The Value Gap is a MarketWatch interview series with business leaders, academics, policymakers and activists on reducing racial and social inequalities.
Teresa Ghilarducci thinks older adults shouldn’t have to work in retirement. She wants people to stop feeling shame about the size of their retirement accounts, and envisions a “Gray New Deal” that creates job and pension improvements for older Americans.
But Ghilarducci is also a professor at the New School for Social Research and an expert on retirement security who explains complicated subjects in an accessible way. She has authored several books and papers, and her latest book, “Work, Retire, Repeat: The Uncertainty of Retirement in the New Economy,” talks about how employees are laboring in the broken U.S. retirement system.
As American society urges people to work longer, this takes a disproportionate toll on middle- and lower-income people who may not have the ability to work longer in physically demanding jobs, Ghilarducci told MarketWatch in an interview.
Fifty percent of women and 47% of men between the ages of 55 and 66 have no retirement savings, according to the Census Bureau.
Ghilarducci calls for a Gray New Deal as a public-policy imperative. Today’s do-it-yourself retirement system — in which workers fund their retirement through 401(k)s, savings and sheer grit — is not working, she said. This interview has been edited for length and clarity:
MarketWatch: You’ve written several books. What did you still want to say in this new book?
Ghilarducci: My other books really focused on how to have enough money for retirement. This is a different subject about the policy push to work longer. We have a retirement crisis that’s a complex problem and expensive to fix. People retreated to the safe place that we can’t fix it. They say, “We have to work a little longer,” and that’s the solution.
My experience with the rest of the world was that they did not have this sense that working longer was the solution. Other countries have 25- to 30-year work lives and have a dignified old age. This working-longer idea robs us of a dignified old age, which we deserve. There’s a cost to our bodies and our lives in working longer.
MarketWatch: Can you talk about the Gray New Deal, what it entails and how insurmountable it may be to see it come to fruition?
Ghilarducci: We have a responsibility to rethink how people work and retire from that work. If you do not ignore the retirement period — people are entitled to retire — there’s got to be new ways to think about it. It has to be part of public policy. It has to be as encompassing as the original New Deal. Ninety percent of workers have no problem embracing this idea of retirement, but 53% of retired people when surveyed say they didn’t choose when to retire. They were laid off or their bodies wore out. Workers get it that they won’t be able to work until they’re 62, and working to 70 is nearly impossible for most.
Policy makers, meanwhile, have better, easier jobs. No one’s telling them what to do — they are telling other people what to do. It makes them a bit unsympathetic. But if they hear enough from workers — there’s lots of support for Social Security. I’m hopeful.
MarketWatch: The demographic bubble known as Peak 65 is happening this year, with a historic number of people turning 65. What will this mean for society, the economy and our culture?
Ghilarducci: Peak 55 happened 10 years ago, and people got really nervous about their retirement savings. Now it’s Peak 65, and all illusions about what’s possible are gone. There will be 35 million people realizing that their work lives are over and the money won’t stretch. We’ll have a sea change in views on Social Security. There’s no stomach among voters for benefit cuts. There’s a bill in Congress — from [Democratic Sen. John] Hickenlooper, [Republican Sen. Thom] Tillis, [Democratic Rep. Terri] Sewell and [Republican Rep. Lloyd] Smucker — that calls for a government match. It gets the individual employer out of it and focuses on the worker and the government.
Peak 65 shows me that the population is aging, and older people vote. There’s also an electorate that’s younger, and they support Social Security. They’re struggling with student debt and they are financially sophisticated. They’re learning about compound interest in high school. There’s a groundswell of concern about their parents. There’s also women in their late 40s and 50s who are having to take care of older parents. Not only are they taking care of older parents, but a lot of the care costs are coming out of their own retirement savings. They’re also giving a lot of their own time to provide care that they could be using for work, making more money and providing for their own security, and they’re not.
MarketWatch: Does increased longevity mean increased senior poverty?
Ghilarducci: We started charting higher levels of increased poverty years ago — millions of people living in de facto poverty. As the numbers of people go up, the rate and number of people in poverty will go up. The ghoulish good news is that people living in poverty don’t live as long. There’s a real inequality in longevity, in that the people with means are living longer. That inequality is real.
MarketWatch: In your book, you talk about how working longer weakens political pressure to expand Social Security and employer retirement plans. How so?
Ghilarducci: It could cost $1 trillion to bring Social Security up to full benefits. It would be spread out over decades, but it’s still a lot of money. Workers and employers have to set aside money for retirement. Workers also have to pay for emergency savings, housing, student debt. The urgency on the retirement crisis dissipates when people say everyone can work more years, and by working for more time, they won’t draw on Social Security. But that’s like saying, “Hey, we can afford lunch by not having lunch.” And people can just work longer? That’s not realistic. There’s a push to have everyone in the labor pool and a spate of work to end age discrimination. But a lot of that is turning the other way.
It’s also psychological — people making policy didn’t want to think of themselves as useless and facing mortality. It’s appealing to human beings: Never say die. The do-it-yourself retirement system is false that one can do it themselves. There’s this shame that you didn’t save enough. We’re a country of very old baristas — people are doing jobs that are a lot less than they had before because they have to.
But I think people are rising up. People are angry and empowered. There’s all sorts of ways to do that — vote for politicians who pay attention. It’s hard to talk to 55-year-old women who have no retirement. They should be angry.
MarketWatch: What do you see happening to Social Security in 10 years as the trust funds supporting it hit insolvency?
Ghilarducci: Social Security is purely a political problem. The country could afford to put more money into the system. We could have a 3-percentage-point increase in payroll tax. It wouldn’t mean job displacement or funding taken away from other groups. It’s not an economic problem. It’s a political problem that will be solved at the last minute, which will make it even more expensive. Any cuts to Social Security will mean more poor older adults. The last time there was a crisis, in 1983, we went to the brink. This time, I think politically there is the will to get something done because no one wants to see benefits cut.
MarketWatch: Will you ever retire? And what will that look like?
Ghilarducci: I have one of the strangest jobs in the U.S. I’m like a medieval priest or something. I have an endowed chair and I’m tenured. I have no supervisor. I have a really rare job. I’ll only retire when my body or my mind gives out. I’m not typical. And those of us with atypical jobs — and policy makers are not typical — we need to be more humble and realize we are not representative of most people.
MarketWatch: What’s the one lesson you want people to take away from your new book?
Ghilarducci: I want people to realize that they deserve retirement and a dignified retirement. It’s not shameful if they haven’t been able to save. It’s not because they got a divorce or had too much avocado toast in their 20s. It’s not their fault. Every American deserves a retirement, and working longer is not the solution.