Americans should retire later and save more if we want to keep our economy from collapsing and preserve federal programs like Medicare, Medicaid and Social Security, warns a congressionally mandated report from the National Research Council released today.

"The unprecedented demographic shift in which people over age 65 make up an increasingly large percentage of the population is not a temporary phenomenon associated with the aging of the baby boom generation, but a pervasive trend that is here to stay," according to the report sponsored by the U.S. Treasury Department and supported by the National Institute on Aging. That trend will have long-term implications for the economy, and "will drive up public health expenditures and demand an ever-larger fraction of national resources."

Although the report contends "there is little doubt that there will need to be major changes in the structure of federal programs, particularly for health," it does not advocate specific reforms to Social Security, Medicare and Medicaid. Those may be determined by the outcome of the November election or, more likely, by knock-down, drag-out fights on Capitol Hill sometime afterwards.

Rather, the report stresses that "the nation needs to rethink its outlook and policies on working and retirement" so that people remain in the workforce longer, "which would boost national output, slow the draw-down on retirement savings and allow workers to save longer."

"Although 65 has conventionally been considered a normal retirement age," says Ronald Lee, professor of demography and economics at the University of California, Berkeley, and co-chair of the report committee, "it is an increasingly obsolete threshold for defining old age and for setting benefits for the elderly."

Moreover, Americans need to plan for retirement earlier and better. "Improved financial literacy will be critical, since between one-fifth and two-thirds of today's older population have not saved enough for retirement and therefore rely heavily on Social Security and Medicare," the authors write.

Adds Roger Ferguson, CEO of TIAA-CREF and co-chair of the report committee, "Population aging does not pose an insurmountable challenge provided sensible policies are implemented with enough lead time to allow people, companies and other institutions to respond."

The National Research Council plans a follow-up report looking "more in-depth at the long-term macroeconomic effects of population aging and provid[ing] quantitative assessments of specific policy choices."