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A retirement crisis could be coming. Here's how to prepare

0:00 spk_0 Most of the time that gap, that retirement gap is not the individual's fault. Life happened, our institutions should have anticipated life happened, um, we shouldn't expect everybody to be superhuman. We should have super institutions, not superhuman beings. 0:20 spk_1 Working longer is often described as the best way to secure your retirement, especially if you haven't saved enough. And here to talk with me about that and all things related to retirement is Teresa Ghilarducci. She's a professor at the New School and she's also the author of numerous books, most recently, Work, retire, Repeat. Teresa, welcome. 0:40 spk_0 Uh, hi, hi Bob. Good to see you. 0:42 spk_1 Uh, good to see you as well. Um, so let's start right with the hard questions, I guess. Um, you've argued that the working longer consensus is not a solution, but an insidious problem. So maybe you could elaborate on why this consensus has eroded both the quantity and quality of people's years, older people's years, diminishing their time before death and often leading to increased illness. 1:05 spk_0 Oh yeah, the working along with consensus was, is really a convenient um untruth. The consensus was that, well, if people haven't saved for the last 40 years, you know, when we told them to, at least they haven't we don't have to do anything about it, you know, it's just the problem is on the individual and since everyone is living longer, then people can clearly live and work longer, and since jobs are getting easier, um, then people, all people can work longer. Well, those two things, everyone's living longer and everyone has easier jobs are false and idea that we could all just work longer to make up for retirement savings gaps, you know, is false. Um, some people are living longer, um, I see it in my data sets that people who have stable lives, good jobs, um, stable jobs, in escalating salaries, they often have access to good health they live, they're living longer. That's like people with professional degrees and above. Men have gotten, especially white men have gotten big longevity gains. They um are taking their statins and they stopped smoking. So we have a bigBig average increase pulled up by these white men doing good things, but they've also been lucky because they've had actually the work careers that lead to longer lives and maybe even a choice to live longer. The rest of us, the rest of us are um faced with like flatline longevity. White women's longevity has not um increased, mainly cause they're working more, you know, working actually isn't that good for you and I looked all over the globe for research on this one question. What kinds of people are made healthier if they work into old age over and over again, and almost every week a new study was coming out, um, from the United States, from Denmark, from all over, all over the world, and the conclusion is it depends. If you're part of the you're the politician who makes retirement policies, you're a professor professor who professes about retirement policy, or if you're a financial advisor or a banker or politician who makes policies on work might make you healthier and keep your mind alive. You can control the pace and the content of your work, but about 11% of populations have those kinds of jobs. They're in the Senate, they're in academia, you know, they're in the, the position of making influence. The rest of everybody, you know, 89% of jobs that if they continue them would actually hasten death by um causing more anxiety and cortisol because work and commutes can, especially if you aren't the boss, can create higher levels of cortisol, and when you get older, those higher levels actually hurt your heart in service related jobs who are um working past 60 are especially vulnerable to having their jobs create more illness, more morbidity, and um a shorter lifespan. 4:27 spk_1 Yeah, so Tracy just as a follow up it sort of creates a dilemma, right? Work longer, die sooner, but if I don't work longer, I won't have the financial security to enjoy whatever years I have left. 4:38 spk_0 Well, there you go. Um, there was a New Yorker cartoon that had two people discussing a couple discussing their retirement accounts. You're smiling, so I, I think you saw the cartoon says, and one of the members of the couple says, ah, I got it, we'll take an early death and a late retirement, that actually unfortunately is the rational thing to do, um, oddly, you know, the rational way to think. The problem is, Bob, it's even worse than that. Most people don't have a choice about whether or not they'll be employed in old age. When you drill down on the people who are retired, you know, just take a, go into a room full of retired people and just ask a simple question. Did you retire when you wanted to?You know, did you retire at the age you wanted to, and most of them will say, no, uh, I retired a lot earlier than I thought I, I had to, and there's all sorts of reasons you can make them up health, wealth, layoff, their skills got it, um, you know, were um obsolete because the world of technology, you know, moved past them and there's age discrimination. So most of us don't even have a choice to work longer, even if we don't have enough money to live on in our old age. 5:52 spk_1 Yeah. So Theresa, in our podcast, we try to do two things. We, we like to say that we want this to be someone's first and last stop in their search for retirement now, but we also want to give people actual advice. So given all that you just said is what should someone do who's in thatsituation? 6:07 spk_0 Yeah, so I, um, so an individual faced right now, you know, you're coming into your 50s, you know, early maybe you're in the mid-60s, um, you have to really do some hygiene. You have to look at your own finances and you have to be realistic about how much you need. Um, and then I say assess your budget. I look at my spending every month, you know, it's not, I don't do it every day, but I look at it every month. It it takes now about 20 to 20 minutes to half an um and then I have to add 20% because I don't always count what I spend, you know, I, I, you know, I like to lowball it's sort of like my calorie counts, you know, I really do 20% more than I say I do. Well, I probably spend 10 to 20% more than I do, and then you have to estimate your future retirement income and um subtract 20% from that because people kind of um raises they're going to get, the kind of uh pension income they're going to get, they forget that stock markets go up and down. So you add 20% to your spending, you decrease your retirement income by 20%, and then you look at the gap, right? And you look at that gap and you have and you should look at it without that inner critic saying, oh, I should have done this, I should have done that, because most of the time that gap, that retirement gap is not the individual's fault. Life happened, our institutions should have anticipated life happened. Um, we shouldn't expect everybody to be superhuman. We should have super institutions, not superhuman beings. Um, so look at that gap without to work longer if you can, if there's that gap, try to decrease your, you know, your income. Everyone knows the, the things to do. You could even be mindful about how much you to a fee only adviser to get rational advice. You've been a really good advocate of staying away from conflicted advisors, so you could help people and really hammer that down. A fee only advisor you could visit AARP's website which has really good retirement calculator, good advice about home equity um loans, um so good job options if you're older and you want to avoid age also a lot of agencies can help older people get access to programs to income that they might not already know about. 30% of elders who are eligible for um food stamps don't apply. 40% of people who are eligible for SSI supplementary income don't apply, home assistance, energy assistance, all those programs are underutilized, so you have to make sure that you um can get all those. And the other thing is, is that you are, this is a collective problem, so it needs collective action to solve it. You are also the um holder of a very valuable resource which is your you need, um, and politicians know that older Americans vote, and they try to bamboozle them by saying, I'm helping the older American, be very careful not to be distracted with a token tax deduction here or there, as we saw in the last tax bill that just and know that Social Security and Medicare and Medicaid are your most important financial assets. The government is your most important financial partner um in your old age, and vote to take care of that. 9:46 spk_1 Yeah. So you've talked about this tale of two retirements, the wealthy and the less wealthy, uh, and you just mentioned Social Security and the trustee's report just came out and we're looking at a 23% cut come 2033 if Congress doesn't act. What, what's your take on that and what to do because of it, or did it happen? 10:06 spk_0 You know, uh, we have been in this business for a long time, you and me, Bob, and we always thought Congress would act by now. We really told people, we reassured people, don't worry, they'll never be across the board cut in benefits of 23%, and that means people who get 100% of their income from 20 from Social Security will get.A 23% cut and people who only get 10% of their income will get a 23% cut. Guess who hurts is hurt the most, the people who depend upon Social Security. So we only have actually optimistically 2033. When you feed in this last tax bill, that um that insolvency comes sooner, indirectly because of the way the taxes are are but it means actually Congress not doing anything is actually a hostile Social Security, you know, you got to a point now that when you hear a politician or a president says, no, no, I'm not going to touch Social Security, that means they are actually planning on that cut because Social Security will cut itself, you know, based on it is. So not doing anything will really hurt, you know, the bottom 60% of people because they depend on Social Security the and it will mean more poverty among elders. Even if you're middle class now, your risk of going into poverty or near poverty will go up by quite a bit because you don't have a backstop to Social Security. We could be going into a recession at that point or the economy will continue this very slow growth with tariffs, you know, with no investments, with a big your ability to get extra work may also be um be trimmed out. There won't be a way out of that low standard of living if Congress doesn't act now. 12:08 spk_1 Theresa, we have to take a short break, but when we come back, I want to talk about, we have so much to talk about the gray New Deal, government retirement accounts, and perhaps the failure of defined contribution plans. So don't go back to Decoding Retirement. I'm speaking with Teresa Ghilarducci. She's a professor at the New School and author of numerous books, including, uh, Work Retire, Repeat. You know, Theresa, I have a friend who has a blog called Work Retire, Die. I like your title better. A little more all right, so I, I promised that we were going to talk about, uh, the Gray New Deal, which is uh a term that I think is unique to you. I think you coined it, so tell us what it is and what people need to know about it. 12:52 spk_0 Yeah, so, um, the New Deal, you remember as Roosevelt, and it was a New Deal for workers and, and people didn't have jobs. Um, this is a New Deal for a very big part of the population. We are richer, we have older people, and it's going to be a a permanent quarter of our of our population, you know, people who are pushed out of work, you know, or want to, um, want a retirement period. So we need a new deal for that it is absolutely a failure to say, well, those people should just have saved, they should have saved, or those people can just work. Those are, I said in my book, those are just unrealistic kind of fantasies and hope. That's not a plan. Um, so what the great New Deal is is to not say that everybody has to retire. If older people want to work, we absolutely should not have age discrimination. Go work, but those jobs should be those jobs get better when people unionize, when there's more regulations on safety, when there is more accommodation for workers' ability to do the job, all those kind of work protections have to be strengthened in order to make the physical requirements of jobs that older people have or the jobs, the requirements um make people have or the surveillance that comes from from computers are really tempered and controlled and make those jobs meaningful and and resourceful if an older person wants to have it. Many people can't work longer, don't want to work longer, deserve a retirement, so retirement should be made decent. Um, we need to shore up Social Security. We're point of cutting Social Security. We're past the point of raising the retirement age, which is just a cut in Social Security. We only have one agenda for Social Security, and that's to increase revenue and probably benefits and across the board $200 increase in Social Security would not be untoward. It should, it' probably actually, it's required now to lower our property rates from a world standard of 23%. So we have to increase Social Security and we need a guaranteed retirement account plan. Half of workers now, Bob, and I'm going to repeat this, do not have access to a retirement plan at means half the people don't. Whenever I'm on a broadcast, everybody who interviews me has a retirement plan, but most of the people listening, half of the people listening, if you have a population listening to you that represents America, won't have a retirement plan, and people move in and out of employers that provide a retirement we need to make sure that people are covered 100% when they work. We are covered 100% with Social Security. Wherever you go, that FICA tax follows you. If you're a gig worker, you pay Social Security. If you're a contingent worker, you pay Social Security, temporary worker, you pay Social Security. Small employer, middle employer, big employer, you pay Social we should have everybody, when they pay into Social Security, pay into their own savings account, and that is called a guaranteed retirement account, and it's in Congress now as a proposal and it's supported by Republicans and Democrats and it's supported by Republicans and Democrats in the House and Republicans and Democrats in the Senate. There has never been such a bold reform of retirement securities, you know, since the 70s. Um andNow that we've done the tax breaks for wealthy people, we now have to turn to retirement security for the best of us. 16:34 spk_1 Yeah, so my understanding of the GARA is that it would be over and above Social Security. It would be voluntary, uh, perhaps what upwards of 3% of your salary going into an account that's in your name and invested how you want it to be invested. 16:48 spk_0 Yeah, let me, let me talk about um the barista, you know, down the street, um, and she isn't 23, you know, she's 40, and she's had these kind of service, um, jobs, you know, for 1520 years, um, she would automatically be in the guaranteed retirement account or we call it the private sector thrift savings plan the rift savings plan for everybody who's on a federal worker is the federal workers' retirement plan. It's a great plan. It's kind of a hybrid between a defined benefit and defined contribution plan, um, and federal workers are automatically put into this, you know, retirement account, and the um federal government because the government matches the low income workers, workers like with that barista down the street is in it because she knows she puts in a $1 and she gets $1.50 from the government, from the employer. Well, our plan would anybody who makes below median wage would be automatically put into a plan at just 1% of and the government would match it 3 times, 3% of their salary. 18:02 spk_1 Yeah, as you're talking, the thrift savings plan allows you to invest in equities and fixed income, etc. and very low cost investment options, and I suspect that would be the case but GRA yeah. 18:13 spk_0 And you know what? Yeah, because the government has the muscle to negotiate for the best plans and the lowest fees. 18:21 spk_1 Yeah, I, I mean, on, on paper and in reality, it sounds like a great thing to do. What, what's the hold up? I, I, I'd love to see this happen because we're at 50% coverage. 18:31 spk_0 Well, the AARP supports it. Many unions support it, worker organizations support it, DoorDash supports it, Charles Schwab, Vanguard, Fidelity, they all support it. There's one little, there's a noisy group that does not support it, and they're the the lobbyists for the brokerage those folks that try to sell these very high fee non-fiduciary accounts, they would have to be retrained to do other work. You know, there would be less demand for these for-profit. Some of them are predatory, not all of them, but some, but they're all so there's only one small piece of the industry of the finance industry that are against it. Almost everybody is for it, even especially small employers. So I think it's just about focus and attention. It's really not about politics. The special interests are against it, butThere are bigger couple policy issues, and I think most of the people supporting have been able to ignore them. 19:34 spk_1 Yeah, you know, it's interesting, at least in the United Kingdom where they have the Nest program, I think it's been widely accepted and uh and widely praised as addressing the retirement crises that presumably was 19:44 spk_0 in. Most of the time, I don't invoke the nest program because most people don't really look outside for shores, for examples, but it's very much modeled after what our peer um countries market-based societies have a Social Security and a um a private savings plan, you know, a savings plan, and even the Netherlands, which always gets like A's and A pluses for their retirement plan, they have greedy capitalists in their country. They care about profits. They're just like us, but their people retire at a decent age before they're worn out, and theyThe 3% of poverty. The US with the same personalities of employers and capitalists and at 23% of poverty and uh and we have we work the most hours of anybody 1880 hours. None of our peers work that many years, so we're like worn out when we are working and we work the longest, you know, we work into our late 60s where our peers um retire in their early 60s. So we're rich and we just need better institutions. 21:03 spk_1 Um, so you've hinted at this already. We have about, I don't know, maybe 90 seconds left or so, Theresa, about this notion of creating a dignified retirement. Um, maybe just to talk, if you could briefly about that. 21:15 spk_0 Yeah, my research has led me away from kind of finances and and economics and cause you have to when you get into this um and also workers' voices about what people want out of their life and the psychologists and the philosophers, and I realized that we are moving away from a vision we had around the 30s, 40s, and 50s, which is the rich and poor alike, the working class people should all deserve um some time to create a personal narrative of their life, not just be a worker bee and be a the end of their lives, you know that that was 10 years, 20 years are the most precious because they're in short supply, you're going to die, and to be able to control your time during that period of time is very human and to deny a huge part of our population, that period of life is the ultimate inequality, and it's not moral, um, and security is more than in kind of a financial decision. It's really a decision about the kind of society we want to create for our people. 22:25 spk_1 I, I hope your great new deal comes to fruition. I hope the GRAs come to fruition, but I'm afraid we've run out of time for now, so we'll have to come, have you come back on. Thanks 22:35 spk_0 for your work, Bob. This is a really great program and it was very well prepared. 22:40 spk_1 Thank you. So that wraps up this episode of Decoding Retirement. We hope we provided you with some actionable advice to better plan for or live in retirement. And remember you can listen to and subscribe to Decoding Retirement on all your favorite streaming platforms. 22:54 spk_2 This content was not intended to be financial advice and should not be used as a substitute for professional financial services.