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.

The Bipartisan Policy Center's (BPC) Commission on Retirement Security and Personal Savings, of which I am a member, today released its comprehensive report on retirement security.

Today's recommendations are both a recognition of an awaiting crisis and a sign of hope for a better future.

Without changes to our failed system, a growing number of Americans will ride a wave of insufficient savings to deprivation in their old age. More than half of American households who are near retirement have less than $12,000 saved. The number of 65-year-olds per year who are poor or near poor between 2013 and 2022 will increase by 146%.

This report takes the first steps toward reform by recognizing the principles necessary to create effective retirement savings vehicles. The Commission's call for Retirement Security Plans to pool resources and decrease administrative burdens supports the need for economies of scale and universal access. The call to expand myRA and create a nationwide minimum-coverage standard supports the need for mandated participation and a shared responsibility between employers and employees. The call for a lifelong income plan supports the need for annuities to ensure seniors don't outlive their savings.

state innovation graphicGrowing inequality has made retirement increasingly available to only a few. We need a federal plan that serves everyone. With 27 states actively pursuing retirement reform, these leaders have made it clear that the political will for change exists. Historically, we have relied on state innovation to spur federal action. As with Social Security and healthcare (see image), this report recognizes that federal legislation is necessary to provide employers and employees consistency and portability across states.

The Commission recognizes the failure of our current system and sets us on the right path to reform. However, it does not claim these recommendations, even if fully implemented, will solve the retirement crisis. I look forward to taking the next steps toward comprehensive reform through supporting Guaranteed Retirement Accounts (GRAs). A joint policy proposal issued with Hamilton "Tony" James of Blackstone (from the diverse backgrounds of academia and investment banking), GRAs would provide savings accounts that advance the same principles in the Commission's report. By creating individual accounts on top of Social Security with mandated contributions from both employers and employees, these accounts would pool investments, guarantee a return, and provide lifelong annuity payments.

The report also put forward reform measures for Social Security. I made a joint statement with my fellow commissioner Alan Reuther on Huffington Post, "A Better Way to Fix to Social Security," to discuss our disagreement with some of the recommended policies. 

I thank the Bipartisan Policy Center for their hard work supporting the commissioners throughout the two-year effort that created today's report by the Commission on Retirement Security and Personal Savings. I also express my gratitude and appreciation to my fellow commissioners for their tireless efforts on behalf of American's retirees, present and future.