Book Draws Praise from Two Former Chairmen of White House Council on Economic Advisors

Screen Shot 2016 09 30 at 12.06.33 PMEconomist Teresa Ghilarducci, one of the nation’s leading experts on retirement security, and Blackstone President Hamilton “Tony” James today announced the publication of their co-authored book, Rescuing Retirement: A Plan to Guarantee Retirement Security for All Americans, at a reception hosted by Michael Bloomberg. The book outlines a deficit-neutral proposal to ensure that all workers can save enough to retire through mandated, individually-owned, and effectively-invested Guaranteed Retirement Accounts. Left unaddressed, the authors emphasize, the strain of a newly poor population of senior citizens would devastate federal, state, and local budgets for decades to come.

Key components of their visionary plan include:

  1. Universal coverage: Every American worker would have their own Guaranteed Retirement Account, ensuring consistent retirement savings throughout their career.
  2. Individually owned, effectively invested: Unlike Social Security, workers keep ownership of their assets through transparent individual accounts. As with traditional pension plans, their assets will be pooled and invested in long-term, strategies that generate higher returns than current 401(k) plans.
  3. Deficit-neutral and costless for families at or below median income: The plan redeploys current tax subsidies more evenly across the income distribution, and uses existing Federal payment infrastructure, avoiding a negative impact on the budget.
  4. Guaranteed lifetime income: Upon retiring, savings will be returned through life-long payments, guaranteeing a continuous standard of living as long as retirees live.
  5. Bipartisan appeal: This model keeps accounts under personal control, distributing savings based on the amount invested, not based on income, and without impacting the budget or raising taxes. 

The publication of the book coincides with the launch of a website dedicated to the plan and its promotion, rescuingretirement.org, and a social campaign driven by the hashtag #fixretirement on Twitter and Facebook. “This book should be required reading for everyone concerned with how Americans will fund their retirements and makes a compelling case that it should include us all. It is an important conversation starter in an area that will only get more relevant in the years to come,” said Austan Goolsbee, Former Chairman, White House Council of Economic Advisers.

“At a moment when America's retirees are caught in the middle of a political tug-of-war, James and Ghilarducci offer a new way forward. Rescuing Retirement proposes a provocative yet practical solution to America's pending retirement crisis,” said Alan Krueger, Professor of Economics, Princeton University and Former Chairman, White House Council of Economic Advisers.

“Our retirement system is broken – if we do not take action, America will face rates of poverty among senior citizens not seen since the Great Depression,” said Teresa Ghilarducci. “Our Retirement Savings Plan is a pragmatic solution that includes no new taxes, will not increase the deficit, and intelligently integrates into existing infrastructure to address this massive issue that cuts across all demographics.”

Said Hamilton “Tony” James, President and Chief Operating Officer of Blackstone: “If the country acts now, we can solve this problem, and solve it relatively painlessly for everyone. Our plan is a simple, sustainable, low-cost and politically viable proposal to enable workers to save and invest more effectively to secure their retirement.”

“Clear, thoughtful, and engaging. This book is a must-read for future retirees, policymakers, and anyone concerned with our nation's future,” said Christian Weller, Senior Fellow, Center for American Progress.

“We may have philosophical differences, but the plan put forth by Teresa and Tony provides a bold, refreshing approach to modernizing America's retirement infrastructure,” said Bill Jansien, CEO, StoneHedge Global Partners and member, Federal Retirement Thrift Investment Board.

The publication of this book follows the authors’ March 2016 white paper published by the Schwartz Center for Economic Policy Analysis (SCEPA) at the New School, “A Comprehensive Plan to Confront the Retirement Savings Crisis,” and their January 2016 New York Times op-ed, “A Smarter Plan to Make Retirement Savings Last,” in which they wrote, “Our plan would guarantee millions of Americans safe and secure retirements that would benefit them, their families, and the nation’s economy.”

nancy pelosi and rescuing retirementOn Tuesday, September 20, 2016, POLITICO's Ben White hosted co-authors Teresa Ghilarducci and Blackstone President Tony James for a "Cocktails and Conversation" event featuring their new book, Rescuing Retirement.

The event welcomed representatives from the media, government, industry, non-profits and advocacy groups as stakeholders in the need to solve the retirement crisis. Ghilarducci and James, left, shared their book and proposal for Guaranteed Retirement Accounts (GRAs) with House Minority Leader Nancy Pelosi.

Ghilarducci and James are working to lift up the efforts of 27 states working to provide a retirement plan for all Americans. The GRA would provide all workers with a safe place to earn higher rates of return than in a 401(k) and ensure workers a stable income for the rest of their lives. 

Teresa Ghilarducci, economist and director of The New School’s Retirement Equity Lab (ReLab), and Hamilton “Tony” James, president of Blackstone, have combined their academic and business expertise to advance a powerful reform idea—Guaranteed Retirement Accounts (GRAs). Outlined in their new book, Rescuing Retirement, GRAs are individual retirement accounts that would provide universal coverage, low fees, and professional investment management.

 

“Older Workers at a Glance” Provides a Full Picture of the Labor Market for Near Retirees  Tweet: New #JobsReport: “Older Workers @ a Glance” Full picture of labor market for 55+ w/inadequate#retirement savings http://ctt.ec/k6f7y+ width=

The historically low headline unemployment rate for older workers - 3.5% in August according to today’s BLS jobs report - is frequently cited as evidence that people can can continue to work if they have inadequate retirement income.

However, the official unemployment rate overstates the strength of the labor market for older workers. For example, an increasing share of older workers are in “bad jobs” - 29.1% in July 2016 compared to 27.0% in July 2006 - that pay less than two-thirds of the median wage (which was $880 per week last month).

To provide a full picture of the reality older workers face in the job market, we are introducing “Older Workers at a Glance.” This one-of-a-kind feature reports key labor market statistics (described below) for workers over 55 as a supplement to our monthly analysis of market trends.

This documentation seeks to provide for a more informed discussion of the policies needed to address the retirement crisis and the resulting downward mobility of workers after a lifetime of work. Rather than cutting Social Security benefits by raising the retirement age, we need to ensure all workers a viable path to retirement security through Guaranteed Retirement Accounts on top of Social Security.

 


 

Older Workers at a Glance Dashboard Headline and Total Unemployment Bad Jobs Labor Force Participation Weekly Earnings No Pension Image HTML map generator

 


 

Older Workers in Bad Jobs

 


 

 

Headline and Total Unemployment for Older Workers

 


 

Labor Force Participation for Older Worker by Sex

 


 

Median Wages for Older Workers

 


 

Pension Coverage for Private Sector Workers

A Lifetime of Stagnant Wages for the Middle Class Makes it Harder to Save for Retirement Tweet: A Lifetime of Stagnant Wages for the Middle Class Makes it Harder to Save for Retirement #JobsReport http://ctt.ec/i38y0+h width=

The July unemployment rate for workers over 55 is 3.7%, an increase of 0.2 percentage points from last month. Although unemployment is low, older workers’ earnings have not increased since the end of the Great Recession in June 2009. As we discussed last month, this indicates a weak labor market.

Annual Real Wage Growth for MenFor most workers, this reflects a continuation of the labor market conditions they experienced over their working lives. Between 1979 and 2015, increasing wage inequality contributed to wage stagnation for workers aged 25-54. Over this period, average real earnings increased by 1.4% a year for men in the top 10% of the income distribution, but only increased by 0.1% a year for the remaining 90% of men.

Wage stagnation makes it harder for workers of all ages to start or increase saving for retirement. Without a raise, workers can only increase saving by reducing their current level of consumption.

Reflecting the many challenges workers face when saving for retirement, our analysis of Survey of Consumer Finances data shows that only 52.4% of working households ages 55-64 have any type of retirement savings plan. For those households participating in a 401(k) plan, the median retirement account balance is a mere $111,000.

Guaranteed Retirement Accounts (GRAs) will ensure that workers’ sacrifices are rewarded. Fees are kept to a minimum, ensuring that workers benefit from investment returns. And at retirement, workers will receive a guaranteed lifetime income rather than having to gamble on not outliving their savings.

And at retirement, workers will receive a guaranteed lifetime income rather than having to gamble on not outliving their savings.

Unlike Prior Recoveries, Older Workers Face Wage Stagnation After the Great Recession Tweet: Unlike Prior Recoveries Older Workers Face Wage Stagnation After the Great Recession http://ctt.ec/t8UDd+ https://pic.twitter.com/RzC9tIJcuh width= 

The unemployment rate for older workers was 3.5% in June, increasing by 0.1 percentage points from May. The wage growth in June for older workers is not released today. According to conventional economic theory, a low headline unemployment rate is associated with rising wages. But unlike prior economic recoveries, older workers’ earnings stagnated in the five years after the Great Recession.

Older Worker Wage Stagnation Between 2010 and 2015, workers over 55 with full-time jobs experienced a decline in median real weekly earnings (-0.8%). In prior recoveries, older workers experienced high earnings growth. In the five years after the 2001 recession, earnings grew 2.3%, 1.0% in the five years after 1991, and 5.9% after the 1982 recession.

Wage stagnation can indicate a weak labor market and low bargaining power, even when headline unemployment is low. And while it affects all workers in today’s labor market, stagnation especially harms older workers.

The average household approaching retirement has retirement savings of only $150,000. In retirement, this sum will only provide $500 a month in income - far short of what’s needed to maintain retirees’ standard of living. However, near retirees' need to prioritize savings is hamstrung by stagnant wages, forcing them to choose between cutting pre-retirement consumption or arriving at retirement with insufficient savings.

America faces a retirement crisis brought on by poorly designed retirement plans and compounded by wage stagnation. Cutting Social Security benefits by raising the retirement age would further erode retirement security. Americans need a reliable way to save for retirement in addition to Social Security. Guaranteed Retirement Accounts (GRAs) open a path to retirement security by providing all workers retirement savings plans with guaranteed growth.

On June 15, 2016, Tony Webb, director of research at SCEPA's Retirement Equity Lab (ReLab), presented a SCEPA report on Philadelphia's retirement crisis before the Philadelphia City Council Committee on Labor and Civil Service. The report, "Are Philadelphians Ready for Retirement?," was done on behalf of Philadelphia City Councilwoman Cherelle L. Parker and the City Council of Philadelphia. Following the hearing, Councilwoman Parker announced plans to introduce a resolution calling for the creation of a task force to address retirement security for private-sector workers in the city.

Workers across the country face a retirement crisis. However, workers in Philadelphia are faring worse than average. 

Philly sponsorship charts
Key Findings:

  1. Philadelphia’s senior citizens are more likely than senior citizens nationally to rely on Social Security for more than 90% of their retirement income.
  2. Only 48 percent (less than half) of all Philadelphia workers ages 25-64 had access to an employersponsored retirement savings plan, compared with 53 percent of workers nationwide.
  3. Only 37 percent of Philadelphia’s workers ages 25-64 participated in an employer-sponsored retirement plan, compared with 45 percent nationwide.
  4. The median near-retirement household in the state’s metropolitan areas had enough financial assets to generate at most $550 a month in retirement income.