A Retirement Crisis of Complicity

 A recent headline asks: “Why Aren’t We Talking About America’s Retirement Crisis?”  Really? It seems to me that that’s ALL we’re talking about!

Even more ironically, that headline appeared in an op-ed crafted by none other than Teresa Ghilarducci (and her new co-author, Christopher Cook) who, so far as I can discern, talks (and writes books) about little other than the so-called “crisis.” And this specific op-ed, as hers often do, got picked up in syndication (see this link for details).  

But then, this week I stumbled across a LinkedIn post from Andrew Biggs, which matter-of-factly stated, “After a period of trying-in-good-faith, I've concluded I have to be more, um, forthright in calling out, shall we say, misinformation regarding Americans' retirement income security.” Said another way, it appears that Mr. Biggs has come to the conclusion – as I have – that polite commentary and even-handed discussions are insufficient to put to bed what continue to be extreme mischaracterizations (and, in some cases, outright lies) about the true state of retirement in America.

Thankfully, in an article posted on Forbes (titled “Fact-Checking Cook and Ghilarducci on Retirement (Again),” Biggs once again takes to task a follow up to his earlier response to (yet) another set of exaggerated claims and assertions by the pair. 

Here’s the latest:

“Nearly half of today’s middle-class adults will be poor or near-poor in retirement.”

Now, that’s a pretty bold statement – and one made without much backing. Actually, the article links to work by the New School (where Ghilarducci is the Bernard L. and Irene Schwartz Professor of Economics at the New School for Social Research in New York City) and is based on “Authors’ calculation using the 2014 Survey of Income and Program Participation.” Note “author’s calculation.” 

Biggs provides his own analysis of data, noting that the Census Bureau defines “near poverty” as having an income between 100% and 125% of the federal poverty threshold, while, according to Census Bureau research, (only) about 6.9% of age 65+ Americans have incomes below the poverty line. He then notes that about 14.8% had incomes below 150% of the poverty line, which is above near-poverty – and that if you split THAT group in half, then around 12.9% of current seniors are either poor or near-poor – TODAY.  

But by most objective measures (Biggs cites the Social Security Administration and the Urban Institute), he suggests that elderly poverty will DECLINE in the coming decades. Beyond that, he comments – as he has previously – that the vast majority of Americans who are poor in old age were poor PRIOR TO retirement. So, where does the conclusion that “nearly half” will be poor or near poor come from? While some of that might be attributed to the specifics of the aforementioned “author’s calculation,” another subtle clue can be found in the reference to “according to internationally-recognized measures”; we’ve seen those in Ghilarducci’s recommendations before – those are the ones that unfavorably compare the economic standards of life in America to Kazakhstan.   

“Nearly half of older Americans have no retirement savings and must rely solely on Social Security in old age.”

As it turns out, this is a two-fer – and Biggs breaks it down as follows. He points out – as he has previously – that the “nearly half of older Americans have no retirement savings” counts only individual retirement accounts. It completely ignores things like pensions (which, according to the Federal Reserve, Americans’ accrued benefits under traditional pensions top $16 trillion). It also excludes a taxable investment account, real estate, a farm or small business, and so forth. Biggs notes that, if you include all forms of retirement savings (and why wouldn’t you, unless you were trying to make a point?), you find a totally different picture. He cites the Federal Reserve, relying on its Survey of Household Economics and Decision-making, in finding that 88% of Americans aged 60 and over have retirement savings on top of Social Security. 

The second part – the level of reliance on Social Security – is also overstated. Biggs cites Social Security Administration researcher Lynn Fisher’s research using IRS data matched to government household surveys to examine how heavily retiree households rely on Social Security. She found that only 4.5% of elderly persons received all their income from Social Security for all of their income. “In other words, literally one-tenth of the figure Cook and Ghilarducci claim,” Biggs notes.  He also explains that the Census Bureau analyzed the number of seniors who receive at least 90% of their income from Social Security – just 12.2%, despite using a lower bar than Cook and Ghilarducci.

About 79% of people aged 62 to 70 can’t afford their pre-retirement living standards.

There’s plenty of actual IRS data – you know, the kind that people provide to the IRS under penalty of law – available to show that retirement income tends to compare favorably with pre-retirement.  Biggs turns to data from economists Peter Brady and Steven Bass that tracked incomes from ages 55 through 72 – and found that for the typical household, income drops by only 12% from age 55 to 65. Which, of course, means that the typical 65-year-old has a “replacement rate” of about 88%.  Beyond that, he explains that for the poorest 25% of seniors, their incomes increase in retirement.

And then there’s the alternative of just asking folks in retirement. Again, he references the Fed’s Survey of Household Economies and Decision-making which found that among 52-to-61-year-olds from 2019-2023, 76% said they were at least “Doing okay” – but among 62-to-70-year-olds, 82% did so. Among those age 75 and over, 86% said they were at least doing okay financially, the best in any age group. 

Of course, op-eds aren’t subjected to the same level of scrutiny as news – not that there’s been any shortage of news coverage on the topic of the looming retirement crisis. Let’s face it, there have been – and continue to be – a series of one after another industry survey that simply parrots the concerns of working Americans – the vast majority of which don’t seem to have ever tried to figure out their financial needs or reserves in retirement, apparently relying solely on the screaming headlines that assure them that retirement Armageddon is just over the horizon. It doesn’t help matters that retirement industry leaders echo and reinforce that perception.    

That said, and to answer Ghilarducci’s question, at least some of us are not just talking, but are actively working to forestall the retirement “crisis” she and others have been “promoting” for the past several years. No doubt, some will struggle in retirement – as they have prior to that date. But we need to quit excusing such “promotion” as anything other than hyperbole designed to sell books, inspire televised interviews and promote “solutions” that would undermine the amazing success of the private retirement system. 

If we don’t – well, we’re quite simply being a complicit enabler in helping spread that narrative by our silence.

- Nevin E. Adams, JD