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This is a repost from Forbes.

When people ask me what I mean when I warn a retirement crisis is coming, I give them one number: 8.5 million. That’s how many older workers and their spouses will experience downward mobility in retirement if we do not act soon.

Who are the endangered 8.5 million? These are working people nearing retirement age (age 50-60) earning above $31,260 for couples or $23,340 for singles, which is twice the official federal poverty level, a common standard used to measure chronic deprivation.

But because of inadequate pensions and low Social Security benefits, they will be poor and near poor when they retire at age 62 (most people, except the highly educated, retire at about 62 or 63.) 8.5 million people will be downwardly mobile because they will experience a decline in their living standards from middle class to poor or near-poor status.

Downward mobility can have political consequences, fueling anger and desperation, and the rise of elders in poverty is a humanitarian crises.

You probably heard “blame the victim”-type explanations for why people don’t have enough retirement savings, including workers spend too much; they are too short sighted, and retire too early. However, our problem is not that humans are flawed, but that the flawed system is not built for the humans we have.

Historically, many families could count on workplace pension plans. But today, less than half of workers not have access to any kind of savings plans at work, not a 401(k), traditional pension, nothing. Even workers with coverage through an employer-sponsored 401(k) cannot adequately grow their savings due to market volatility and predatory fees and job changes and job changes and other life events. The system doesn’t match up with the real lives of workers, no wonder the median older workers only has $15,000 saved for retirement.

Working longer, alone, won’t allow older workers to bridge the gap. Delaying retirement as a solution depends on older workers being able to physically and mentally continue working and crucially employers willing to hire them. 

Our research found that, instead of technology making the workplace less physically and mentally demanding, technology has made speed-up more possible. Older workers, especially older women and black workers, face physically and mentally challenging on-the-job requirements: intense concentration, keen eyesight, and bending and stooping.

Headline elder unemployment rates at dizzyingly lows, about 3.2%. But hidden elder joblessness is workers much higher; over 3 million older workers trapped in hidden unemployment include those working part time, but want full time work, and those who want a job and who have stopped looking for full-time. The real unemployment rate is over 7 percent. An the labor market isn’t great. In the last quarter of 2017, 15% of older workers with college degrees were paid less than $15 an hour. And despite recent news article heralding the end of wage stagnation, wages for older working women are falling.

Mandatory add on accounts to Social Security, called Guaranteed Retirement Accounts (GRAs), paid for by contributions from employers and employees and targeted refundable tax credits give every worker an individual retirement account. This account is pooled with other workers’ investments, professionally-managed, with guaranteed principal. With a progressive, refundable tax credit for all workers, lower-income workers can save for retirement without pinching pennies.

Working longer, cutting back on little luxuries - these are not going to save middle class workers from falling into poverty in old age. The risk of being poor or near-poor is exactly that: a risk. To protect ourselves and each other from this risk, we need structural reform.

This is a repost from Forbes.

Now you are prepared to negotiate the best price for college—see my previous blog—you need to start negotiating. A Forbes article a while back described good tips. Here are my four: you need Power, Logic, Language and Leverage.

1. POWER Be psychologically ready with a back up plan to exit and choose another school. The road to bargaining power is the well-marked path out the door. Being able to exit is the definition of bargaining power – one who has the least to lose by walking away from the agreement has the most bargaining power. Know your number – walk away from a number that is higher than that number; you have already determined what you can afford.

2. LOGIC Once you get the offer, write a letter that explains your argument to lower the price by increasing the aid. Follow up with a phone call or  person appointment with a financial aid officer. Keep track of everyone you talk to so that you can come back to any prior discussions. You have to make your case, be prepared to explain why what they think you can afford is not what you can. Explain other children’s needs, insecure job situation, debts, expectation of medical expenses. Gather up all the supporting materials you need to negotiate the price you can afford. Your negotiating party needs to have a reason to agree with you. Ask for a deadline extension. Since you are confident and prepared you will be nice, courteous, and hopeful. No one likes mean people, and pressure won’t help here. Trust me I am a New Yorker and I think I know when pressure and impatience works.

3. LEVERAGE Important leverage is negotiating college aid – not loans. Your leverage is any other offers your child has received. Come with research in hand on the total cost of attendance for all the schools your child has been admitted to, back up your claims with copies of offer letters.

4. LANGUAGE Know how college pricing works so you can speak their language and know their levers. Just like on an airplane, everyone pays a different price for a seat. Colleges can price discriminate by lowering or raising the need-based or merit-based aid. You will have to back up arguments for need-based aid with payslips, medical bills, the whole 9 yards.

Parents and students often make the mistake of thinking prestigious colleges are the most expensive. Smart students who come from families that have less than about $120,000 annual income and accepted by a prestigious school will likely face a very small price – Princeton, Stanford, Yale and Harvard pay for low income students they have accepted.

This is a repost from Forbes.

After 25 years of teaching at the University of Notre Dame, the sweet seniors asked for a list of “vital books for new college graduates.” Top choice? Getting to Yes: Negotiating Agreement Without Giving In by: Roger Fisher, William Ury and Bruce Patton. But students should read Getting to Yes BEFORE college, more particularly as college acceptances and financial aid offers start rolling in. Like cars, houses and mattresses, college prices are negotiable. To get the best price you have to know how to prepare for negotiations and how to behave in negotiations. Part 1 is about preparing; tomorrow’s blog is about negotiating.

Four things you need to negotiate a lower cost of college:

1. Parents, know your number, backwards and forwards. That number is what you can afford to pay out of current consumption to pay for college. How much living on cheap noodles is going to pay for college. What you can pay is the amount you can afford without taking money out of your retirement plan or taking out more debt, including taking out a second mortgage. Don’t pay for college by taking out retirement savings -- your child benefits from your financial security. If you need to spend $80,000 a year in retirement, you'll need about $800,000 at age 65. You may need to deploy your detailed budget in negotiations. Prepare it now. Include your retirement savings requirements.

2. Students, know your number! Parents, don’t accept an aid offer stuffed with loans. I cannot emphasize enough how insidious student debt can be, though a modest amount can be helpful. After 37 years of teaching, I can see how it destroys young people’s careers and family life for decades.


You might get an offer that requires just $10,000 in loans per year! But if your student graduates -which is not guaranteed- in four years (again, many take five or six years), then she is expected to borrow $10,000 per year for four years. The total amount owed by graduation day is $43,190 (because interest accumulated). If your student earns $40,000 a year at graduation and can stretch their payments for ten years, they will spend almost 20% of net pay just on loans. Even a few thousand dollars matter. Help your student anchor on the number. You can also try this handy online calculator from Dinkytown.

3. Prestige doesn’t matter. Don’t assume the prestigious, expensive school is adding value to your student’s education. Research in the 1990s has held up – students accepted by Harvard and other prestigious schools and those who went to nonelite schools, like Colorado State, for instance – did just as well as the students who went to Harvard. In other words, the Ivies were good at selecting which students would do well in college. Gregg Easterbrook’s 2004 gem of an essay, Who Needs Harvard is still worth reading! Successful students create relationships with one or two professors, engage in some research, always attend class and copy their notes after class. That’s pretty much it – the recipe for success. Students add the value and the college provides the platform.  I have been teaching for 37 years and know that no college is a make or break for your student.

4.Colleges want to make a deal – the number of college-age students is shrinking as a percentage of the population and college enrollment rates have fallen by 1.3 percent between 2015 and 2016. Colleges are competing to fill their seats and dorms – and are willing to make concessions on tuition.

February 2018 Unemployment Report for Workers Over 55

owaag tile feb 2018


The Bureau of Labor Statistics (BLS) today reported a 3.2% unemployment rate for workers age 55 and older in February, an increase of 0.2 percentage points from January.

While low unemployment is finally leading to wage increases for some prime-age men, women and older workers are being left behind. In the last year, the gap between wage gains for prime-age men and older women was 8 percentage points, a loss of $4,000 a year for an older woman making $50,000 a year. click

As last month’s Federal Reserve's Monetary Policy Report observed, “While the aggregate labor market appears to be modestly tight at the moment, not all individuals have benefited equally from these developments.”

Between January 2017 and January 2018, hourly earnings (adjusted for inflation) of men ages 25-54 grew by 4.4%, the highest year-to-year increase since the recession ended in 2009. Wages of older men ages 55-62 increased by 2.8%, while prime-age women's wages were stagnant and older women’s wages fell by 3.6%. Mar 9 narrative image v5 updated

Stagnant wages for older workers and women increases wage gaps and make it harder to save for retirement. Stagnant wages are symptomatic of an “unfriendly” labor market. Older workers who lose their jobs face long periods of unemployment. If they find a new job, they typically face pay cuts of 20% or more.

Partly because traditional gender roles require women to interrupt their careers for unpaid care work and partly because of sex discrimination, women’s jobs are less secure, pay less, and are less conducive to accumulating retirement savings.

A stronger Social Security system and the creation of Guaranteed Retirement Accounts (GRAs) will allow all Americans a dignified retirement, including those affected by cumulative disadvantage in the labor market. GRAs are a proposal for universal individual accounts funded by employer and employee contributions and a refundable tax credit throughout a worker’s career.


*Arrows next to "Older Workers at a Glance" statistics reflect the change from the previous month's data for the U-3 and U-7 unemployment rate and the last quarter's data for the median real weekly earnings and low-paying jobs.

This is a repost from Forbes

America romances low wage jobs and obsessively depends on work as the answer. No friends? Answer: work. Lack structure in your day? Answer: work. No pensions? Answer: work.

The consequence of this relationship is U.S. old age poverty and old age labor force participation rates standing out in unusual ways.

Retirement income security is weak, so American retirement policy encourages paid work among the elderly and Americans live with unusually high rates of old age poverty. The two are related because we do have a failed retirement system that leads to inadequate balances as I argued in a previous blog.

  • According to the OECD, America leads the club of rich nations in the provision of low wage jobs. According to the OECD over 1 out of 5 jobs pay very low wages (two thirds the median wage). In comparison, less than 1 out of 7 of New Zealand’s jobs are low wage.
  • The Social Security system rewards people for delaying claiming their Social Security benefits until the age of 70. Lifetime benefits rise by 70% if you delay claiming for 8 years between 62 and 70. But only 8% of Americans get the reward, most claim before 65.
  • Most older Americans retire by the age of 65 according to our calculations.
  • The educated work more than the less educated; 53% of college-educated men of age 66-69 work more, compared to 27% of those with high school educations.
  • But, Americans retire at far lower rates than elders in other rich nations. Older Americans work hard – only American and Japanese elders and those in emerging nations have elder labor force participation rates over 30%.



  • The jobs older Americans have aren’t great, 15% of older Americans with college educations earn less than $15 per hour.
  • Despite the work, or because of it, American elder poverty rates top most nations, few nations exceed 20%.



The unusually high rates of old age poverty and high rates of elderly work is related to federal pension and old age policies. Republican President Ronald Reagan’s deputy labor secretary Malcolm Lovell told Congress that older Americans will need to work because Social Security was slowly being cut as the retirement age was increasing and employers were eroding their workplace pension plans. Ever since the 1980s, Americans are expected to save, work or make do.

ReLab’s backgrounder, The Retirement Crisis, spells out the causes of the severe retirement crisis and proposes solutions.

The Problem: Lack of Adequate Retirement Savings

1. Inadequate Account Balances

ReLab’s backgrounder, The Retirement Crisis (add pdf link once final), spells out the severe retirement crisis and proposes solutions.

Most workers approaching retirement do not have enough saved to maintain their living standards in retirement, regardless of income. The typical older worker in the bottom 50% of the income distribution (earning less than $40,000/year) has nothing saved for retirement.  The median savings of worker in the middle 40% (earning between $40,000 and $115,000/year) are only $60,000. Among workers in the top 10% of the income distribution (above $115,000/year), the median amount saved is $200,000.




2. Lack of Needed Retirement Income

Low savings mean that all income groups fall short of their target replacement rates – the percentage of pre-retirement income needed to maintain one’s standard of living in retirement – by over 20 percentage points. The typical worker in the bottom 50% of the income distribution needs 85% of their pre-retirement income in retirement to maintain their standard of living. However, they can expect to have only 60% based on their current savings and Social Security benefits. In the middle 40%, older workers need 75% of their pre-retirement income, but will be able to replace only 54%. Even older workers in the top 10% are likely to experience a shortfall. As retirees, they will need 65% of their pre-retirement income, but will be able to replace only 40%.


 fall short of target rep rates


 3. Downward Mobility in Retirement

The systemic problem of inadequate retirement saving leaves retirees at risk of experiencing a sharp decline in their living standards. With less income in retirement, many will have no choice but to cut back. For some, this deprivation means falling into poverty or near-poverty when they retire.

ReLab defines workers as downwardly mobile if their and their spouse’s current income is more than twice the 2014 Federal Poverty Level ($23,340 for a single individual and $31,260 for a couple), but projected to fall below this level in retirement. Relab projects that out of 21.5 million older workers ages 50-60 and their spouses who are not poor or near poor, 8.5 million - or 40% - will fall into poverty or near poverty when they retire at 62.


The CAUSE: The “Do-It-Yourself” Retirement System Has Failed

1. Lack of Coverage

Inadequate retirement savings result from systemic failures of the American retirement system. Workers do not have access to employer-sponsored retirement savings plans. Half of all older workers in the bottom 50% of the income distribution do not have access to a retirement savings plan at work. In the middle 40%, a fifth of workers do not have access. And in the top 10%, 15% of older workers do have access to a plan at work.

2. Switch to 401 (k)s

Since the 1980s, employers have increasingly replaced their defined benefit (DB) pensions with defined contribution (DC) savings accounts such as the 401(k). DC accounts fail American workers for the following reasons: participation is voluntary and conditional on the employer offering a plan, so that many contribute sporadically, if at all; many withdraw funds before retirement; investment returns are eroded by high fees and sub-optimal portfolios; balances are paid out as lump sums rather than in the form of a lifetime income; and the tax preferences for retirement savings disproportionately benefit high earners.


Lack Cov



Scholars and analysts who view the retirement crisis as a problem of human error and poor individual choices offer two solutions: behaviorial “nudges” to increase savings, such as auto-enrollment into existing DC plans and auto-escalation of account contributions, and working longer.

1. Nudges Are Not Enough

Behavioral nudges are inadequate for the task as they ignore the reality that almost all workers experience swings in income over their careers that make it difficult to maintain the consistent contributions necessary to accumulate enough retirement savings in a 401(k)-type account. Over a working lifetime, almost all workers experience multiple unemployment spells lasting over a year and reductions in earnings of 10% or more, with the bottom 50% of earners more vulnerable to both. When these income shocks occur, DC accounts are often tapped, serving double-duty as both emergency funds and retirement saving and making them less effective at both.

2. Working Longer Won’t Work

If workers with inadequate savings are forced to work longer to avoid deprivation in retirement, the quantity and quality of the jobs available to them is dependent on the whims of the labor market. Currently, the labor market for older workers leaves many suffering from long-term unemployment, low wages, and a lack of employer-sponsored retirement coverage, particularly for older women. Additionally, many older workers cannot continue working due to physical limitations, particularly black workers.

Given these realities of the labor market, a structural change in how we approach retirement security is necessary to solve the retirement crisis.

3. Guaranteed Retirement Accounts

Comprehensive reform includes two necessary steps: 1) strengthening Social Security, and 2) creation of Guaranteed Retirement Accounts (GRAs) as individual accounts to supplement Social Security.

Conceived as “pensions for all”, GRAs are universal, professionally-managed, portable, mandatory retirement savings accounts. Workers and their employers split annual contributions of at least 3% of wages. Additionally, GRAs benefit from risk-pooling, guarantee workers’ principal, provide a tax credit to offset low-earners’ contributions, and prohibit early withdrawals to ensure savings are preserved for retirement.

GRAs are designed to close the gap in retirement savings left by the loss of traditional DB pensions in the workplace, low access to any kind of coverage on the job, and inefficient DC accounts such as 401(k)s. They provide a safe, effective vehicle for workers to accumulate personal retirement savings over their working lives.

Note: With the exception of downward mobility, our analysis of the retirement crisis focuses on individuals, rather than households. The reality of growing divorce rates among near-retirees, and the disproportionate effects of divorce on women’s health and financial security, make it imperative that retirement income adequacy be studied at the individual level. When estimating the risk of downward mobility, we focus on the household, not the individual, because poverty is measured at the household level.

This is a repost from Forbes

So interesting that the conception of a retirement crisis among the financial industry and policy makers is so different from what ordinary people in working households think the retirement crisis is.

To the finance and policy elites, the “retirement” crisis is that state and local government entities may have to raise taxes to pay for their pension obligations.

Closer to what ordinary people view as the retirement crisis is the World Economic Forum’s analysis (I was on the advisory board committee). The "retirement crisis" is the gap between what working households need and what they have. The World Economic Forum study showed that the six largest economies (the US, UK, Canada, Australia, China and India) faced a savings gap.

Various vehicles and programs encompass old age income security, totaling $67 trillion in 2015 or about global GDP. That number is large or small depending on a nation’s ability to raise the money to pay for workers’ retirement years.

Working households fund their retirement through a variety of government and private programs. In the US, working households have some mix of Social Security, Medicare, pension funds, 401(k) plans, IRAs, and home equity. The viability of the retirement income mechanisms depends on the assumptions made about returns on assets and liabilities – like health and longevity. The US savings gap – $7.7 trillion in 2013 – is a train wreck ready to happen.

Similarly, the gap between pension funds and promised retirement benefits to current and former employees by US state and local government is either a piece of cake to handle or a painful horse pill. This depends on the assumptions about future rates of return, where the looming bill can be anywhere from $1 trillion or $3 plus trillion. For some state and city governments (Dallas, Illinois, New Jersey), the gap is so large they will have to make politically-difficult choices about benefits or taxes.

To ordinary households in the US, the retirement crisis is described by the following:

  1. Most people will have little more than Social Security, will have inadequate balances for retirement savings, and will be relatively worse off than their parents and grandparents.The consequences will split us apart, impoverish families, and weaken the economy. Retired baby boomers make up more than 20% of the population and have anemic buying power.




  1. Our current voluntary, do it yourself, individual commercial accounts​​ do NOT work for most people, though the well-off are mostly secure having generous wealth to rely on.

Tony James and I have worked hard using wisdom from experts and our own scholarship and practical experience. We have thought through the policy reform principles for practical and efficient recuse of retirement in the United States. We start with the goal of providing everyone with security in old age.

  • We want a strong Social Security, Medicare and Medicaid system as no pension supplement is effective without a strong base of funding.
  • We don't want to worsen anyone's current arrangements – 401(k) and IRA arrangements work for some – but we do need a good competitor. We need a public option and more fair tax subsidies.
  • A streamlined and efficient funded supplement to Social Security the GRA helps everyone accumulate assets, invest them well, and decumulate in the form of a life-long stream of income.

A relevant analogy to the affordability of old age income is how a family assesses its mortgage debt. If you owe $100,000 on your house, that is a lot if you assume your productivity is in permanent decline. Or, this may be fine if you are thriving economically – perhaps earning $200,000 per year in a secure job.

The nation may not have a liability problem, but a revenue problem. I am not calling it, nor am I making a vapid generalization. I am putting the notion of having too many pension obligations in the context of what we want and our capacity to pay.