corners toward the middle of the ring, a change that’s a necessary step toward getting something done.

Campaign proposals are watercolors, not photographs. Details are often indistinct. Attempts (including mine) to price candidates’ proposals and identify how they’d pay for them inevitably founder on unverifiable assertions, unspecified technicalities and arithmetically accurate, but politically improbable, cost-cutting vows.

In the watercolor version, Sen. McCain would make health care more like the market for everything else, offering vouchers — that is, tax credits — so Americans can shop for health insurance like they shop for cars. Covering everyone isn’t a priority, nor is keeping employers providing insurance; less regulation and less government are priorities.

The Clinton-Obama approach — differences between the two candidates are smaller than they suggest — prizes coverage for nearly everyone. Both would push individuals to buy insurance, press employers to chip in, impose new rules and expand government insurance to fill gaps.

And all three candidates promise pain-free ways to restrain costs. Most aren’t clear money savers, though. If you don’t hear providers yelping about it, it isn’t going to save money, counsels John Sheils of health consulting firm Lewin Group.

But at a Washington forum this week, Len Nichols, a veteran of the failed Clinton health initiative of the 1990s now at the New America Foundation, and Joseph Antos, a Republican economist at the American Enterprise Institute, each ticked off some virtues of the other side’s plan.

Without the class-warfare rhetoric used by Democrats, for instance, Sen. McCain acknowledges inequities in today’s $220 billion-a-year in tax breaks for health insurance. The lucky two-thirds of Americans get health insurance through their employers, but they don’t pay any taxes on the benefit. The break is worth much more to high-bracket taxpayers than low-bracket taxpayers, and worth nothing to those Americans who don’t have health insurance.

Sen. McCain would replace that tax break with a $5,000 tax credit for every family, no matter what their tax bracket or where they get insurance. Take from the rich, give to the bottom half, a Democratic applause line.

This week, Sen. McCain conceded that not everyone who wants to buy insurance under his plan would find it. So he suggested a vaguely articulated network of nonprofit, government-sponsored outfits that would contract with private insurers, set “reasonable limits” on premiums and offer subsidies to low-income families. That’s far from Hillary Clinton’s 1993 “health alliances,” and definitely not universal coverage, but an admission that the market can’t do the job alone.

Democrats, meanwhile, have moved away from the 1993 Clinton approach. “They have elements of consumerism that might surprise people,” Mr. Antos says. They have moved toward Republicans in proposing to subsidize individuals so they can shop for insurance; they emphasize more than ever the virtues of people choosing from among competing health plans.

And, though he accuses Democrats of low-balling the price tag, Mr. Antos praises them for acknowledging that expanding access to health care will cost money. Indeed, Sen. Clinton’s first campaign speech on health, in May 2007, focused not on universal coverage, but on costs. “I think we finally have a recognition that everyone sees there is an economic imperative to rein in costs,” she said.

Paying for those costs? Well, Mr. Antos (and, privately, some Democratic analysts) translates Democratic candidates’ rhetoric this way: “We’re going to get rid of the Bush tax cuts and do that as many times as necessary to pay for all this stuff.”

Not to worry. There’s still plenty to argue about. By eschewing the hugely popular goal of nearly universal coverage — which means making sure the poor can afford insurance they want and the young and healthy are forced to buy it even though they think themselves immortal — Sen. McCain fuels the debate over “whether” to expand coverage, instead of how to do it.

Mr. Nichols says that Sen. McCain’s plan to allow people in one state to buy individual insurance in another — essentially deregulating this part of the insurance market — amounts to “ideology trumping policy.” Rational insurers will attract the healthy with low premiums and boost premiums for those with pre-existing conditions. “Fifty to 75 million Americans will discover what ‘actuarially fair’ really means,” he says. (Sharply higher premiums.) The result, he predicts, will be a rush to Medicare-for-all that Republicans will hate.

Mr. Antos counters by focusing on the Clinton-Obama proposals for forcing private insurers to compete against expanded government health-insurance plans. The government’s muscle is so great it will dictate prices to hospitals and doctors below those offered to private insurers, he warns. “Clinton and Obama tie the hands of private insurers, and then say ‘let’s have a race,’” he complains. The result, he predicts, will be a rush to a government-run health-care plan that he suspects many Democrats long for.

The moment of compromise isn’t at hand; voters are offered a choice between two fundamentally different approaches. But behind the rhetoric, there’s movement.

John McCain’s plan for a health-care system built around consumers shopping for their own insurance comes with a significant downside: for people with a history of illness, it can be impossible to find coverage on their own.

The Republican presidential candidate’s main answer is to bolster the role of high-risk pools, which sell insurance to people with pre-existing conditions such as diabetes, cancer and AIDS.

These pools, typically created by state governments, require significant government subsidies, charge high premiums and sometimes sharply restrict benefits or enrollment. Nationally, fewer than 200,000 people are enrolled in such pools, while 47 million people in the U.S. are without insurance.

“They tend not to work particularly well,” said Sara Collins, an assistant vice president at the Commonwealth Fund, a nonprofit health-care-research group. “States have really struggled to finance these adequately.”

Democratic presidential nominee Barack Obama, as with candidate Hillary Clinton, would address the problem of the uninsured partly by creating new regulations that would compel insurance companies to cover the sick and healthy alike. Both would build on the current employer-based health-insurance system by requiring large companies to provide coverage or pay into a fund.

Sen. McCain’s plan goes the opposite direction: He would rely on tax cuts, market forces and consumers themselves to broaden access to coverage, and give a smaller role to employers as a source of coverage.

Most Americans younger than 65 get coverage from an employer, a structure that generally ensures workers who are young and old, sick and healthy are mixed together. Insurance companies charge the same for everyone in the group, with premiums from the healthy subsidizing treatment costs for the sick.

The tax code encourages this employer-based coverage by granting a tax break to people who get their insurance through an employer. Sen. McCain would change that, giving individuals a tax break to offset the price of buying their own insurance, and eliminating the tax subsidy for employer-based insurance. That is expected to drive many people to shop for insurance on their own.

Sen. McCain said this would allow people the freedom to choose any plan they like, not just one of two or three offered by their employer. Healthy, young people would likely see lower rates.

Older and sicker consumers could have problems. In today’s market, insurance companies routinely reject applications for coverage from people with histories of illness because they know these people are likely to rack up more in health-care bills than they will pay in premiums.

To fill the gap, Sen. McCain proposed new high-risk pools that would scoop up those who can’t get insurance on their own. He called it a Guaranteed Access Plan. Premiums would be reasonable, with subsidies for low-income participants, but he has given few other details. “We need to make sure they get the high-quality coverage they need,” he said when he rolled out his plan in April.

Sen. McCain derides government-run health care, but the high-risk pools in existence now require a heavy dose of government intervention. The candidate’s chief policy adviser, Douglas Holtz-Eakin, said the plan would require similar government involvement, adding that the Democrats’ approach requires even greater intervention.

High-risk pool participants pay premiums above standard prices for healthy people. In 2006, premiums provided, on average, 61% of the funding for high-risk pools. Most of the rest, about $722 million, or an average of $3,800 a participant, came through state governments, largely from assessments on commercial insurers.

Mr. Holtz-Eakin has suggested the federal government might need to spend $7 billion to $10 billion to subsidize these pools — an estimate he calls “extremely preliminary.” Many experts said that is nowhere near enough, particularly given the large number of people with pre-existing conditions who would need this help if employers send their workers out to the open market.

“There’s no way you can ever charge a premium that’s going to pay the cost of this population,” said Douglas Stratton, director of Indiana’s high-risk pool and chairman of the National Association of State Comprehensive Health Insurance Plans, an association that represents the 34 existing state programs.

States are controlling costs for high-risk pools by either limiting enrollment or limiting benefits.

The Florida Comprehensive Health Association has been closed to new members since 1991. It currently has 320 participants. One analysis found demand could be as high as 20,000 members, but the state’s legislature hasn’t been willing to pay for that kind of expansion.

Even the most well-established pools require significant support. The 32-year-old Minnesota Comprehensive Health Association is seen as one of the most successful programs, and Sen. McCain’s staff has pointed to it as a model.

It has about 28,500 members, and consumer premiums are capped at 125% of standard rates. As a result, about half of the pool’s costs are covered by its premium revenue. For 2007, the nonprofit’s net losses were about $115 million, which will be made up through assessments on private insurers that are passed along as higher premium charges to their customers.

McCain adviser Steve Parente, a health economist at the University of Minnesota, said his state’s experience proves that people with pre-existing conditions aren’t always as expensive to insure as private companies think. “People generally assume every one of these is a walking cancer victim,” he said. “Some of them [will be] but more likely they have less expensive medical histories, with manageable conditions like asthma or diabetes.”

Roger Feldman, a professor at the University of Minnesota who focuses on health insurance, said the Minnesota program shows that high-risk pools can work. He added that Sen. McCain “will have the same question — how much does he want to subsidize these plans?”