I am honored to be named as one of Next Avenue’s 2016 Influencers in Aging for my work to reform our broken retirement savings system by giving every American a Guaranteed Retirement Account. Each year, the Influencers in Aging list recognizes 50 thought-leaders at the forefront of changing how we age and how we think about aging. Influencers are leaders in improving the lives of older adults and their families and communities.
I'm honored to join experts from business, labor, and academia on Philadelphia’s Task Force on Retirement Security for Private Sector Employees. Chaired by Councilwoman Cherelle Parker, the 16-person group is charged with issuing a report to the Council recommending policy solutions to address the city’s retirement crisis.
In 2016, SCEPA produced a report for the City Council at the request of Councilwoman Parker describing the retirement crisis in Philadelphia. It found that only 47% of Philadelphia’s workforce has access to a retirement plan at work, compared with 53% of workers nationally. Philadelphia’s seniors are more likely to be poor or near poor, with 50% having incomes below 200% of the poverty line, compared with 31% nationally.
Philadelphia is the latest in a series of cities and states to recognize and confront the retirement crisis. I sit on a similar commission for New York State and has been asked to advise on plans in some of the 29 states that have proposed or implemented retirement reform in the past five years.
Philadelphia is not waiting for the federal government to act on the upcoming retirement crises. At SCEPA, we have found the average 401(k) and IRA balance for older workers is $14,500 and half the workforce does not have access to a retirement plan at work. Middle class retirees risk working into their 70s or living an impoverished retirement. We hope to help all Philadelphia workers retire by contributing to a professionally managed, low fee retirement account that pays a pension for life.
In the absence of federal action, cities and states have taken the lead in proposing solutions to the retirement crisis. But to provide everyone a viable path out of the retirement crisis requires a national solution. I propose Guaranteed Retirement Accounts -- mandatory, universal savings accounts with a guaranteed rate of return -- as the best way to ensure that everyone can retire with dignity.
Edward Wolff, an economist at New York University (NYU) presented his latest paper, “U.S. Pensions in the 2000’s: The Lost Decade” on October 14, 2016 as part of the Economics of Aging speaker series. His work examines trends in pension, total wealth, and wealth inequality between 1986 and 2010, a period during which 401(k) plans largely displaced traditional defined benefit retirement plans in the private sector.
Presentation: U.S. Pensions in the 2000's: The Lost Decade
The Political Economics of Aging speaker series is a forum for academics and practitioners to share and engage in cutting edge research in social policy and the political economy of aging. The series is designed to forge interdisciplinary connections and examine how to progressively manage an aging society. The series is sponsored by SCEPA's Retirement Equity Lab, led by myself and Tony Webb.
The event was free and open to the public.
This morning’s job report from the Bureau of Labor Statistics (BLS) calculates a 3.6% unemployment rate for workers age 55 and older in September, an increase of 0.1 percentage points from August. Given this low rate, the labor market for older workers appears healthy. However, if we include all those over 55 who reported in August they would like a job, more than 1 in 10 were either unemployed or underemployed.
The 3.6% headline unemployment rate, referred to as U-3 by the BLS, includes only workers who actively sought work last month. The BLS also reports U-6 for all workers, a broader definition of unemployment that also includes those who looked for work within the past year or worked part-time while wanting full-time jobs. However, this still misses the “hidden unemployed,” those who would like a job but gave up looking more than a year ago. Since the BLS doesn’t compute this number, we use the latest available Current Population Survey (CPS) data from August to calculate an unemployment rate that includes the hidden unemployed, which we call U-7.
The BLS reports an August headline U-3 unemployment rate for older workers of 3.5%. Using CPS data, the same data used by the BLS to calculate U-3, we calculate the broader U-6 measure at 8.7% for workers over 55, and our inclusive U-7 rate at 11.1%. U-3 represents 1.3 million older Americans who looked for a job in the month of August, U-6 includes an additional 425,000 people who looked for work within the last year and 1.4 million who worked part-time while wanting full-time work, and U-7 includes an additional one million hidden unemployed.
Many discouraged older workers give up looking for a job and involuntarily retire. However, early retirement is far from a panacea. First, retiring early means lower monthly Social Security benefits. Second, because households nearing retirement have a median of only $12,000 in retirement savings, early retirement increases the risk of downward mobility and old-age poverty.
With more than 1 in 10 older workers either unemployed or underemployed, delaying retirement is not a solution to the failings of the retirement savings system. Guaranteed Retirement Accounts (GRAs) provide a mechanism to ensure workers save throughout their careers and insure against the risk of old-age poverty due to job loss.
Book Draws Praise from Two Former Chairmen of White House Council on Economic Advisors
Economist 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:
- Universal coverage: Every American worker would have their own Guaranteed Retirement Account, ensuring consistent retirement savings throughout their career.
- 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.
- 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.
- Guaranteed lifetime income: Upon retiring, savings will be returned through life-long payments, guaranteeing a continuous standard of living as long as retirees live.
- 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.”
On 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.