The government’s Fourth National Climate Assessment clearly shows that climate change is real and accelerating.
The evidence in the report also indicates that climate change will make many things – health, housing, and transportation, to name the most important – more costly and make it much harder for people to save for retirement. This is especially true for vulnerable populations such as lower-income families and communities of color. Climate change will undoubtedly worsen retirement income inequality.
Climate change harms people’s health. Droughts, for instance, lead to a more widespread fungus that causes Valley fever. And, worse air pollution contributes to a decline in respiratory and cardiovascular health. In worse health, people will have to miss work more often, they will earn less, and they will have to retire earlier. They will both face higher medical bills while they work and in retirement and earn and save less over the course of their careers.
Further, climate change poses a particular challenge for transportation. Higher temperatures, heavier rains, larger swings in temperature, among other factors, put a heavy burden on transportation infrastructure. This could, for example, lead to more and deeper potholes in the already congested roadways. And extreme weather events such as floods, droughts, blizzards and hurricanes can destroy roads, bridges, rail lines, among other transportation infrastructure. The costs of getting and keeping a job will consequently increase as commutes get longer and transit becomes less reliable. Climate change again raises costs for people and makes it harder to save due to less job stability, for instance.
The costs of housing in a large part of the country will also go up. For one, people either spend the money to better cope with the consequences of extreme weather or they suffer through the consequences such as hotter homes, poorer air quality and more water damage. Either way, housing becomes more costly as people pay more, live in lower quality housing or both pay more for lower quality homes.
Moreover, climate change will reduce the value of people’s houses, which are often their largest assets. It increases the chance of damage to houses, which translates into higher homeowners’ insurance costs and makes it harder for people to sell their houses. People will not only live in worse conditions while they work, but they will also have fewer savings. Retirees in particular will need to spend more money on upgrades and upkeep to live in relative physical comfort, but they will have less money to do so.
As the wedge between costs and savings grows, people cannot count on governments to fill the retirement income gap. Governments will have to spend more to fix infrastructure and they will have to pay for some services, especially health insurance. Heat waves and repeated flooding shorten the service life of the public infrastructure such as roads and bridges. And, extreme weather events such as fires, droughts, and hurricanes outright destroy public infrastructure. Furthermore, worse health means more people will need to seek medical attention. This will raise the costs of programs such as Medicare and Medicaid. These growing demands on the public purse will make it harder to fill the increasing retirement savings gap with more social spending.
People will be increasingly on their own to prepare for the financial consequences of climate change. But, climate change and its accompanying effects on health, incomes and savings contribute to more and more mental stress. Stress, though, makes it harder for people to focus on long-term financial savings goals such as retirement. As a result, people may not save as much to prepare for the challenges of higher health care, transportation and housing costs, leaving them financially vulnerable.
Climate change then poses the biggest challenge for the most vulnerable, especially the elderly, communities of color and low-income families. They already face some of the biggest challenge with respect to poor health, finding and keeping good jobs as well as access to quality transportation and affordable housing. These challenges will only get worse as climate change accelerates. And, these are many of the same groups of people that have fewer emergency and retirement savings to begin with. Climate change further limits their economic opportunities, making an already bad situation worse.
It is conceivable to design policies to address the adverse long-term financial effects of climate change. Fortunately, such solutions already exist, particularly by promoting renewable energy production and energy saving. These energy sources have also become inexpensive relative to fossil fuels. And they offer other direct benefits such as cleaner air and savings on utility bills, among others, which help reduce the costs for families and make it easier to save for retirement. Other solutions, mainly climate adaptation that helps people cope with the foreseeable changes in temperatures and extreme weather, for instance, could be targeted towards the most vulnerable. Policymakers can alleviate the burden of climate change on retirement income insecurity by taking serious, meaningful, expedient and targeted steps towards mitigating climate risks.
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