Strange Bedfellows

 It’s been said that politics makes strange bedfellows — but it doesn’t get much stranger than President Trump and Teresa Ghilarducci.

At least temporarily, they appear aligned on one of retirement policy’s most persistent challenges: how to reach workers who don’t have access to a retirement plan at work.

President Trump’s April 30 executive order directs Treasury to develop a federal IRA savings framework aimed at uncovered workers — contract workers, part-timers, the self-employed, and employees of small businesses. And while the proposal is still light on details, it has drawn enthusiastic support from one of the nation’s most consistent critics of the employer-based retirement system: Professor Teresa Ghilarducci.

The Trump initiative — hinted at in the State of the Union address — would synchronize with the expanded Saver’s Match included in the SECURE 2.0 Act of 2022. The Saver’s Match is one of the more consequential — if still underappreciated — changes in that legislation. The Saver’s Match replaces an often-invisible tax credit with something workers can actually see: a direct federal contribution into a retirement account. In practical terms, it turns a tax benefit into something that feels a lot like an employer match — except funded by the federal government and targeted at lower-income workers.[i]

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That said, Ghilarducci’s full-throated support of the proposal doesn’t seem based on the Saver’s Match synchronization, but rather on its outreach to those without access to a retirement plan at work. And while — like the state-run plans for private sector workers — it seems likely to help close that coverage gap — Ghilarducci is quick to acknowledge that it shares some elements of a proposal that she and her latest conservative-leaning “partner,” Kevin Hassett, who these days directs the National Economic Council in the Trump White House have drafted. That proposal, embodied in the Retirement Savings for Americans Act, also seeks to extend coverage, notably for workers who currently lack access to a retirement plan at work.[ii]

Now, lest one be inclined to think that Professor Ghilarducci has reconsidered her long-standing and well-documented cynicism regarding the employer-sponsored system, her recent commentary continues to refer to it as “broken,” “failed,” and a “retirement wealth inequality machine.” While Ghilarducci has occasionally insisted she doesn’t want to “blow up” the 401(k) system, her preference for direct federal involvement over employer sponsorship remains fairly unmistakable.

Ironically, however, the workers most likely to benefit early on may be those who already participate in workplace retirement plans. The infrastructure is already there — payroll deduction, participant communication, automatic savings mechanisms, and recordkeepers eager to facilitate the flow of matching contributions.

Still, since the details of the new Trump proposal, much less its implementation aren’t yet known, it might turn out differently. And — as with many of the provisions in SECURE 2.0 —employers are not required to accept Saver’s Match contributions, though many are expected to, particularly larger programs.

In the end, this may be less an ideological convergence than a practical one. Trump sees an opportunity to expand savings access without creating a new entitlement structure. Ghilarducci sees a step away from reliance on employer-sponsored retirement programs. Both see political and policy value in federal matching dollars tied to individual savings.

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Strange bedfellows, indeed.

• Nevin E. Adams, JD

 

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[i] Eligibility is aimed squarely at lower- and moderate-income workers. To qualify, an individual must be at least 18, cannot be claimed as a dependent, and cannot be a full-time student. The key gating factor, however, is income. The match is available in full for those below certain modified adjusted gross income thresholds — roughly $20,500 for single filers, $30,750 for heads of household, and $41,000 for married couples filing jointly — and then phases out until it disappears entirely at about $35,500, $53,250, and $71,000, respectively.

[ii] However, see The Results Are In! Most Workers Would Be Worse Off Under RSAA.

Things That Make Me ‘Mad as Hell’

  So, what kinds of things get your blood “boiling?”

Some of you will recall that back in 1976 there was a movie called “Network” with a big cast that got nominated for a bunch of academy awards including best picture and director (didn’t win), as well as best actress and actor (won both, as well as best supporting actress and several others). The underlying premise of the movie was one of corporate greed, more specifically the extremes to which TV networks would go to garner ratings. The most extreme was allowing an aging network anchor named Howard Beale to remain on camera after he said he was going to blow his brains out on national TV.

Well, he didn’t — but he did wind up being positioned as a kind of “mad prophet” ranting about the ills of society, leading up to an evening where he encouraged similarly frustrated viewers to go to their respective windows and shout “I’m mad as hell, and I’m not going to take it anymore!” While that frustrated call to action likely didn’t actually change anything — it apparently was good for ratings.

While we still have TV ratings (though I’m amazed at the mere slivers of population that these days constitute “winners” in the various time slots), these days it’s all about clicks, views, forwards, and impressions. 

And it was with that in mind last week I shared with those in attendance at the Leafhouse National Retirement Symposium (LNRS) a list of things that made me “mad as hell” — things that those in our industry generate, promote and often share as fact without any application of common sense, and no apparent appreciation for the damage done by their complicity in sharing such nonsense. 

Here's my list — of things that make ME “mad as hell” — in hopes that you’ll agree.

1. Reports that label as “abandoned,” unclaimed or “forgotten” account balances that have simply been “left behind.” See Talking Points: Third Time No Charm in ‘Forgotten Account’ Fantasy.

Seriously — does ANYBODY think that 20% of the total balances in the 401(k) universe is “forgotten?” And yet there were any number of retirement industry folks (and trade publications) that faithfully picked up and shared this third bi-annual report from Capitalize, which every year gets even bigger and more exaggerated (the “black magic” of compounding). 

Sure, there are SOME in that category — but TRILLIONS? This report is nonsense — and shame on you if you gave it legitimacy by passing it along with anything other than jaw-dropping incredulity. 

2. People who think “good faith compliance” with the law could include completely ignoring the law. See Talking Points: Braking ‘Breaking’ News.

Last month, the IRS surprised us all with the release of final regulations regarding the Roth “cap” on catch-up contributions. And then the rumors started. 

Let’s face it — the regulations were a LOOOONG time coming. So long in coming that there were some who were thinking (a) they weren’t coming at all, or (b) the IRS would simply push back the enforcement date (as they had previously). To their credit, most of the industry publications acknowledged the complexity of the read and indicated there would be more to follow. 

But then some misread the effective date of the final regulations (01/01/2027) as applying to the date on which the Roth cap on higher-income individuals would be applied — which had been set as 1/1/2026 in the preliminary regulations issued in January — and which the final regulations stated was NOT impacted by the final regulations. 

Worse — they somehow saw the IRS’ lenience in allowing for “good faith compliance” with the (admittedly) late issuance of the final regulations as allowing them to just ignore the 2026 date. And then there were the folks who, in their hurry to share that news, got on social media to do just that.

Folks — if you don’t KNOW the answer, don’t make matters worse (not to mention your credibility) by sharing it. 

3. Pretending like everybody used to have a defined benefit plan. See A Penchant for Pensions?

This one’s a “golden oldie” — a “myth” that keeps coming up. Indeed, in a recent Fortune article, Teresa Ghilarducci tried to explain away the lack of an apparent retirement crisis by claiming that older Boomers all had pensions.

The truth is that, at its peak, only 38% of workers in the private sector were ever covered by a pension. And “covered by” only means they worked for an employer that offered a pension. Only about 12% ever got a full pension from the plans they were covered by. You want to talk about a retirement crisis? Think about the one we’d have if we were relying on defined benefit plans.

4. Adding up 20 years’ worth of potential expense and presenting it as a lump-sum retirement savings target. See: Talking Points: A Health Care ‘Scare’

Are you ready to spend $86,000 on cable TV in retirement?

I know, crazy, right? And yet that’s the kind of math being used to get people’s attention about retirement these days. The most recent — an annual study by Fidelity that now estimates that a 65-year-old retiring in 2025 can expect to spend an average of $172,500 on health care and medical expenses throughout retirement. There are some lengthy caveats footnoted on that projection, but suffice it to say that the number is — and is certainly intended to be — an attention-grabber. 

And, let’s face it, a headline that said you’re going to need to spend $8,625 per year in retirement on health care (1/20 of $172,500) really doesn’t have the same impact — particularly if you are paying attention to what you are spending on health care prior to retirement, which may well be less than that.

In which case the headline might actually be something like “you might not have to spend as much in health care after retirement as you do now.”   

But where’s the panic button for THAT? 

5. Surveys that ask people who have never done a retirement-needs estimate to estimate the “magic number” they’ll need to save for retirement. See No 'Magic' in These 401(k) Retirement Numbers

Another annual report that makes my blood boil is one that purports to share a “magic” number for retirement, based on what survey respondents said they thought they’d need. As though they’d know.

It always garners a lot of coverage — generally climbs higher from the previous iteration — and is always positioned next to numbers from completely different people as to what they actually have accumulated, and always about half the magic number. 

There are many problems with reports like this — none of which the breathless reporting of the conclusions acknowledged:

(1) It’s an average — while we get some breakdown on age brackets, we know nothing about their incomes, where they live, their health, etc. What someone needs (or thinks they need) living in New York City is (or should be) considerably different from the projections of someone living in Dubuque, Iowa.   

(2) It’s based on what people “think” (who have probably not given this any real thought).

(3) It’s surveying completely different groups of people a year apart, so drawing a trendline is a predictable, but dubious reality.

Let’s face it, stories like this serve mostly to fuel the concerns that responsible human beings already have as they try to look ahead to future decades in a time of tremendous uncertainty.

If they weren’t nervous before they saw these headlines, they surely are afterwards. 

Next week: The rest of the list — and what you can do about it/them.

• Nevin E. Adams, JD

When ‘More’ Retirement Readiness Is (Much) Less

  A new study shows how a proposed government-run retirement program said to increase coverage could actually undermine the nation’s retirement readiness.

The report — by Morningstar’s Spencer Look and Jack VanDerhei (yes, that Jack VanDerhei) — considers the potential effects of the Retirement Savings for Americans Act (RSAA) on retirement-income adequacy for Generation Z and millennial workers. The proposed legislation — which aims to expand retirement coverage for American workers by creating a federal retirement plan for those not covered through their employer — has been introduced in both the House and the Senate.[i] 

The legislation has been positioned as a means of helping close the coverage gap — of creating not only an opportunity for those without access to a retirement plan at work to save for retirement, but to receive the incentive of a matching contribution from the federal government. How then, would such a proposal undermine the nation’s retirement security?

‘Under’ Mining

As it turns out, in a variety of ways. 

Structurally, and significantly, it directly competes with the existing private retirement system — providing an alternative that employers might well consider rather than adopting a new plan on their own. 

That said, and even more significantly, it seems likely to encourage employers that already provide a plan — and matching contributions — to abandon those in place of the proposed government-run alternative. 

Finally, and compounding the damage of the first two, it does so with a structure that would not only have workers contributing less (generally speaking) than they do with the current system[ii] — and with a match that runs well below that found with the current system.[iii] 

The Damage Done

So, how much damage could this proposal wreak on the nation’s retirement security? The Morningstar researchers found that wealth could decrease by as much as 20% for Gen Z workers and 12% for millennial workers.

Those are some jaw-dropping numbers, to be sure — but the Morningstar researchers apply what seem to be reasonable, conservative estimates to get there.

First, since workers would be able to opt-out of this program, they assumed an opt-out rate roughly half that of the current state-run programs (that don’t have a match) — 20% (that’s about double the rate in private sector plans, which enjoy the backing and support of their employer as well as the convenience of payroll deduction).

More than that, one of the biggest assumptions in the researchers projected impact had to do with employer behaviors in response to the RSAA alternative — and here they used two different scenarios.  In one — a “best case” scenario — they assume that no plans with a thousand participants or more would do so (but that a third of those with less than a hundred participants, and a quarter of those with 100-999 participants would). 

However — the one that they said more likely represents the longer-term impact — they assumed anywhere from a third to 22% of employers of ALL sizes that currently offer a plan would abandon it.[iv]  

The Bottom Line

The research provides valuable insights as to the potential calamitous impact of this proposal on the nation’s retirement security — its introduction ironically just ahead of when some of the more impactful provisions of the SECURE Acts on new plan formation are scheduled to take hold. 

There is, however, yet another factor that could even more dramatically impact these projections — something that the bill’s sponsors have, for the very most part, avoided speaking to; how would this expansive government match program be paid for? 

The answer to that question — which might well have an even more deleterious impact on retirement security — was at least hinted at a couple of months back by the RSAA’s sponsor Sen. Hickenlooper — who said that he’d be willing to lower 401(k) tax incentives and contribution limits to pay for this program.

Talk about robbing Peter AND Paul…

- Nevin E. Adams, JD

 

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[i] Sponsored by Sens. John Hickenlooper (D-CO) and Thom Tillis (R-N.C.), as well as Reps. Terri Sewell (D-Ala. 7th) and Lloyd Smucker (R-Penn. 11th), the bill is championed by the Economic Innovation Group (EIG), an organization founded by Napster and Facebook billionaire Sean Parker and Steve Glickman, former Senior Economic Advisor at the National Security Council under President Obama. Rocket Mortgage majority owner Dan Gilbert is a member of the organization's Founders Circle, an advisory board with no governance responsibilities. 

[ii] As the Morningstar study notes, the default RSAA contribution rate of 3% is significantly lower than typical contribution rates in DC plans. For instance, the average deferral rate in Vanguard’s "How America Saves 2024" report was 7.4%. Notably, even workers earning less than $50,000 per year had deferral rates of 5.1% or more.

[iii] “Additionally, employer matches for DC plans do not start to phase out for workers earning more than the median income level,” the study explains. “Therefore, for many workers, including those earning less than median income, participation in an employer sponsored DC plan would result in larger overall contributions than the RSAA federal account. Results for the RSAA improve when we assume federal program participants increase their savings rate to 7%, as those earning less than median income would get the full 5% federal match tax credit (the "Above Default Saving" scenario). However, while some participants would save at a higher rate, most participants are likely to contribute at the default. This is because the RSAA does not include an auto escalation feature, which is a key driver of the higher contribution rates seen in DC plans.”

[iv] “To elaborate, the RSAA would likely stymie new plan creation, and while the change may primarily affect smaller plans in the short term, we do think that access to plans, even with larger employers, would go down in the long run.”

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

Facts Versus Factoids

 “What if the entire retirement-crisis narrative playing out in opinion polls, the government, and the media was a massive case of confirmation bias?”

That’s the provocative position of an intriguing new white paper titled “America’s ‘Retirement Crisis’: The Emperor Has No Clothes” by Andrew Biggs.[i]  Readers of my work will note that with frightening regularity there are any number of assertions, “studies” and surveys all painting a dismal picture of the state of the nation’s retirement—each and every one embraced and promoted with attention-grabbing headlines without so much as a question as to the veracity of the underlying data, the logic of the conclusions drawn, or the motivations of the proponents that have drawn them.

Consequently, I was delighted to come across this paper that provides a detailed, thoughtful, and data-driven analysis that focuses on a number of points that have been made (and uncritically trumpeted by the media) by none other than Teresa Ghilarducci[ii]—points that Biggs’ analysis concludes are “either trivial or inaccurate.” More specifically, he comments that these “points that are true do not necessarily lead to the conclusion that Americans have undersaved for retirement, while other points that could potentially lead to such conclusions are not factually accurate.”

Here are the 10 claims asserted by Ghilarducci/Cook in an Op-Ed (calling for folks to “urgently get over our retirement crisis denial” along with a pitch for the ironically named “Retirement Savings for Americans Act”)—and Biggs’ data-driven responses.

Claim 1: The Poorest Portion of Americans Do Not Have Sufficient Savings

It’s not so much that the statement is inaccurate—but Biggs argues that “their problem was not that they failed to save enough for retirement; it was that they were poor throughout their lives.” While noting that he has long argued for increasing Social Security benefits for the lowest-income retirees, he explains that “these households’ unusual predicament says nothing about their own retirement savings, much less about the US retirement system as a whole.”

Claim 2: 10% of Seniors Live in Poverty

This claim Biggs acknowledges is accurate “if we exclude the income seniors receive from retirement accounts such as individual retirement accounts (IRAs) and 401(k)s.” Biggs doesn’t accuse Ghilarducci (and Christopher Cook) of deliberately glossing over this significant point, though he does point out that this “shortcoming” in poverty measures for seniors “has been well-known by retirement experts for over a decade.” 

Well-known, and well-documented, as it turns out, and Biggs provides a half-dozen written acknowledgements of that shortcoming over the years. Among those, he cites a 2012 report by Social Security Administration researchers that pointed to that Census Bureau data as “greatly” unreported distributions from DC plans and IRAs, “posing an increasing problem for measuring retirement income in the future.”

Perhaps more significantly, Biggs cites information from a new dataset put together by the Census Bureau that finds not only that “The true median income of households age 65 and over increased from $43,700 in the CPS to $55,610 in the more accurate NEWS dataset, while the incidence of poverty fell from 9.75 percent to 6.42 percent.” In other words, even by those measures, seniors’ risk of poverty fell by more than one-third over a 28-year period “in which seemingly everyone came to believe the US retirement system was doomed,” Biggs writes—oh, and the annual income of the median households age 65 and older increased by 32% over that same period.

Claim 3: Retirees Are Subject to Exorbitant Long-Term Care Costs   

Ghilarducci (and Cook) claim that the average American turning 65 today will incur $120,900 in future long-term services and paid care—an assertion Biggs characterizes as a “hall-of-fame level of misdirection”—and he’s kind in applying that label.

Biggs explains that the $120,900 figure cited by Ghilarducci is the total cost of long-term care, not the cost borne by seniors—EVEN THOUGH the source Ghilarducci relies on “makes clear that $120,900 is the sum of costs covered by Medicaid, other public programs, private insurance, and, finally, out-of-pocket expenditures.” Instead, Biggs notes that the true average out-of-pocket cost to seniors beginning retirement at age 65 is $24,029—and that’s NOT per year, but over their entire retirement.

Claim 4: Middle-Income Retirees Are at High Risk of Downward Mobility

Biggs notes a couple of issues with this assertion; that it’s meaningless (it’s widely accepted that individuals can maintain that lifestyle in retirement on less than 100% of pre-retirement income, hence the common targets) and—“it’s almost surely false.”

To that point, Biggs challenges Ghilarducci’s claim that 40% of seniors will see their incomes drop below 200% of the poverty line—pointing to a 2017 Census Bureau study that tracked household income five years before and after retirement—and ultimately concluding that (only) about 4.1% of near-retirees with incomes above 200% of the poverty line would meet Ghilarducci’s definition of “downwardly mobile, less than one-tenth the number she projects,” according to Biggs.

Claim 5: Seniors Cannot Afford Emergencies 

“Roughly half of Americans (49.4%) aged 55–64 say they could not afford an emergency of more than $2,000.”

Once again, a statement that is factually accurate is being misapplied to retirees. Biggs notes that while only 23% of respondents aged 18–24 could handle a $2,000 emergency bill, and just 47% of respondents aged 45–54 felt capable, more than two-thirds (68%) of 75-and-over households stated they could do so. “The fact that not every retiree can cover every financial emergency using cash says nothing negative about the US retirement system, since seniors are far better able to weather financial emergencies than are younger adults,” Biggs notes.

Claim 6: The United States Has a Low Ranking in the Melbourne Mercer Global Pension Index

Admittedly, this one is a pet peeve of mine. The index has been published for a bit over a decade now, and the U.S. winds up in the lower-middle grouping—Biggs comments that “this index should be treated with caution because it is not a measure of a retirement system’s results. Rather, it measures the features of a retirement system that pension consultants tend to favor.”

Biggs notes that the U.S. gets “dinged” for things like “not requiring that retirees annuitize part of their savings, even though Social Security benefits—which form the base of retirement income for everyone and the majority of income for lower-earning households—are already paid out as a lifelong inflation-indexed annuity.” He also notes that if you look not at design but at results, you get a whole different perspective. Among the data points he cites is this one: for median disposable incomes of residents aged 65 and above, the U.S. ranked second…after the tiny tax haven of Luxembourg. 

Claim 7: Too Many Seniors Claim Social Security Early

The claim here by Ghilarducci is that “Due to financial pressures and inadequate retirement savings, 1 in 5 seniors claim Social Security before their full retirement age, thus losing up to 30 percent of their full benefit.” As Biggs notes, “there’s a lot to unpack,” specifically “one (claimed) fact, that ‘1 in 5 seniors claim Social Security before their full retirement age’; one (claimed) cause, that these Social Security claiming patterns are ‘due to financial pressures and inadequate retirement savings,’ and one (claimed) consequence, of seniors ‘losing up to 30 percent of their full benefit.’” 

As it turns out, the 1 in 5 is understated—Biggs says it’s actually closer to 1 in 2. But then, he states what should be obvious; that people claim when they do for lots of reasons. Moreover, he notes that as recently as 2005, 74% of retirees claimed benefits before their full[iii] retirement age, “a far higher rate than today despite the Social Security retirement age in 2005 being nearly two years lower than at present.” He also comments that “whatever the reason for early Social Security claiming, fewer Americans are doing it today than they were in the past.”

Claim 8: Available Jobs to Retirees Are Physically Demanding

To Ghilarducci’s claim that “More than 25 percent of older white workers and over 40 percent of older Black and Hispanic workers toil in physically demanding jobs,” Biggs comments that “the question isn’t whether Americans can work forever—we know they can’t—but whether today’s older workers can remain in the workforce longer than they did in the past.”

Among other studies, Biggs shares data from the Social Security Administration that—based on a definition that the job required regularly lifting up to 50 pounds—the share of retirees who were last employed in physically demanding occupations declined from 20.3% in 1950 to 9.1% in 1980—and that researchers at the Urban Institute updated these figures through 1996, finding a further decline to 7.5%. 

Claim 9: Widespread Retirement Anxiety

Biggs acknowledges that “Some people worry about retirement because they are not well prepared for retirement,” and that worrying about retirement planning is “fully understandable” even among those who are on track. But he then points to reports from EBRI, the RAND Corporation, and Gallup that revealed that individuals’ worries about retirement faded dramatically once they were actually IN retirement. He turned to the same Federal Reserve data on which Ghilarducci based her claims (caution—this is self-reported data), which revealed that while in 2013, 36% of Americans aged 55–64 reported they were “finding it hard to get by” or “just getting by,” but by 2021, when that group was approximately age 65–74, only 16% reported the same financial condition.

“Similarly, the share reporting they were ‘living comfortably’ increased by 22 percentage points,” Biggs explains. “If Americans nearing retirement in 2013 possessed inadequate savings and thus had something to truly worry about, one would expect nearly the opposite results.”

One can’t help but note that one big reason people might be worried about retirement is the merciless flow of scary headlines and interviews with prophets of doom…telling them they should be worried…

Claim 10: Retirement Income Has Flatlined

To this one, Biggs observes calmly, “If retirees are so poor, their savings so low, and their incomes so stagnant, how has their spending risen by 29 percent above inflation over 18 years? How did they afford it? Where did the money come from?” 

It’s really a rhetorical question—and one that he answered earlier: “Household surveys using the Census Bureau’s definition of ‘money income’—that is, only money received on a regular basis, while excluding the vast majority of withdrawals from IRAs and 401(k)s—dramatically understate retirees’ true incomes. The Consumer Expenditure Survey (CES), which is the source of Ghilarducci’s claim, uses the Census Bureau definition that fails to count most retirement account withdrawals as income.”

“According to Census Bureau research using IRS data, the median 65-and-older household in 2004 had an annual income of about $44,810, expressed in 2018 dollars,” Biggs writes. But by 2018, median incomes had increased to $55,610, implying an annual rate of increase of about 1.55% above inflation—and assuming that same rate of increase (1.55%), Biggs observes that the median 65-and-older income in 2021 would have been $59,149 in 2018 dollars—a 32% increase since 2004. “So, is it shocking that retiree households’ spending increased by 29 percent over a period when their incomes increased by approximately 32 percent? Not at all. Once again, a seemingly devastating factoid presented by Ghilarducci turns out to be a big ‘meh.’” Though I’d have a different adjective in mind.

Biggs closes the piece with a section titled “What Do Retirees Say?” where he notes that while he’s prepared to take the Federal Reserve data noted earlier, and take the 3% of 65-74-year-olds who say they are “finding it difficult to get by” as those actually in a retirement crisis. He groups together the 37% who say they are doing “ok” and the 49% (yes, 49%) who say they are “living comfortably” as having enough (there’s another 12% who describe their situation as “just getting by”). Ghilarducci took issue with this assessment (she actually referred to his stance as a “wave of denial”) deigning only to count the 49% as having adequate income. Fortunately, Biggs has done his homework here as well, and cites plenty of research to back the notion that financial security does seem to increase with age.

The Bottom Line

Biggs classifies the debate here as one between facts and factoids, noting that “most of Ghilarducci’s 10 factoids are either true but trivial or nontrivial but untrue.” The claim that one-fifth of retirees have less than $100,000 in net worth and no pensions is more or less true, but it not only doesn’t prove the U.S. retirement system is in crisis, “it doesn’t even prove that these specific households face a retirement crisis, given that the Federal Reserve’s data show they have higher incomes in retirement than they did before retiring,” Biggs notes. 

Among the untrue assertions: 10% of seniors live in poverty, that the typical retiree will pay anything approaching $120,000 for long-term care, or that retirement incomes flatlined in recent decades.

“What the discussion over retirement policy needs is not factoids but facts—that is, accurate answers to relevant questions that shed light on the underlying issues being examined,” Biggs notes. “There is no need to turn upside down a retirement system that by objective measures is among the most successful in the world.”

Amen to that.

- Nevin E. Adams, JD

[i] Biggs, a senior fellow at the American Enterprise Institute, was previously the principal deputy commissioner of the Social Security Administration (SSA), where he oversaw SSA’s policy research efforts.

[ii] Most recently in an Op-Ed published in The Hill with Christopher D. Cook, a senior writer for The Schwartz Center for Economic Policy Analysis (SCEPA). Teresa Ghilarducci is, of course, a professor of economics at The New School for Social Research and author of “Work, Retire, Repeat.”

[iii] Noting the Employee Benefit Research Institute’s (EBRI) Retirement Confidence Survey that found that more than a third (35%) retired early because they could afford to do so.