We live in precarious times, both for those nearing retirement and for those already in their 60s, 70s and beyond, struggling to piece together funds to cover living expenses. It is alive.
Teresa Ghilarducci, a labor economist, professor at the New School for Social Research and an expert on retirement security, said, “In the past few decades, older people have been 'retiring' in poverty. “Whether they were living there or working for a living, they were never kind.” She is the author of the new book Work, Retire, Repeat: Retirement Uncertainty in the New Economy.
“The myth of a happy, healthy older worker masks a clear reality: Millions of Americans must spend their retirement years struggling to survive,” she said. writing. “The time has come when people will have to work even after they are old.”
Almost half of all U.S. households have no retirement savings, she added. “This humanitarian and economic crisis is coming to a boil.”
read more: Planning for Retirement: A Step-by-Step Guide
Here she talks about America's broken retirement system and why working longer is not the answer to financial security in old age. Edited excerpt:
kelly hannon: Teresa, one of the things I've always loved about your work is that you look at the world from the bottom up. Can we talk?
Teresa Ghilarducci: I think it's because I grew up at the bottom. I grew up with a single mother and worked throughout my childhood. When we care about working-class lives and home security, it comes down to what people do in retirement. From personal experience, I have always looked at it from the perspective of the workers and the poor.
How is our retirement system broken?
A 40-year experiment with the DIY model in America's pension system is failing. For example, the median retirement account holdings of all workers ages 55 to 64 is only $15,000, but the average worker needs her $600,000 to supplement Social Security and maintain their standard of living. is. The bottom 50% have nothing and need $300,000. Next he needs $600,000 while she has $60,000 for 40%. The top 10% need at least $1 million, but have $200,000.
The DIY model means that workers and their employers can decide whether to set up a workplace retirement account. It is up to the employer whether to sponsor a 401(k), and it is up to the worker whether to participate in the 401(k).
All decisions will be made by the worker, which means that the worker will bear all the risk of not putting in enough, or if financial markets do not give the return that the worker expects. It means that.
What's broken about this system is that your 25-year-old niece or nephew starts saving 7.6% of her salary paycheck to paycheck, leaves it alone for 42 years, invests it optimally, and then how does she take it out? Because it depends on whether you come up with it or not. That's not possible, but that's what the system demands.
I always advocate for people to work as long as possible. On paper, it looks like I'll be able to work for a few more years. But you don't agree. Elaborate?
Now, work is the new pension.
The assumption is that people won't drain their 401(k)s even if they work a little longer. And they will continue to save and delay claiming Social Security. In reality, low-income and middle-class people collect Social Security benefits as soon as they turn 62 and do not save the income they earn from work.
Most older workers do not receive any pension. And less than 10% of Americans will wait until age 70 to receive delayed retirement benefits.
Even in their late 60s and 70s, there are very few people who work purely for pleasure. More and more people are working because their retirement income is low and unstable. Therefore, policies must be directed towards that majority. And you need to lower the temperature of excitement about the extraordinary work of seniors.
In fact, the reason your retirement benefits become cheaper when you work longer is simply because your retirement benefits become smaller. It's like skipping lunch to make it more affordable.
I challenge the idea that people should work longer to compensate for inadequate pensions. All adults should be able to work if they wish, but the terms and conditions of their work are important. Working because you “have to” and working in a good alternative position can yield very different results in terms of pay, conditions, and dignity.
But from an economic perspective, there's more to this than that.
Persuading older people without pensions to seek employment and accept any job offered tilts the bargaining power in favor of employers.
Older workers with insecure and inadequate retirement plans have less leverage when looking for a job or accepting an offer. Poor pension quality reduces bargaining power. Reduced bargaining power means there is less pressure on employers to improve working hours, wages, and working conditions.
You write that class is really important. Could you please break that down for me?
When you look at how people live on average in retirement, or how much their 401(k) accounts have grown, you can see that the reality of America's retirement income security is actually hidden. Masu.
That's because the average is actually driven up by the top 10% who performed great under our system. They keep putting money into their accounts. They have forced employers to spend a lot of money and get the maximum tax breaks from the government. They were able to keep their money even when the stock market was down. They could buy stocks at low prices and accumulate them. And our service has never been interrupted. Therefore, they did not have to withdraw money from their account.
They are doing very well and are approaching retirement with savings of $1 million to $3 million. But for each of them, there are hundreds of people who had a 401(k) and had to drain it. It contains almost nothing. Or some people have never earned anything at all because they've worked as a gig worker or temporary worker, or in an industry where their employer doesn't offer his 401(k).
read more: How much can you contribute to your 401(k) in 2024?
Why should I be ashamed of my retirement?
There are people in our society who take pride in being able to work and afford their retirement. However, many of us are ashamed of not working. And that contributes to the American style of retirement, where people stay busy and declare they're busy.
If they can't afford to retire, it breeds more shame, and shame breeds depression and inaction, making the problem even worse because they don't show some kind of anger or urgency at the ballot box.
Please tell us about your “Gray New Deal”
We don't realize how much of a financial partner the federal government is to us. We need to support expanding Medicare for hearing aids, vision, and long-term care, and we need to make sure more revenue goes into Social Security.
My Gray New Deal has three elements.
We must ensure social security. This is the basis of social insurance for the bottom 90% of workers. So we need to put more revenue into Social Security and stop talking about cutting Social Security. Retirement age should not be raised. We should not tax Social Security benefits any more. Social Security should be increased, even if it's only $200 a month.
The next thing we need to do is make sure everyone has access to a real retirement plan. It's not something you can withdraw money from. And we need to automatically bring in talent.
The third thing we need to do is actually insure our medical and long-term care costs. We need to expand Medicare, lower the Medicare retirement age to 55 or 60, and make older workers the first payer to make them more attractive to employers.
Lowering the Medicare eligibility age would allow older workers who have been pushed out of the labor market to buy health insurance, and employers would be able to enroll older workers with first-payer insurance before they reach Medicare age. The cost of hiring becomes cheaper.
Are there other policy changes that could help people who need money keep working?
Raising the minimum wage would help increase compensation for older workers in low-wage food service, retail, and caregiving jobs. More unions will lead to improvements in the service industry. Actively tackling age discrimination would give older workers more bargaining power.
And it is truly important to create an Office of Older Workers in the Department of Labor to develop standards and policies to promote the welfare of older workers, improve their working conditions, and promote gainful employment opportunities. Is required.
Economists predict that more than 6 million jobs will likely be added to the U.S. economy by 2026, and more than 4 million of those jobs will be held by workers age 55 and older.
There are many older workers.
Kelly Hannon is a senior columnist at Yahoo Finance. She is a career and retirement strategist and the author of 14 of her books, including “The World's Best.''Taking Control Even Over 50: How to Succeed in the New World of Work.” and “You’re never too old to get rich.” Follow her on X @Kellyhannon.
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