Book CoverOn November 21, 2015, Institutional Investor published Mark Henricks’ review of my new book, “How to Retire with Enough Money and How to Know What Enough Is” (available December 15th). He describes the book as a basic guide to retirement security for low- and middle-income earners, containing the standard prescriptions (save early, save often, and delay taking Social Security until you’re 70) while offering much more.

Specifically, Henrick calls the guaranteed retirement account (GRA) proposal my “primary intellectual contribution to retirement planning.” GRAs are nationwide mandatory savings plans to which workers and their employers would split a contribution of at least 5% of their income. Funds would be pooled and invested in low-cost index funds, managed by the federal government.

GRAs are the solution to what Henricks identifies as the big takeaway from the book: the failure of the “do-it-yourself” retirement savings experiment of the past 35 years. When people are left to rely on employer-sponsored retirement accounts - to which only half the workforce has access - they don’t save enough. Most Americans over age 50 have less than $30,000 in their retirement accounts. This trajectory leaves half of Americans with a food budget under $5/day in retirement.

Ordinary savers aren’t to blame, given the one-two punch of wage stagnation coupled with the complexity of long-term planning in the 401(k) system. Rather, the lack of retirement savings is a systemic failure with a simple and straightforward policy solution: GRAs.

Eduardo Porter summarizes his point in today's Economic Scene column in the New York Times when he states, "Tax expenditures die hard."  As an economist, I have long called for reform, working to raise the issue during the many deficit commission and budget negotiations since the 2008 recession took over the nation's headlines. As Porter correctly notes, a little sunshine on tax expenditures could be a game-changer in terms of who gets what from Washington.

Porter echoes my argument that tax expenditures are both inefficient and regressive through his analysis of the lopsided effects of $1.1 trillion in tax breaks that are designed to promote social policy - like housing, medical insurance and retirement savings- but operate through the back door of the budget. Because these tax breaks – or foregone tax revenue – never see the light of day in a budget hearing or as part of the annual appropriations process in the U.S. Congress, it often goes unnoticed that they don't work.

In October of 2015, SCEPA co-hosted "How Can Tax Reform Address the Income Retirement Crisis?" with the Center for American Progress. We discussed the erosion of American's retirement security and how the tax code can be used to encourage retirement savings. SCEPA has also gone directly to Capitol Hill, holding a briefing for lawmakers, their staff and advocates in October of 2010. David Walker, former Comptroller General of the U.S., called for the need to implement statutory budget controls that address tax preferences, and and Eric Toder of the Urban Institute presented data supporting the fact that the well-off are more likely to benefit.

Retirement savings tax breaks are particularly lopsided. Rather than increasing retirement plan coverage and savings rates, most of these subsidies go to high earners who already have adequate retirement savings and can simply shift savings to tax-favored accounts. A 2005 GAO report cites research showing that no more than 9% of savings under the IRA tax expenditure are new savings engendered by the program. Taxpayers in the highest-earning 20% claim nearly 80% of the total benefits of entitlement programs for retirement accounts. If the total sum of these tax breaks were turned into tax credits, every taxpayer would receive $600 per year.

This behind-the-scenes tradition trickles down to the states. With little fanfare or acknowledgment, many states pass through these tax breaks. In Connecticut, New York and California, a credit would yield an extra $53, $158, $145, respectively. This means that on top of a federal tax credit, taxpayers in New York could receive as much as $758 per year to contribute to their retirement account. This may not sound like much, but it would be seed money for the workers who need it most: those that have little to no retirement savings.

I have been working with Christian Weller from the Center for American Progress (CAP) on how to improve the federal government’s system of retirement savings incentives. On October 30th, we published a paper on The Inefficiencies of Existing Retirement Savings Incentives and hosted an event with academic and political experts to discuss the issue in depth. On November 18th, we released another paper on Laying the Groundwork For More Efficient Retirement Savings Incentives that contains proposals for reform.

The federal government’s current policy to encourage retirement savings in the tax code is both inequitable and inefficient. The wealthy have higher marginal tax rates and therefore benefit more from tax deductions than the poor and middle class. Furthermore, research has shown that wealthy households would save anyways, and the tax deductions just encourage them to shift their savings into retirement accounts to lower their tax bill.

We suggest a simple set of reforms to make the federal government’s retirement savings incentives more fair and effective. First, the tax code should prioritize refundable tax credits over tax deductions. Second, the Saver’s Credit should be made fully available to low income households. Third, there should be a universally available, simple, low-cost, and low-risk vehicle for people to save for retirement outside of employer sponsored retirement accounts.

The AtlanticIn “A Missed Business Opportunity: Senior Centers That Are Actually Fun,” I suggest that more and better senior centers are not only an untapped market for entrepreneurs, but also cost-effective for government.

In the U.S., there are about 5,000 adult-daycare centers for a quarter of a million seniors. The remainder of the 40 million Americans over age 65 are a large and unserved market.

The services offered to Japan’s seniors represents the possibilities in the U.S. Last year, 60 casino-themed senior centers opened in Japan, reflecting a desire for “adult” entertainment. The owner of one new casino told the Financial Times that most centers are “too childish.”

More adult-daycare facilities and increased participation could also ease financial pressure on Medicare. At such facilities, seniors are often in constant contact with professionals, who may notice symptoms before they become serious, preventing costly emergency room visits and hospital stays.

The U.S. has three types of adult-daycare facilities: social, medical, and specialized. Medical and specialized centers focus on rehab and managing conditions like Alzheimer’s and Diabetes. Social centers provide a hub for seniors to connect for meals and recreational activities. Both seniors and the insurance companies that pay for their care would prefer more of all three kinds of adult daycare centers.

Perhaps we have a new use for Atlantic City’s abandoned casinos!

Kim Clark from Money Magazine interviewed me for her article, "How to Solve America's Retirement Crisis." We discussed how America’s current retirement system is failing, evidenced by declining coverage rates and traditional pension plans, as well as the high fees associated with 401(k)-type plans.

Fortunately there’s a lot we can do about this, both as individual savers and through government policy. In the article, I go into specifics, but for the long-term, we need Guaranteed Retirement Accounts to ensure retirement security across the board.

On Wednesday, November 18, 2015, I joined the Economists for Peace and Security's Symposium on Inequality, Austerity, Jobs, and Growth. The symposium featured a keynote address by Sarah Bloom Raskin from the Treasury Department.

My presentation was part of the first panel, "Jobs, Growth, Wages, and Inequality: What's the Agenda?," along with Allen Sinai (Decision Economics), Stephen Rose (Georgetown), and Heather Boushey (Washington Center for Equitable Growth and a New School Economics PhD). The two other panels were on austerity and growth, and economics and global security, and will include Stephanie Kelton (Senate Budget Committee), Mike Konczal (Roosevelt Institute), and Josh Bivens (EPI), among many others.

Economic growth can be a rising tide to lift all boats, so we are told. Advocates for cutting Social Security benefits by raising the retirement age imply that economic growth will create jobs for older workers left to work longer. But the data debunks this myth: America’s fastest growing cities have the highest rates of unemployment for older workers. Tweet: America’s fastest growing cities have the highest rates of unemployment for older workers @tghilarducci #JobsReport

chartNationally, this morning’s job report from the Department of Labor reported an October unemployment rate of 3.5% for older workers (aged 55-64). But in the 10 cities with the highest gross metropolitan product (GMP) growth in 2014, the numbers are worse, with 5.6% of older workers unable to find jobs, as compared to a metropolitan average of 4.0%.

Economic growth is not a quick solution to the difficulties faced by older workers who can’t afford to retire. Why? The factors that drive economic growth – a booming tech and finance sector, for example - don’t necessarily produce jobs for older workers. In fact, industry specialization - a key driver of growth - could explain why older workers struggle in booming cities.

The 10 cities with the highest growth in output, over 5.5%, have a higher demand for technology jobs and significantly higher demand for finance, insurance and real estate jobs than the national average. For example, Austin, Texas, and San Jose, California, are home to expanding technology sectors, but recorded unemployment rates for older workers of over 12%. If high growth becomes dependent on jobs requiring knowledge of cutting-edge software at a time when firms are less willing to train workers, older workers will continue to be at a disadvantage in the labor market.

Instead of raising the retirement age, consigning older workers to an unfriendly labor market and increasing risk of old-age poverty, Americans need Guaranteed Retirement Accounts (GRAs), a reliable and effective method to save for retirement.