Latest news with #Ghilarducci
Yahoo
6 days ago
- Business
- Yahoo
Working longer won't save your retirement, expert warns
Listen and subscribe to Decoding Retirement on Apple Podcasts, Spotify, or wherever you find your favorite podcasts. For years, working longer has been promoted as the best way to shore up your retirement — especially if you're behind on savings. A 2018 study even found that delaying retirement by just six months can have a greater impact on financial security than significantly increasing your savings rate. But economist Teresa Ghilarducci, professor at the New School and author of "Work, Retire, Repeat," argued that this advice, while convenient, masks a deeper problem. "The working longer consensus was really a convenient untruth," Ghilarducci said in a recent episode of the Decoding Retirement podcast. "The consensus was that ... if people haven't saved for the last 40 years ... when we told them to, at least they have an out and we don't have to do anything about it." Ce contenu intégré n'est pas disponible dans votre région. The root issue, she said, is that the responsibility has been shifted entirely onto individuals. The thinking goes that "since everyone is living longer, then people can clearly live and work longer," she explained. "And since jobs are getting easier, then all people can work longer." Read more: Retirement planning: A step-by-step guide But that logic is flawed, Ghilarducci argued, because the premise that everyone is living longer and has easier jobs is false. "And therefore, this idea that we could all just work longer to make up for retirement savings gaps is false," she said. While it's true that longevity has increased for some Americans, Ghilarducci pointed out that it's primarily those with stable lives, high-paying jobs, and access to quality healthcare. "Men, and especially white men, have experienced the biggest longevity gains," she said. "So we have a big average increase pulled up by these white men doing good things. But they've also been lucky because they've actually had work careers that lead to longer lives and maybe even a choice to live longer." For many others, life expectancy has stagnated. White women, for instance, have seen little to no improvement, in part, she said, because they are working more. "Working actually isn't that good for you," she said, adding that oftentimes, the benefits of working longer depend on whether an individual is "part of the elite." For the privileged few, work might make them healthier and keep their minds sharp, especially if they control the pace and content of their jobs, Ghilarducci said. But only about 11% of workers have that kind of autonomy. "The rest, 89% of people, have jobs that if they continue them would actually hasten death by causing more anxiety and cortisol [a stress response] because work and commutes, especially if you aren't the boss, can create higher levels of cortisol." And chronic stress, she noted, is especially harmful in older age. "Women in service-related jobs who are working past 60 are especially vulnerable to having their jobs create more illness, more morbidity, and a shorter lifespan," Ghilarducci noted. The retirement dilemma This presents a dilemma. On paper, working longer boosts retirement income — and in many cases, it's a rational choice. But Ghilarducci warned that "most of us don't even have a choice to work longer, even if we don't have enough money to live on in our old age." So what can people do? If you're in your 50s or 60s, she recommends a financial reality check. "You have to look at your own finances, and you have to be realistic about how much you need," she said. Start by estimating your expected retirement income and subtract 20%. Then, estimate your expenses and add 20%. If there's a gap, Ghilarducci recommends trying to work longer, if possible, cutting expenses, and consulting a fee-only financial adviser. Tools like AARP's retirement calculator can help. And don't forget that programs like Social Security, Medicare, and Medicaid are key financial assets. "The government becomes your most important financial partner as you age," she said. The Gray New Deal According to Ghilarducci, instead of relying on individuals, the government needs to take a bold new approach: a "Gray New Deal." She explained that, just as FDR's New Deal addressed the needs of workers and the unemployed, today's policies must support a large and growing population of older adults — many of whom are being pushed out of the workforce or retiring without enough savings. "It is absolutely a failure to say, 'Well, those people should just have saved ... or those people can just work,'" she said. "Those are ... just unrealistic kinds of fantasies and hope. That's not a plan." A Gray New Deal doesn't mean forcing everyone into retirement. "If older people want to work, we absolutely should not have age discrimination," she said. "Go work." But, she added, those jobs need to be better by offering union protections, safety standards, and workplace accommodations that reflect the realities of aging. That also includes curbing digital surveillance and managing job stress. At the same time, Ghilarducci emphasized that many people either can't or don't want to keep working, and they deserve the right to retire with dignity. "So retirement should be made decent," she said. A key part of the Gray New Deal, she said, involves strengthening Social Security, not cutting it. That includes increasing revenues and possibly even raising benefits. "A $200 across-the-board increase in monthly benefits isn't unreasonable," she said. "It's probably actually required ... if we want to bring our senior poverty rate — currently around 23% by global standards — down to a more acceptable level." Read more: When will I get my Social Security check? Payment schedule for 2025. Another pillar of Ghilarducci's plan is the creation of a Guaranteed Retirement Account, or GRA, which would be designed to supplement, not replace, Social Security. The GRA would ensure universal retirement coverage, particularly for the half of workers who currently don't have access to a retirement plan at work. Workers would automatically contribute 1% of their salary to the GRA, and the government would match it with 3%. Contributions could increase over time — up to 5%, with continued government matches. Workers would retain ownership of the account and choose how to invest, and the plans would be managed by a nonprofit public entity — likely the federal government. "We need to make sure that people are covered 100% when they work, just as they are with Social Security," she said. While the GRA is not currently in bill form, Ghilarducci pointed to the Retirement Savings for Americans Act (RSAA), a bipartisan proposal that shares several core features. Supporters of the GRA concept include AARP, many unions, and firms like Vanguard, Fidelity, and Charles Schwab. But one group remains opposed: brokerage industry lobbyists. "There's a noisy group that does not support it,' she said. "Almost everybody is for it, especially small employers. So I think it's just about focus and attention. It's really not about politics." Got questions about retirement? Email Robert Powell at yfpodcast@ and we'll do our best to answer it in a future episode of Decoding Retirement. Each Tuesday, retirement expert and financial educator Robert Powell gives you the tools to plan for your future on Decoding Retirement. You can find more episodes on our video hub or watch on your preferred streaming service. Sign up for the Mind Your Money newsletter
Yahoo
05-06-2025
- Business
- Yahoo
Couple faces retirement fears amid market swings
Dinner at the Gomez home outside Boston provides a textbook image of the sandwich generation: three sets of relatives living under one roof. "A club sandwich has a lot of layers, and we have a lot of layers," 57-year-old Alicia Gomez said. It's not the easiest way to save for retirement, as Gomez and her 59-year-old husband, Chu, told CBS News during an interview last year. Back then, their nest egg was healthy and growing. Stocks were climbing, hitting an all-time high by February of this year. But they cratered as the trade war started, only to climb back and recover most of the losses. "I feel like I'm on a rollercoaster," Alicia Gomez said. "You just hope that if we're gonna be on the downturn now, will we be on the upturn when we decide to retire?" Like millions of Americans, the couple is experiencing waves of an uncertain, see-sawing market. These gyrations can trigger rash decisions, said labor economist Teresa Ghilarducci of the New School for Social Research. "We have a name for living through that kind of volatility, and it's called scarring," Ghilarducci said, stressing the importance of asking the experts in times of financial crisis. "Do not talk to your friends or your family about what to do. Take a breath, take a minute and rely on expert advice," Ghilarducci said. Alicia, who holds down two jobs, had thought maybe she'd cut back work at 62. Chu, who works in logistics, thought it would be at 65. Now, they've adjusted that mindset. "It's probably gonna be 67 at least, but you know, I think there's still a lot of unknowns," Alicia said. Right now, the couple is maxing out their retirement accounts, Chu said, but that could change if they needed to pull back. Adding to their anxiety is the fear that the Social Security system could run dry. There's been a 13% jump this year in people claiming retirement benefits early, despite the reduced payouts, according to the Urban Institute. Ghilarducci strongly advises against that. "Wait for the maximum benefit that you can get. Don't haircut yourself now, anticipating it'll be cut later," she said. The Gomezes say their retirement investments are up by about 3% this year, so they'll simply sit tight and work hard to hold onto their jobs. "A lot of us have been through a lot within, you know, just less than a year. We don't have do-over time," Alicia said. Sneak peek: Where is Jermain Charlo? Baldwin grills McMahon on unallocated funds for students, schools, approved by Congress Hegseth orders Navy to rename USNS Harvey Milk, Jeffries calls it "a complete and total disgrace"
CNBC
31-05-2025
- Business
- CNBC
As Denmark raises its retirement age to 70, experts weigh in on whether the U.S. may follow its lead
Denmark has moved to increase its retirement age to 70 — making it the highest retirement age in Europe. Yet it may be difficult for the U.S. to follow its lead. The new change in Denmark will apply to public pension retirements starting in 2040. Since 2006, the country has been adjusting its retirement age to reflect changes in life expectancy. The U.S. does not technically have an official retirement age. At age 65, individuals become eligible for Medicare coverage. At age 66 to 67, depending on date of birth, an individual becomes eligible for full Social Security benefits based on their earnings record. More from Personal Finance:House Republican tax bill favors the richSome lawmakers want to defer capital gains taxes for mutual fundsWhat the House GOP budget bill means for your money However, those individuals who wait until age 70 to claim Social Security retirement benefits stand to get the biggest payout — an increase of 8% for each year beyond full retirement age. (The full retirement age is when beneficiaries are eligible for 100% of the benefits they've earned based on their work records.) Yet few people wait until age 70 to claim benefits. While more than 90% of individuals would benefit from delaying Social Security until that age, only about 10% actually do, according to a 2023 paper from the National Bureau of Economic Research. While age 70 is not the official U.S. retirement age, it is the threshold based on economists' definition — the age at which you can't accrue any more benefits, according to Teresa Ghilarducci, a labor economist and professor at The New School for Social Research. "In the United States, it's been 70 for decades, and we had the highest retirement age than any other country for years," Ghilarducci said. Yet there are efforts to officially bump up the U.S. retirement age higher. In 1983, Congress passed legislation to gradually raise the full retirement age for Social Security from 65 to 67. That change is still getting phased in today, with people born in 1960 and later subject to the higher 67 retirement age. In December, an amendment to raise the full retirement age to 70 was introduced by Sen. Rand Paul, R-Ky., during last-minute efforts to advance legislation that increased Social Security benefits for certain public pensioners. The bill, the Social Security Fairness Act, was voted into law. However, the proposal to raise the retirement age was struck down. Paul called for raising the retirement age by three months per year until it reached age 70, to reflect current life expectancies. The change would have created nearly $400 billion in savings for the program, while the Social Security Fairness Act added $200 billion in costs to the program over 10 years. Other Republican proposals have likewise called for raising the retirement age. The Social Security Administration faces looming depletion dates for the trust funds it relies on to help pay benefits. To help resolve that issue, lawmakers may consider raising taxes, cutting benefits or a combination of both. Raising the retirement age is effectively a benefit cut. Like the changes enacted in 1983, raising the retirement age could be on the menu. Denmark's move to raise the retirement age to 70 is not a surprise, experts say. In 2023, research published by the Danish Center for Social Science Research found increasing good health and educational resources for 60- to 70-year-olds, along with higher demand for older workers, could point to retirement age increases in the future. In 2025, Denmark residents can retire with public pensions when they are 67. That will gradually increase to age 70 as of 2040. "That means simply that younger people today will have to work longer before they can go on retirement," said Jesper Rangvid, professor of finance at the Copenhagen Business School and co-director of its Pension Research Centre. That retirement age affects everybody entitled to basic public pension income, according to Rangvid. However, those with private pension savings may retire earlier. "There's nothing that prevents you from retiring earlier if you have the funds and the means to do so," Rangvid said. Denmark does offer options for early retirement, including an early pension. However, raising the retirement age conveys a message, Rangvid said. "It sends a signal that this is what the positions would like, that you should work longer," Rangvid said. Retirement experts say raising the U.S. retirement age may not present the same solution for the population that it does in Denmark. Denmark has a much more "equal society" when it comes to income, wealth, education and life expectancy compared to the United States, said Alicia Munnell, senior advisor at the Center for Retirement Research at Boston College. In the U.S., government data shows a stark difference between the life expectancy for those at the bottom and top income quartiles, Munnell said. "When you have such a big, big difference, any across-the-board increase in the retirement age would be foolish," Munnell said. "It'd be immensely harmful to those at the bottom who already receive benefits for a shorter period of time." A policy to raise the retirement age may also be problematic for another reason — it would take time to phase the change in, according to Andrew Biggs, senior fellow at the American Enterprise Institute. For example, Congress may enact a higher retirement age that starts to go into effect in 10 years, and then it would take 30 years for people with the higher retirement age to go through the system. While moving the age from say 67 to 69 would produce savings for the program in the long run, "they're going to need the money right now," Biggs said. The welfare reform that began in Denmark in 2006 — whereby the retirement age increased with life expectancy — has been "extremely important" for the country's economy, according to Rangvid. "We have basically no public debt at all," Rangvid said. In contrast, the U.S. faces high national debt that requires the country to spend more on interest payments than on the military. Budget legislation that is currently under consideration in Congress could add an estimated $3.3 trillion to the debt including interest, according to the Committee for a Responsible Federal Budget. That package would not touch Social Security or its retirement age. However, other proposals have suggested that change, a benefit cut that would be a "pretty powerful lever" toward helping to resolve the program's funding issues, according to Munnell. One proposal scored by the Social Security Administration's actuaries found raising the full retirement age to 70 would eliminate 26% of the program's 75-year shortfall.
