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Thursday, April 3, 2014

Retirement Planning Advice For Teens To 50+

Many people in the workforce used to look forward to the many benefits of retirement – having the time to spend with loved ones, to travel, or just relax. However, due to a changing economy, as more baby boomers age out of the work force, the reality of retired life doesn’t always match up to previous expectations.

(Tax Credits/Flickr)

(Tax Credits/Flickr)

NPR Correspondent Ina Jaffe covers aging and retirement issues for NPR and recently reported a three-part series called “Rethinking Retirement” for All Things Considered. Ina talks with Here & Now’s Jeremy Hobson to recap her findings from the series, and to discuss the truths, myths and reality of retirement these days.

Jeremy Hobson and Robin Young then turn to retirement expert Teresa Ghilarducci to discuss how people can plan for retirement so they have enough money. According to Federal Reserve data, about half of all Americans have set aside no money for retirement.

Ghilarducci, a professor of economics at the New School for Social Research, is author of “When I’m Sixty-Four: The Plot against Pensions and the Plan to Save Them.”

Interview Highlights

Ina Jaffe on how retirement is changing

“That old idea that you stop working completely after working full-time for years and years and years, and then you hang out with your grandchildren or play golf or something– that really is a myth. That is going away. And the reasons are both good and bad. In this last recession, baby boomers who are reaching retirement age, they really took a beating. They were much more likely to be among the long-term unemployed, so they had to dip into their retirement savings, their homes lost value. Even people who weren’t hit that badly simply weren’t able to save enough. So people are still working because they need the money. On the positive side, people are living longer, many are staying healthier longer, and they want to keep working. They enjoy the job, or at least they enjoy being around their co-workers, and they don’t see any reason why they should stop because they’ve reached some arbitrary age.

Jaffe on people’s motivation for staying at work

“It’s really kind of simple. They enjoy it, and they feel they still have something to contribute. That’s over and above the fact that the money always helps. There’s an interesting program present at some companies that I’ve reported on: it’s called ‘gradual retirement’ or ‘phased retirement.’ This is a formal deal that some companies have where retired workers can come back for up to 1,000 hours per year, and do some of the things they used to do before. It’s formalized. They have a program for it. I went to the aerospace corporation here in Southern California. They do a lot of very technical work for the DoD and NASA on spacecraft and satellites. I met a 73-year-old physicist who feels he still has something to contribute. Clients still ask for him by name, according to his supervisor. It’s not just the physicists and engineers and things like that. Even the clerical workers, the head of human relations there said that a retired clerical worker comes and does the orientation for new workers every Monday.”

Teresa Ghilarducci on people who can’t afford to retire

“There are always very highly educated, professional, dedicated, hearty souls who’ve stayed longer in the workforce. Your grandma would have a story about somebody who worked longer. But the trends are showing that the huge increase in service sector jobs are sweeping up older people that don’t have enough money. We’re seeing a lot of debt among the near-retirees, people in their mid-60s. We’d never seen that before. And we’re also seeing that their retirement income is a lot less secure than it used to be because we’ve shifted from pensions to the do-it-yourself 401(k) model.”

Ghilarducci on what Americans should be doing to save for retirement

“If you’re a human being with a job, make sure you take advantage of all the saving opportunities you have at work. It’s usually subsidized by the employer, because they’ll put something in even if they don’t have to. I can’t say that enough: The retirement plans that employers might have are all voluntary, and they could cut it at any moment. If you’re lucky — and half the workers have something at work — participate. … If you are saving in your 401k or in your IRA, be a smart investor and run — don’t walk, but run away from active funds. And get an index fund. And I don’t work for Vanguard, but they’re the king of index funds. There are a lot of other companies, like Fidelity, that provide index funds, but nobody will sell it to you. You have to buy it.”

Guest

Transcript

JEREMY HOBSON, HOST:

Well, as we continue to follow that story, we are waiting for numbers tomorrow that many economists think are the most important economic indicators of the month. We're going to find out from the Labor Department how many jobs were created in the U.S. last month and what the new unemployment rate is. And one of the things that's been showing up in report after report is that workers are staying in their jobs later in life. In other words, we are not retiring as early as we used to.

Ina Jaffe covers aging and retirement issues for NPR. She's been reporting a series of stories called Rethinking Retirement, which wraps up this afternoon on ALL THINGS CONSIDERED, and she joins us now from NPR West to talk about it. Ina, welcome.

INA JAFFE, BYLINE: Hi Jeremy.

HOBSON: Well, when you say rethinking retirement, it really gets to the heart of the issue, which is that retirement is changing. You set out to bust some myths about retirement.

JAFFE: Well that old idea that, you know, you stop working completely after working fulltime for years and years, and then you hang out with your grandchildren or play golf or something, that really is a myth. That is going away. And the reasons are both good and bad. In this last recession, baby boomers who are reaching retirement age, they really took a beating. They were much more likely to be among the long-term unemployed. So they had to dip into their retirement savings, their homes lost value.

Even people who weren't hit that badly simply weren't able to save enough. So people are still working because they need the money. On the positive side, people are living longer, many are staying healthier longer, and they want to keep working. They enjoy the job, or they at least enjoy being around their co-workers, and they don't see any reason why they should stop because they've reached some arbitrary age.

HOBSON: Well, let's talk about those people who have decided to keep working. More than 30 percent of people between 65 and 70 are still in the workforce. You spoke with some of them. What was their motivation for staying at work?

JAFFE: It's really kind of simple. They enjoy it, and they feel they still have something to contribute. I mean, that's over and above the fact that the money always helps. There's an interesting program that is present at some companies that I reported on. It's called gradual retirement or phased retirement. This is a formal deal that some companies have where a retired worker can come back for up to 1,000 hours a year and do some of the things that they used to do before, and it's formalized, they have a program for it.

I went to the Aerospace Corporation here in Southern California. They do a lot of very technical work for the Department of Defense and NASA on spacecraft and satellites. And I met a 73-year-old physicist who still feels he has something to contribute. Clients still ask for him by name according to his supervisor. But even - it's not just the physicists and the people who are engineers and things like that. Even the clerical workers, the head of human relations there, said that a retired clerical worker comes in and does the orientation for new employees every Monday.

I also talked to an 80-year-old bartender, going from physicist to restaurant work, an 80-year-old bartender at Musso and Frank's Grill in Hollywood, that iconic old Hollywood place. His name is Manny Aguirre(ph), and he says he could afford to retire if he wanted to. So he has to keep explaining to family and friends why he wants to keep working. Let's listen.

MANNY AGUIRRE: My kids and my grandchildren, they say to me grandpa, it's time, but they don't realize you miss that other life: your customers and your friends.

HOBSON: And Ina, this is someone who is going back to a job that he has been in. He knows this job. Are most of the people who are working later into their lives doing jobs that they've been in before, or are they going out and finding new jobs altogether?

JAFFE: It really varies. It's very individual. Some people are sticking with what they know and like, like Manny Aguirre, and for others it's an opportunity to reinvent themselves and to try something they couldn't afford to risk when they had to pay off the mortgage and put kids through school. They can afford to maybe take something that doesn't pay as much, that's in the not-for-profit sector, that maybe even has a social mission.

HOBSON: Or they can start their own businesses. You report that business creation in this age group grew by 60 percent from 1996 to 2012. Tell us about that.

JAFFE: Well, there are a lot of reasons for it that are pretty interesting. The bad one is that people who are older have trouble getting hired. Age discrimination is alive and well. And so if you can't get someone else to hire you, sometimes you go to work for yourself. Also technology has made having - starting your own business much easier than it used to be.

You can incorporate online. You can process payments online. And it's just made business a lot more accessible for people. And I interviewed a man named Paul Tasner(ph), who is in Northern California, and he started his own business in packaging, and he said that it's really just a matter of leveraging the experience that he's had in his business life up until this point.

PAUL TASNER: I have spent almost my entire life doing exactly what we're doing here with PulpWorks, although I've done it for employers, not for myself.

HOBSON: A lot of interesting voices there, Ina. Tell us finally how people have reacted to this because this is something that hits home for everyone as people have heard your stories about retirement. What kind of reaction have you gotten from listeners?

JAFFE: You know, listeners tend to be inspired by these stories. It's really been fascinating. There's a tendency in our culture to define aging as decline and disability and loss, and these stories really show another side of that. They show that people can have rewarding lives at any age.

HOBSON: NPR's Ina Jaffe, whose final piece in the Rethinking Retirement series will air tonight on ALL THINGS CONSIDERED. Ina, thanks so much.

JAFFE: Thank you.

HOBSON: This is HERE AND NOW.

(SOUNDBITE OF MUSIC)

HOBSON: It's HERE AND NOW, and let's continue our conversation about retirement. We just heard from NPR's Ina Jaffe about people who are choosing to stay on the job past the age of 65. But many people don't have a choice; they're working because they need the money. So what does that mean for workers who are working later? What does it mean for younger workers who want to get into the workforce? And what does it mean for all of us when it comes to how we should be planning for retirement in this new economy?

ROBIN YOUNG, HOST:

We all have some questions here, so I'm going to jump in too. Retirement expert Teresa Ghilarducci is a professor of economics at the New School for Social Research, also the author of "When I'm Sixty-Four: The Plot Against Pensions and the Plan to Save Them." Teresa, welcome.

TERESA GHILARDUCCI: Thank you.

YOUNG: And get right to it. Are the older working longer? Is the fact that, as Ina said, Ina Jaffe just said, 30 percent of those between 65 and 70 choosing to work longer, are they replacing, say, 30 percent of younger workers? Are they taking the job of younger workers?

GHILARDUCCI: So two parts. The American job machine, and I'm not saying that it creates, the economy creates good jobs or fulltime jobs, but we're really good at, in this economy, creating a lot of service-sector jobs and a lot of lower-paid jobs. And those are the jobs that the 30 percent of older workers are holding, by and large.

We find kind of a barbell, where younger people take service jobs and lower-paid jobs, then they get better jobs, we gave better jobs when they're older and more mature, and then we see the - an older worker more likely to be in teenager jobs. But the trends are showing that the huge increase in service-sector jobs are sweeping up older people that don't have enough money. We're seeing a lot of debt among the near retirees or people in their mid-60s. We had never seen that before. And we're also seeing that their retirement income is a lot less secure than it used to be because we've shifted from pensions to the do-it-yourself 401(k) model.

And then the second part of your question is: Are these older people taking jobs, or staying in jobs or taking different jobs, taking away from younger people? And the answer is yes, and it's especially true in some sectors. And even if the younger people get the job, the competition with older people suppresses the wage rates.

HOBSON: You bring up an interesting point there, Teresa, about retirement security. And what we're seeing now in case after case is especially governments that employ people deciding that because things are getting really tight that they have to go back in and change people's pension plans, or they have to make changes that are going to affect stuff that workers thought that they were guaranteed to get. What is that doing to retirement?

GHILARDUCCI: Well, it's another attack on retirement or the choice to retire or not, and it's really dumb, that's a scientific word, because what these governments are doing are making a short-term budgetary decision. Hey, we don't have enough tax revenue because our economies, you know, are weak, and so we're going to go after the big-ticket item and reduce the retirement income for our employees. But the long-term consequences of that are that cities and states are going to have to actually help out the impoverished elderly.

So they're already facing a problem from the private sector, and for governments to go back and actually make the problem worse by cutting the pensions of their own workers really is dumb. It's just very, very short term. So some people have called this movement to cut pensions for government workers - I really like it and I actually started the term - pension envy, which was in reaction to not having something that you need.

You could have, you know, two reactions. You can be really envious and angry at the people who have it, or you can bind together and try to get what they have. And I'm really of the mind that public-sector workers have good solid pensions. They worked for it. Some places they may be too expensive, we can, you know, maybe carve that back or put in more money like Illinois is planning to do. But to cut them like they're doing in Detroit is just making - is just pushing a problem now and making it - down the road and making it much worse in the future.

YOUNG: Teresa, if I could just take you back to our thesis question because I just have a question about that, about again this looming culture war of younger people thinking that older people are taking their jobs. You said yes, that does happen, but you've also said it's sector by sector. So for instance, if a university professor is staying longer, it might keep a younger colleague from getting a job. But generally it's somewhat not true.

I mean, if the economy is doing well, everybody does well. It's not an older worker who might have more experience, and a younger worker could never get that job.

GHILARDUCCI: That's right. Yeah, it's really sector by sector, and most of the time a younger worker is not directly substitutable for an older worker. But what's happening, what this generational war is about, is really a war about there not being enough jobs in general.

YOUNG: Yeah.

GHILARDUCCI: And you always - I mean you see, you see people staying in their jobs when they don't have enough retirement income, which is directly related to the fact that there aren't enough jobs for younger people. So I think that the generational war is really misplaced and that if there were jobs for older people if they wanted them, there would be jobs for younger people too. And so now they're fighting over the scraps.

HOBSON: We're speaking with Teresa Ghilarducci, and you're listening to HERE AND NOW. And Teresa, what would you say is the number one thing that most Americans ought to be doing when it comes to planning for retirement that they're not doing?

GHILARDUCCI: Yeah, that's great because a person is a lot of things. They're a voter, they're a saver, they're an investor, and they're a worker. All right, so let me go down those roles and talk to you and your listeners as a human being. All right, so if you're a human being with a job, make sure you take advantage of all the savings opportunity you have at work.

It's usually subsidized by the employer because they'll put something in, even though they don't have to. I can't say that enough, that the retirement plans that employers might have are all voluntary, and they could cut it at any moment. But if you have, if you're lucky, and half the workers have something at work, participate. Also the government gives you a little bonus because they deduct your contributions from your current taxes.

Now, if you're a high-income worker, and you have a higher tax rate, the gift from the government is a little bit better, but go ahead and take advantage of it. Also you're an investor. So if you are saving in your 401(k) or in your IRA, be a smart investor and run, don't walk but run away from active funds and get an index fund.

And I don't work for Vanguard, you know, but they're - you know, they're the king of index funds. There are a lot of other - there are a lot of other companies like Fidelity, you know, that provide index funds, but nobody will sell it to you.

YOUNG: Save, save and save. If you don't know what you just heard, go talk to someone who does. Teresa Ghilarducci, thank you so much, from the New School for Social Research. Just a wake-up call, you know, about retirement around the corner, even if you're young. Teresa, thanks so much.

GHILARDUCCI: Thank you.

HOBSON: And we're already hearing from our listeners on HEREANDNOW.org. George Brock writes: One of the problems is education, the lack of it. Retirement planning should be taught in every school. Retirement planning and saving and investing has to become a priority for everyone. The key is to start saving and investing early in life. (Unintelligible) writes: If 20-somethings are having trouble finding jobs, I guarantee you 70-somethings are too. I do have some retirement, so at this point I am not on food stamps nor did I apply for unemployment, but I am scared of what the future will bring and I am not optimistic that it will get better any time soon. We would love to hear from you. You can go to HEREANDNOW.org. Or you can send us a Tweet. We are @HEREANDNOW. I am @JeremyHobson. Robin is @HEREANDNOWRobin. This is HERE AND NOW. Transcript provided by NPR, Copyright NPR.


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  • dialyn

    I had planned, silly me, to retire to a part time job. Well, the employer downsized me out of existence; my mother entered the last year of her life in a painful way which required more care (and expenses) then we expected; and then, after she died, I became ill and I can no longer hold job. Now if you think you will be healthy and active until one second before you die, that’s great and I wish you well. But you should also assume that the unexpected can happen. One illness or accident in a family can wipe out savings and/or retirement. I also discovered, observing friends, that younger family members can often view a retired elder as a source of endless funds, and the elders often give money they can’t afford to give because they don’t want to upset the family. The political atmosphere is hostile to anyone needing extra services so you can depend on the far right to be seeking to cut back on any help that the elderly previously counted on so keep that in mind. The young and the healthy think that’s great, but they won’t think so when they are not so young and not so healthy but it will be too late. You may scream at someone to go get a job, but it’s not so easy when you are old and/or sick and thought the job you worked a lifetime at was going to support you in retirement (laugh, if you will, but many of us thought that was true). If you are one of the 1%, you don’t have to worry and you can pretend that everyone has your plushed out lifestyle, but not many of us are in that group. If twenty-somethings are having trouble finding jobs, I guarantee you seventy-somethings are too. I do have some retirement so, at this point, I am not on food stamps nor did I apply for unemployment, but I am scared of what the future will bring, and I am not optimistic that it will get better any time soon.

  • loyal listener

    Another biased story promoting government pensions.

    Who represented the taxpayer in this story? Nobody.

    I fund my own retirement savings. Government workers should do the same.

  • Rick Evans

    Teresa Ghilarducci’s assertion that older workers are taking jobs away from younger workers is pure nonsense. If a worker has a job and chooses to keep it its HER job and not the young whip-snapper who uploaded her resume.

    On “pension envy”:It is taxpayers who are being asked to pay more taxes to bail out underfunded pensions who are ticked off. It’s not the simple envy that Ghilarducci snickered about. The underfunding has come about because pols past pandering to both their unions and anti-tax voters.

    Finally, Ghilarducci should be recommending index ETFs and not just index mutual funds. ETFs generally have the lowest fees of any type of mutual funds.

    • loyal listener

      Look sweetheart, nobody “owns” their job (unless they are self employed). So if an employer wants to replace you with someone who is more energetic at a cheaper labor rate, that is their choice.

      • Rick Evans

        What does your comment have to do with anything I said?

  • Frog

    The Detroit Pension system…aka “The 13th Check”? Is it “pension envy” to end these abominations?

    “One of Detroit’s two pension funds handed out nearly $1 billion in bonus cash payments over two decades to retirees and active employees’ retirement accounts instead of reinvesting the extra earnings for the future, according to a Free Press review of city records. The payments, often referred to as a “13th check,” contributed to Detroit’s financial crisis and its historic Chapter 9 bankruptcy filing by increasing the amount the city needed to contribute each year to keep the pension fund solvent.”

    “Had the city’s General Retirement System held on to the excess cash, the city might not have felt the need to borrow $1.44 billion in 2005 to plug the city’s unfunded pension liabilities gap, the Free Press found.”

  • George Brock

    One of the problems is education. The lack of it. Retirement planning should be taught in every school. Retirement planning and saving/investing has to become a priority for everyone. The key is to start saving/investing early in life, be consistent, take advantage of any employer matching plan, max out contributions when possible, eliminate debt, avoid risks with your nest egg and plan for multiple streams of income once retired (social security, pensions, dividends, part time work, etc.). There is a great deal of information about retirement available on the web. I use several sites including the site Retirement And Good Living which provides information on finances, health, retirement locations, part time work and also has a great blog of guest posts about a variety of retirement topics.

  • Obendop

    I am 68. I work 40 hours a week in Boston. I am a high scool graduate. I make $60/hour. No way am I giving his up. :)

  • Patricia

    Ghilarducci purposely cut off before she could address the actions called for if you are a voter?

  • Applelady

    If a retired person has the ability to fund a viable business which can employ freelance workers, it is a plus for all. Some retired people are not “finished” because they have aged out of a traditional work environment. Lessons learned over a lifetime can be invaluable.

  • Zoya2

    At something past retirement age, I am re-inventing myself for the third time. My goal now is to start a small business that gives me some creative satisfaction AND that permits me to hire at least one person who needs work. Our 20-something daughter no longer lives with but continues to receive notice of scholarships, educational travel opportunities, internships, business start-up counseling, and other tasty low-cost options. Given that Americans are living longer with their faculties and previous experience intact, I am AMAZED that universities and other educational and incubator institutions are not targeting me as much or more than they target my daughter. Our national biographic arc should include TWO episodes of waiting for the “skinny” envelope: one after high school and one in our 60s.

  • billiamh

    You unfairly portray the issue of public-sector pensions. No one would deny a public sector worker a fair, equitable pension after a career in public service. However, in many municipalities and governments, these are not fair or equitable but are extravagant and unsustainable, created in deals by politicians in return for public sector support. In some states public pensions for careers in public service (some as short as 20 years) are greater than 75-90% of SALARIES in the private sector! This is unfair to us taxpayers, who are working and worrying about how to provide for our own retirements, knowing that the first dollars we earn go instead to support public sector retirees with compensation and benefits we can’t even dream about.

  • it_disqus

    Government an union pensions are going away because everyone sees the fallacy of working 20 or so years and then getting paid 30-40 more years after.

  • Caroline

    I was divorced in 2000 and went to a local bank for investment advice. If I’d taken it I would have lost money! Best advice that I can give would be BE CAREFUL! Don’t put yourself into a situation where you could lose by investment. Playing it safe is wise. You may not make a killing, but you might survive when there comes a crash.

  • Jessica Chang

    Here’s the path to retire on your own terms, in 7 steps:

    1) Pay off your debts as fast as you possibly can. If this means living in a crappy studio apartment and eating ramen everyday for a couple of years, do it. If you want to buy a car, get a reliable beater. Get insurance for $25/month from Insurance Panda. Forget about buying a house until your debts are paid off.

    2) Once you are out of debt, stay out of debt. The only exception to this rule is a vehicle and a house. If you want to get a nicer car, buy used and be able to pay it off in a year or 2.

    3) If you are going to stay in the same spot for at least 10 years, buy a house, preferably with at least a little bit of usable land. An acre is good, 5 acres is better. Take the amount you are pre-approved for and cut it in half – that’s how much you should spend on a house. Come to the table with at least 20% down and make a couple of extra mortgage payments every year. If you’re going to be transferred or relocate every 5 years, forget about buying a house and rent instead.

    4) Develop multiple revenue streams. Do contract work. Start a business on the side. Invest in a business as a silent partner. Raise chickens, breed dogs or grow apples. Build websites. Buy and sell antiques. Acquire rental property. Sell something that generates residual income. Learn to play the currency markets or trade stocks. Do whatever you can to generate income from multiple sources.

    5) Grow these multiple revenue streams to the point that they generate enough consistent and reliable cash flow to replace your current income.

    6) Make as much as you can. Save as much as you can. Give away as much as you can.

    7) Retire!- the sooner, the better. Be sure you understand that “retirement” doesn’t necessarily mean you stop working, it just means having the freedom to do what you want to do, when you want to do it.

    Don’t be foolish and fall into the trap of trying to measure your wealth by the value of your assets. Markets change. Valuations fluctuate. Instead, measure your wealth by the amount of cash flow your assets consistently generate.

  • Floan

    I am a physician of retirement age who
    changed careers 5 years ago to go into Pharma research. I was laid off in
    August and had to sign a statement that I had read the ages of people who were
    retained to show non-discrimination. I did not get my severance until
    this statement had been signed.
    I have applied for >100 jobs in my field that
    I am definitely qualified for. I get many calls per week from recruiters
    and have had quite a few good interviews. However, I have not been
    offered a job. I have no personality quirks or mental health problems.
    I have great recommendations. I have to assume that I am the victim
    of age discrimination.
    I hear lots of shows on this subject – Here
    and Now – Ina Jaffe – but no one is discussing what to do if you are a victim
    of age discrimination. Most employers have an equal opportunity statement
    on their websites but it is well known that some large employers in the area
    won’t hire anyone over 50. I have had hiring managers call me back with a
    clearly made-up story about why I am not longer a candidate.
    Although these practices are clearly illegal,
    no one seems to be taking it on as an issue. There is never a note
    about
    whom to call at the end of the programs.
    The reason that retired people (and some who
    did not retire willingly) are “taking the entry level jobs from
    Teens” is that we cannot get employment at our level.
    I hope someone will decide to do a story on
    this issue.

Robin and Jeremy

Robin Young and Jeremy Hobson host Here & Now, a live two-hour production of NPR and WBUR Boston.

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