STUMP » Articles » Meep Picks Apart: Teresa Ghilarducci on Working Longer » 20 January 2020, 11:38

From Teresa Ghilarducci: Working Longer Is A Lame Answer For Failing Pensions

Today, I am going to be fisking this piece. If you want to understand my motivation, skip to the bottom of my post. Or check out this video in which I explain my highest value.

Here we go:

CLAIM THAT REPORTERS ARE NOT NEGATIVE ENOUGH ON OLDER WORKERS

It’s a journalism cliche that reporters always highlight the bad: they never write about the planes that don’t crash or the companies that don’t lie and cheat. But the topic of working into old age seems to be one of the most consistent exceptions. Most every example of journalism about working longer is of someone for whom working in their 70s, 80s, 90s is full of joy; everything has gone right!

Often these stories have not a single proviso that working longer in a nice job—a job that doesn’t break down health and spirits or take away from important end-of-life leisure—might be a scarce privilege that class status affords.

Okay, I would like to know how deep a dive into journalism of people working into old age she did.

I just did this google news search on “working into old age”. The top results are not positive about working longer into old age.

It’s amusing to me the top item is from France, about people working past age 65 in the U.S.

Obviously, her own piece comes up. Let me push the news search into the past year. Okay, this bright sunny piece popped up: Boomers in the next decade: Working longer, living better

Let’s see what the bright, sunny piece has to say:

Within 10 years, all of the nation’s 74 million baby boomers will be 65 or older. The most senior among them will be on the cusp of 85.

…..
Living better, longer. Could extending “healthspan,” the time during which older adults are healthy and able to function independently, ease some of these pressures?

The World Health Organization calls this “healthy life expectancy” and publishes this information by country. Japan was the world’s leader, with a healthy life expectancy at birth of 74.8 years in 2016, the most recent year for which data is available. In the U.S., healthy life expectancy was 68.5 years out of a total average life expectancy of 78.7 years.
…..
Working longer. How will economically vulnerable seniors survive? Many will see no choice but to try to work “past age 65, not necessarily because they prefer to, but because they need to,” Stone said.

Dr. John Rowe, a professor of health policy and aging at Columbia University, observed that “low savings rates, increasing out-of-pocket health expenditures and continued increases in life expectancy” put 41% of Americans at risk of running out of money in retirement.

Will working longer be a realistic alternative for seniors? Trends point in the opposite direction. On the one hand, the U.S. Bureau of Labor Statistics suggests that by 2026 about 30% of adults ages 65 to 74 and 11% of those 75 and older will be working.

Oh wait, that wasn’t all that happy.

I will get to her example in a moment, but if you actually do a broad sweep through news about working older — and I do, because I have google news searches on retirement age and other pension issues to try to catch trends — you will see that there is more often a negative slant given to working longer.

CRITIQUING MEDIA ADDRESSING THEIR READERS’ CONCERNS

But back to Teresa G.:

For example, John D. Stoll began a Wall Street Journal article last week on “the end of retirement” with the following: “It took about six years of annual asset reviews with my financial planner…” When I read that, I knew the focus would not be on the typical worker approaching retirement. Instead, it focused on the ability of a privileged slice of professional workers to work as long as they please, however they please.

Most Americans don’t have that luxury. Without decent pensions, working longer is not the answer for most people. For the first time in modern history, the American elderly will be relatively worse off than their parents and grandparents. Many will turn to work—any kind of work. The failing do-it-yourself American pension system will cause humanitarian and political crises unless we find a better way.

So, she’s bitching about the Wall Street Journal running a piece about the kinds of people who actually read the Wall Street Journal.

Now, I am the type of person who reads the Wall Street Journal, but some of the ads/stories are quite funny to me, because that’s not my type of lifestyle (such as really expensive watches, a second home in a different country, or worrying about my children getting into an Ivy League school.) I often laugh at some of the pieces that are clearly not aimed at me (yeah, I’m not about to drop $300 on a scarf. Or $1000 on a bag.)

But I am well aware that most of the people who read the WSJ only get exercise at the gym, if at all. We sit in front of glowing screens all day, and our worst danger is back problems and obesity from our sedentary lifestyle. Our jobs are not physically taxing, per se.

CRITIQUING THE “FAILING DO-IT-YOURSELF AMERICAN PENSION SYSTEM”

But let us consider her bitchery about pensions — “failing do-it-yourself American pension system”.

She’s correct — fewer people have DB (defined benefit) pensions than before. But let’s look at how many people actually had DB pensions in history.

From the Social Security Administration in 2009: The Disappearing Defined Benefit Pension and Its Potential Impact on the Retirement Incomes of Baby Boomers

The percentage of workers covered by a traditional defined benefit (DB) pension plan that pays a lifetime annuity, often based on years of service and final salary, has been steadily declining over the past 25 years. From 1980 through 2008, the proportion of private wage and salary workers participating in DB pension plans fell from 38 percent to 20 percent (Bureau of Labor Statistics 2008; Department of Labor 2002).
….
More recently, many employers have frozen their DB plans (Government Accountability Office 2008; Munnell and others 2006). Some experts expect that most private-sector plans will be frozen in the next few years and eventually terminated (Aglira 2006; Gebhardtsbauer 2006; McKinsey & Company 2007). Under the typical DB plan freeze, current participants will receive retirement benefits based on their accruals up to the date of the freeze, but will not accumulate any additional benefits; new employees will not be covered. Instead, employers will either establish new DC plans or increase contributions to existing DC plans.

So here are things to consider: yes, fewer private-sector workers are being covered by traditional DB plans.

I grabbed this specific paper given its timing — published in 2009, using data through 2008. You may remember something that occurred in fall 2008: a very large equity markets drop, plus short-term interest rates falling to zero (and other stuff, too).

The DB plan percentage drop continued after 2008, obviously. But actually, most of the drop occurred before that stock market drop. A paper from 2019, detailing DB plan access and take-up in 2018, showed this:

• 13% of all private-sector workers participated in a DB plan (contrasted to 77% of public sector employees)
• 16% of full-time and 5% of part-time private-sector workers participated in a DB plan
• 61% of union members in private-sector jobs participated in a DB plan
• Those in the lowest quartile of wages in the private sector had a 3% participation rate in DB plans
• Those in the highest quartile of wages in the private sector had a 27% participation rate in DB plans

I thought that was all interesting.

In any case, I agree with Ghilarducci that DB pensions have dropped a lot, and I also agree that lots of people have trouble with having to take asset accumulations and turn them into retirement income.

But I also claim that the traditional DB pensions are fading out because those are failing, too, due to increasing costs and unsustainability of the promises. The promises made in traditional DB plans are very expensive to make, and that’s a big reason these plans are being offered less and less. If risk-sharing type plans were more common, perhaps this wouldn’t be so bad.

I don’t think it works well when the worker takes on all the investment and longevity risk… but it also doesn’t work well when the sponsor takes on all the investment and longevity risk.

ADVICE TO WORK LONGER TO THE INDIVIDUAL NOT THE SAME AS GENERAL POLICY

Back to Ghilarducci’s piece:

The champions of working longer

Working-longer advocates can be found everywhere. One personal finance end-of-year article that came my way posed 14 reasons one should work past age 65. Every reason was an assertion with no proof and some falsehoods. One was that leisure might be boring. There is no evidence having leisure and adequate income is bad as long as you have control over the pace and content of your time.

The Economist recently lionized a Fall 2019 OECD report, “Working Better with Age,” concluding that “the employment of older workers is vital if prosperity is to be maintained.” According to the Economist, all we need is “silver surfers,” elders who modernize and learn to “surf” computer technology. The helpful advice for retraining is often paired with the shaming message: If you don’t have enough money to retire, it is your fault.

So the first piece she links is this: 14 Reasons Why Retirement Jobs Are the Best! — it’s from 2016. It’s a fluffy editorial piece for a website created by somebody who is a retirement planner.

It is a mish-mash of unsupported comments written probably by the financial planner (or grabbed from a financial planner marketing group that the person was allowed to re-use). Some of those comments probably comes from the person’s experience in working with retirees… but it also may be out of thin air. Who cares?

There are plenty of working longer advocates out there, but that’s because there are a lot of people who have a good idea that retiring at, say, age 55 or 60, will likely lead to some money pressures even for the most diligent savers. The list indicates costs that many retirees may not have thought about — I mean, how many understand that they’ll actually have to pay premiums for Medicare? And what the different parts of Medicare cover?

In any case, it’s advice for an individual. Individuals should be told that working to older ages (and not necessarily full-time) is an option, and individuals need to be told that they are likely to live longer than their parents and grandparents due to a reduction in smoking rates, improvement in air quality, and improvement in medical treatments.

There is nothing unique about the piece she linked, for what it’s worth, but there’s no reason to consider a random retirement planning website should be definitive (nor a blog).

OECD POLICY POINTS TO THE PROBLEM

But let’s look at the link to an official OECD research piece. This is making claims of authority.

Working Better with Age

People today are living longer than ever before, but what is a boon for individuals can be challenging for societies. If nothing is done to change existing work and retirement patterns, the number of older inactive people who will need to be supported by each worker could rise by around 40% between 2018 and 2050 on average in the OECD area. This would put a brake on rising living standards as well as enormous pressure on younger generations who will be financing social protection systems. Improving employment prospects of older workers will be crucial. At the same time, taking a life-course approach will be necessary to avoid accumulation of individual disadvantages over work careers that discourage or prevent work at an older age; What can countries do to help? How can they give older people better work incentives and opportunities? This report provides a synthesis of the main challenges and policy recommendations together with a set of international best practices to foster employability, labour demand and incentives to work at an older age.

This is about the old age dependency ratio — how many workers there are to support paying retirement benefits. This is an issue for DB pensions, Social Security systems, AND DC pensions [somebody has to be buying those assets you’re selling off to make retirement income].

The OECD paper is not about advice to individuals, but about advice to policy-setters. Part of this comes from how retirement ages are treated in many countries.

In the U.S., except for a very small group of professions (like airline pilots), there are no mandatory retirement ages. In fact, there are laws against age discrimination for old people [how effective these laws are… that’s another thing.] So, in the U.S., we see “retirement age” as the age at which you’re allowed to take retirement benefits.

In many other countries, “retirement age” is when employers are allowed to force old workers out. Yes, it also coincides with when the people can take retirement income, but the point is that nobody expects to be able to work past retirement age.

This OECD report is encouraging removing such mandatory retirement ages, among other things:

The OECD policy agenda for better work choices and opportunities at an older age
The OECD Council recommendation on Ageing and Employment adopted in 2015 puts forward an age-friendly agenda in three broad policy areas to promote employment at an older age.

1. improving incentives to work at an older age
2. tackling employer barriers to hiring and retaining older workers
3. improving the employability of older people through a lifecycle approach

Here is the paper specifically about Japan. Note that Japan is the country that has “gotten old” first, has a well-below-replacement-rate fertility level, actually has falling population numbers, etc. They really need their elderly to continue to be economically productive as long as possible.

More must be done to address rapid population ageing

Based on current retirement patterns, the OECD projects that for Japan the number of older people (50+) out of the labour force because of inactivity or retirement who will need to be supported by each worker could rise by around 29% from 46 per 100 workers in 2018 to 59 per 100 workers in 2050. Thanks to Japan’s high employment rates at an older age and a relatively high effective retirement age (see chart below), the increase is somewhat smaller than the projected rise for the OECD area of nearly 40%. Nevertheless, it would put severe upwards pressure on social contributions paid by Japanese workers to finance retirement schemes.

This is just reality. Japan is shrinking in population, and the population it does have is getting old. There are many different adjustments to deal with this, of which a higher retirement age is one. Supposedly, Japan has the highest effective retirement age, and one of the highest labor participation rates for older people… and yet, the OECD says they have to do more.

The Economist piece on this report is titled “People are working longer for reasons of choice and necessity”, which is not showing it all as a positive, either… note the “necessity” item.

Many people will be more than happy to work longer. A recent survey of 1,000 British retired people found that a quarter thought they had stopped too early (on average they had quit at 62). A third said that they had lost their purpose in life after they retired.

Hmmmm. Well. That supports some of the mish-mash of comments from the financial planner.

Working longer should be easier now that most jobs require mental, rather than manual, labour. But the physical strain of being a fireman, miner or construction worker makes it harder to keep working in your 60s.

Of course, many people are working longer not because they enjoy what they do, but because they cannot afford to quit. That is not solely because governments have been pushing up the state retirement age. In practice, the average age at which people actually retire (the “effective” retirement age) is lower than the official age by several years. In part, that is because rather than rely on a state pension, which kicks in at the official age, as their sole source of retirement income, many people supplement it with work-related pensions, which can be taken earlier.

FFS, the Economist piece points out the downside, too.

This helps explain the long-term trends. The effective male retirement age across the oecd was 68.4 in the late 1960s and then steadily fell to reach a low of 62.7 in the early 2000s. At that point it started to increase, reaching 65.3 by 2017. For women, the pattern has been similar. The effective retirement age fell from 66.5 in the late 1960s to 60.9 in 2000, and then rebounded to 63.7 by 2017.

OH LOOK — in ye Good Olde Days, men worked to higher ages [I noticed this in Social Security stats from early years, too – this applies to the U.S. as well as the OECD nations in general].

Many men did really work until they died. Retirement was not considered a goal, for a variety of reasons. One reason is that DB plans actually built up over the 1950s & 1960s, so men who were old in 1950 didn’t have much of a benefit built up.

This is how the piece ends:

Such deficits can be tackled with proper training, organised by the government or by companies themselves. But the over-55s should take it upon themselves to keep up with technological changes. Become a silver surfer. Your livelihood may depend on it.

That does not sound positive at all to me. The author is simply claiming that age discrimination has become lower in the UK, but that if you do not keep up your work skills, you may still be replaced. I have seen this sort of thing in my own working life, with some of my Boomer colleagues keeping up with changes… and others, not. It’s not always the skills that you think.

So far we’ve seen Ghilarducci pretending pieces that are pretty ambivalent about people having to work to higher ages as being RAH-RAH! WORK TIL YOU DROP! pieces.

The thing is that many of these folks are giving advice to individuals, and where they point out the downsides to retiring early (by the way, I do come across a lot of articles talking about the downside of waiting til “too late” to retire… but I will leave that for another time.)

On the other side are pieces on general retirement policy for countries, with the reality that people are having fewer children, while living to older ages in almost all these countries. There are different choices to be made in light of that reality. One is to increase retirement age and encourage working to higher ages. There is also increasing taxes and/or cutting benefits (beyond raising retirement age).

BENEFIT CUTS IN LONG-LIVED COUNTRIES

Back to Ghliarducci.

In 2019 both the World Economic Forum and the Mercer consulting firm recommended that most nations cut benefits by raising the retirement age, including (for example) in Japan and the U.S. Yet Japanese and American workers already work longer than elders in most other OECD countries and also have some of the highest elder poverty rates—20% in Japan and 23% in the U.S.

Yes, that is correct with respect to effective retirement ages, with Japan having the highest effective retirement age of 70.8 years.

But what about those elder poverty rates?

For international comparisons, the OECD treats poverty as a “relative” concept. The yardstick for poverty depends on the median household income in a particular country at a particular point in time. Here, the poverty threshold is set at 50% of median, equivalised household disposable income.

That… is not really a helpful definition of poverty if you really want to see how poorly the elderly are off. Especially when the median income is very high, as it is in both Japan and the U.S. I am not going to use this bullshit measure – and all of the stats they have in the table are relative, so I can’t talk about real poverty in old age.

FRANCE AS AN EXAMPLE?

But let’s continue.

There is pushback. Pension tensions cause political instability. Consider France. Earlier this month the leader of the General Confederation of Labor dismissed a bid for compromise on Macron’s plan to consolidate French pension plans by calling for, well, “strikes everywhere.”

Well, she’s correct here.

But it’s not like the long-lived French with the lowest retirement age is a sympathetic example.

ITALY AS AN EXAMPLE?

Or take Italy. The Five Star and Northern League movements owe much of their popularity to resisting the previous Italian government’s raising the retirement age back in 2011. But working-longer advocates have not been swayed. Italian economist Edoardo Campanella argued in Project Syndicate that the underfunded Italian pension system was overly generous and the only solution was older Italians working more. Yet the Italian economy can’t fully employ prime-aged adults, much less an infusion of elders seeking work. No wonder there is political dissonance.

Note that the specific retirement age is not noted.

Here you find out they reduced retirement age from 67 to 62. That retirement age of 62 is if you’ve got at least 38 years of working history… so working since age 24.

Again, remember in the U.S., 62 is the youngest eligible age to take Social Security. 67 is the full retirement age for those born in 1960 and later.

But she’s got a point about employment rates – it’s tough to push for the old to work if younger workers are having trouble getting jobs. Both Italy and France have what Americans would consider very high unemployment rates.

This is not the case in the U.S. — we are having the lowest unemployment rates since the late 1960s…when much fewer women worked. So we’ve got more of the population working than ever before.

BITCHING ABOUT JOBS

Back to Ghilarducci:

Bad pensions, bad jobs

Earnings are fast becoming the new pensions. And working is the new retirement. Bad pensions mean weaker worker bargaining power. Old age financial insecurity causes a drop in older workers’ reservation wages—that is, the lowest possible pay they would accept. Predictably, older workers’ wages and job quality have eroded.

Since 1992, older men’s wages started to fall relative to younger workers’ wages and have lagged behind ever since. Older full-time workers experienced almost no real wage growth since 2007, while weekly earnings for prime-age workers (ages 35 to 54) grew 4.7%. In prior business cycles, older workers’ earnings grew at similar or higher rates relative to younger workers.

I followed her links, and it looks like a quarterly report. She didn’t link to the most recent older workers report, and here are the stats in the 2019Q3 report:

Median weekly earnings:

The above is inflation-adjusted to 2018 dollars. So squinting at this… I note that the minimum in the graph is $860 and the highest $960. That would be a fluctuation of $100, or $5,200 per year. That is not nothing, obviously. But given the fluctuations, I’m not sure I can make much of this… it may be that inflation has been kicking in more lately, and wages tend to be stickier.

Again, I’m not sure what to make of this. The healthcare coverage looks pretty even, even going back to before Obamacare. but there is a difference in surveys in 2014 re: pension coverage, so it’s tough to say what’s going on there.

Let’s look at the bad jobs:

The jobs held by older workers are arguably worse, not better. For older women, jobs increasingly require considerable stooping and bending; think warehouse and care work. Next time you get an Amazon package from a fulfillment center thank a Granny. Writer Jessica Bruder has reported on the phenomenon of Amazon recruits who call themselves “workampers”—people, many of them elders, traveling the country living in trailers to find work in warehouses.

In the next ten years, the occupation with the most job growth will be personal and home health care aides, whose ranks will grow by 1.2 million workers. Three quarters of these new jobs will go to women over 55—older women will be taking care of even older women. Just 7% of personal and home health care aides belong to unions, and nearly a quarter of them earn less than $15 per hour.

Okay, I followed the links. The Amazon workampers article has an interesting detail:

The first member of CamperForce I corresponded with at great length, over a period of months, was a man I’ll call Don Wheeler. Don had spent the last two years of his main career as a software executive, traveling to Hong Kong, Paris, Sydney and Tel Aviv.

Retiring in 2002 meant he could finally stay in one place: the 1930s’ Spanish colonial revival house he shared with his wife in Berkeley, California. It also gave him time to indulge a lifelong obsession with fast cars. He bought a red-and-white Mini Cooper S and souped it up to 210 horsepower, practicing until he was named third overall in the US Touring Car Championship pro series.

The fast times didn’t last.

When I started exchanging emails with Don, he was 69, divorced, and staying at the Desert Rose RV park near the warehouse in Fernley. His wife had gotten to keep the house. The 2008 market crash had vaporized his savings. He had been forced to sell the Mini Cooper. In his old life, he’d spent about $100,000 a year. In his new one, he learned to get by on as little as $75 a week.

So, this article is from 2017, and the author mentioned the holiday 2013 season. So I will assume she started talking with Don in 2013, when he was 69. In 2002, when he retired, he would have been 58.

See the dangers of retiring too early?

But more to the point — if you retire when you’re 58, you may expect to live about another 25 years, and you should probably plan to 40 years, even.

Why would you have all your retirement savings in a volatile asset? That is very poor planning. At the very least, lock in some of your asset value via something like an indexed annuity. Yes, I know income annuities are very unattractive right now due to low interest rates, but annuities (or even CDs) would lock in some of your value, and if the market takes a hit, at least a portion of your savings would be protected.

Yes, I know this is complicated. Sorry, life is complicated. And annuity promises are expensive. That’s reality.

If he had had a DB pension, retiring at age 57 still would have him exposed to market risk, though indirectly. If his pension funds, like many pension funds, had been hit just like his personal savings, it would be more and more likely to run out of assets and then the benefits might get cut.

WHAT IS SPECIAL ABOUT BEING OLD?

Back to Ghilarducci:

Without secure pensions older people are forced to accept wages, hours, and working conditions on employers’ terms. An increase in the supply of labor invariably redistributes income away from wages and toward profits. Working longer reduces incentives to increase worker productivity and helps tame pressures for higher pay and improved working conditions.

So, for younger folks, we are supposedly forced to accept wages, hours, and working conditions on employers’ terms? Is that what’s really occurring for people like me, who is at least 20 years away from retirement?

Yes, having a source of income independent of employers and not needing a job does give one a freedom to walk away from crap jobs that those who don’t have such things. That’s true whether you’re 35 or 65.

Now, older people can be in a bind, because they really do tend to have increasing medical problems, which would interfere with any kind of work. They may have a shrinking group of jobs that they can actually accomplish. The examples given of Amazon fulfillment workers and home health aides are of people who don’t have much in the way of specialized skills. Yes, those who are not particularly skilled, no matter the age, are going to have trouble.

But wages have actually increased for low wage workers, though that could, of course, fall again.

There is a claim here that older folks working longer reduces wage pressure on employers, which may be true… in some areas. Older workers come with their own mix of skills and costs that are different from younger folks. Even if the wage is lower, their healthcare costs, in reality, are higher, so you need to look at the total cost of the worker and not merely the hourly rate.

With a very low unemployment rate, and rising wages for the lowest-paid workers… it’s tough to say that having the Boomers working longer would provide too much wage relief.

GRAY NEW DEAL OR GRAY OLD DEAL?

The only evidence that is unassailable about working longer is that it makes retirement time more unequal. Retirement time is the new contested struggle for American workers. A Gray New Deal that mandates pensions, expands Social Security, and finances long term care will increase worker bargaining power, strengthen labor markets, and make workers better off.

This is the closing paragraph. There are no links. I don’t know what she means by “mandating pensions” [what form would that take?], “expanding Social Security” [force public employees on Social Security? Removing the salary cap on payroll taxes?], “finances long term care” [there is a reason that this bit got dropped from the ACA] — and I certainly don’t see how this would increase worker bargaining power, as the costs would definitely be passed onto the workers.

That people are living about 5 to 6 years longer in older age has an effect. Back when men lived to be about 78, if they made it to age 65 (that was 1950), the effective retirement age for men was 70 years old. Men used to have about 8 years of retirement.

Now people are looking to close to 20 years…if you retire at age 65.

The younger you retire, the longer you need to plan for, and the more risks you are exposed to.

People are living longer, and they’re living healthier longer, too.

It is correct that people are finding that guaranteed retirements are being eroded… look to that longer life expectancy, and the fewer workers coming behind to support those pensions. You can write all the laws you want to mandate this or that, but the reality is that the money must come from somewhere.

Working longer is something an individual can do to reduce their own risk in retirement. I assume you don’t want to have a retirement of 8 years (retire at age 75?), as they did back in 1950. But if you have more years to cover, you need to have more assets to last that amount of time.

But when it comes to population-level policy, the choices are realistically: increase taxes, cut benefits, increase retirement ages, encourage people to work longer.

Or encourage people to have more kids and to do things so that they die younger.

So yes, one can argue for these various policies, whatever they mean, but makes sure you incorporate the costs. Lately, the argument has been “Tax the rich!” and in [Ghilarducci’s case, it’s been “grab those assets!”], but I am very skeptical that there is enough money in the rich to fill her grocery list of policy prescriptions.

Or, at least, to last longer than a couple years. It definitely won’t last long enough for the Boomers.

That’s the end of my nit-picking. The next is why I did the above.

MEEP’S MOTIVATION

I am getting tired of bullshit.

To be sure, I was never very bullshit-tolerant, but getting older and then seeing the same bullshit continue (or get worse – as in the case of the 80% funding myth moving down to 70% and then ending up with “Pay-as-we-go is just fine!”).

So I have decided to just unleash my inner detail-picker when I run into bullshit, as I feel like it. I’ve got two items in the hopper, so I’ve started with one of my nemeses: Teresa Ghilarducci.

In general, I just try to ignore her. (She ignores me, but I’m just a blogger, while she’s at a think tank or university or something.) She has popped up on this blog before only twice.

From January 2017: Setting the Stage for 2017: The Liability Side of Pensions

[From a WSJ piece]” “Economist Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis, says she offered assurances at union board meetings and congressional hearings that employees would have enough to retire if they set aside just 3% of their paychecks in a 401(k). That assumed investments would rise by 7% a year.
…..
Ms. Ghilarducci says she came to realize the 401(k) math she used in the 1980s and 1990s no longer works. The 7% annual compounded investing returns, a pillar of the concept, now seems too rosy. She now believes setting aside 3% of salary isn’t enough.”

[My comment]: So let me see if I get this right.

Ms. Retirement Expert used to assume lower returns than public pensions assume, and said that lower contribution percentages than public plans were making would be sufficient?

I have a feeling she’s lying about this. I didn’t get into the biz til 20 years after her, to be sure, but we were doing projections with 10% contributions (which I knew was too low) and assuming 6% returns to be conservative. But that’s a story for another time.

…..
Don Surber’s take is that liberals want to grab the 401(k) assets – and they obviously do. Just like they obviously want to grab IRA assets, and any assets at all. Money money money money! Teresa G. in particular has been pushing this private retirement asset grab for years, and I’ll dig that up another time. This is not a new revelation on her part, and it preceded the financial meltdown of 2008.

I know, because I’ve seen her propose this stuff in person.

Yep, the very first time I saw her present, it was to a Marxist group at Columbia University, and some people there were a bit confused as to why some very non-Marxist actuaries showed up. It was because an actual Marxist actuary [yes, really] let the New York actuaries about this presentation. So a few of us traipsed uptown to see what it was all about.

I don’t mind that Teresa G. [and that Marxist actuary] have different policy preferences from me. Lots of us have different values and goals.

But I do mind about lying about the math. Or, more broadly, lying about the trade-offs involved in their preferred policies.

Teresa G showed up in this piece on divestment follies, but I leave my comment there as:

Ha, Teresa Ghilarducci. Mmmhmm.

In general, I left it at that. At the Actuarial Outpost, I would post links to her writing — I link to all sorts of things there with zero commentary, because I’m using it for my external memory.

I will not necessarily do the above kind of nit-pickery with all her pieces, but the one I linked today just annoyed the hell out of me, and it’s a holiday.

So why not?