Money Talks: The United States is Doing Retirement Wrong

Summary

Slate Money: Money Talks – "The United States is Doing Retirement Wrong"

Host: Felix Salmon
Guest: Teresa Ghilarducci (Economist, The New School)
Release Date: June 5, 2024

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Episode Overview

This episode delves into the broken state of the American retirement system, why so many U.S. elders face poverty, and how models from other countries point to solutions. Host Felix Salmon interviews Teresa Ghilarducci, a leading expert on retirement policy and author of the new book Work, Retire, Repeat. Together, they dissect the failures of the 401k, the realities of elder poverty, and Ghilarducci's proposal for a "Gray New Deal" to restore dignity and security to American retirement.

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Key Discussion Points & Insights

1. International Comparisons: Why U.S. and Japan Get Retirement Wrong

• Elder Poverty Rates:
  • U.S.: 23% of elderly live in poverty
  • Japan: 21%
  • Netherlands: 3%, France: ~5% ([02:00])
  • Both America and Japan have much higher elderly poverty than peer nations.
• Japan's Retirement System:
  • Suffer from high elder isolation, inadequate support, and scandals in longevity statistics ([02:38])
  • “Japan and the United States stand out…with having very high elder poverty rates… the Dutch are at 3% and the French…high fives.” — Teresa, [01:52]
  • Japan's approach: Automation in elder care due to labor shortages, but lacking robust pension support ([04:50])
• Social Context:
  • In Japan, stigma towards aging and preference for automation creates further social isolation.
  • Neither U.S. nor Japan’s issues stem from longevity alone — they stem from poor system design.

2. What Good Retirement Systems Do Right

• Elements of a Strong System:

  • Universal coverage and mandatory contributions ("money in")
  • Professional, pooled investment with low fees ("invest well")
  • Payouts structured as life-long, defined benefits (“annuity payout”) ([05:08])

• Failures of the U.S.:

  • U.S. rated C-minus, below Kazakhstan, on global pension system rankings ([06:45])
  • Reliance on individual savings vehicles (401ks) rather than pooled, risk-sharing plans

• Quote:

  “It’s really money in, money out… a well-designed pension system puts money in, invests it well, and pays benefits for life… We have not managed to do that in the United States.”
  — Teresa, [06:00]

3. The Problem of Individualized Retirement Savings

• Accidental Bequests & Longevity Risk:

  • 401k participants must self-insure against possibly living very long, leading to inefficient over-saving and stress ([07:03], [08:51])
  • Defined benefit pensions let the “dead subsidize the living” — pooling the risk

• Human Cost:

  • Managing a lump sum through old age increases anxiety, cognitive burden, and susceptibility to financial scams ([10:16])
  • “It’s like putting $10,000 bills on the lapels of old people… and give them a pamphlet on financial literacy.”
    — Teresa, [11:56]

• Empirical Evidence:

  • Individuals with defined benefit pensions (DB) have better mental health and lower stress than those needing to “manage down” a lump sum ([10:16])

4. The 401k System: A Failed Experiment

• Origins:

  • Created in the Reagan era as a tax shelter for corporate elites, not as a pension solution for the middle class ([13:09])
  • Rapid adoption but with unintended consequences

• Current Reality:

  • Formerly, 65% of households had access to a DB plan, now only 50% of workers even have a retirement plan at work ([16:07])
  • “Ted Benna… said, ‘I created a monster. It has failed.’” — Teresa, [15:18]

• Portability Myth:

  • Advocates touted portability with 401ks, but frequent job changes lead to “leakage”—early withdrawals, especially for women of color and lower-income workers ([18:39])
  • “The portability is actually really dangerous for people because of what we call leakages.” — Teresa, [17:58]

5. Elder Work and Retirement Realities in the U.S.

• The Fake Promise of Working Longer:
  • “The idea that we’re living longer – most of us aren't. The longevity gains go to the wealthy.” ([20:10])
  • High-stress, low-control jobs (Amazon warehouse, home healthcare, janitorial) are especially tough to endure into old age
  • “Most people… say, I didn’t retire, I was retired.” — Teresa, [21:43]
• Morbidity/Mortality Link:
  • Forcing people to work longer quickens their decline, perversely making retirement more affordable because people die sooner ([22:43])

6. The 'Gray New Deal': A Real Solution

• Core Proposals:
  • Elevate the dignity and desirability of being “gray”: Encourage retirees to enjoy leisure, socialization, and agency ([24:48])
  • “Gray and proud”—embrace the social status of aging
  • Economic leg:
    • Substantially expand Social Security (“throw more money at Social Security”) ([24:56])
    • Universal, government-facilitated, easy-to-access pension account for all, modeled on the federal Thrift Savings Plan ([27:33], [29:01])
    • Remove income caps on Social Security taxation for high earners ([26:00])
  • Political note: Even as some in Congress propose cuts, overwhelming public opinion supports strengthening Social Security.
• Quote:

  “We are a grown up country and we’re very wealthy… We can raise the payroll tax for Social Security… Lift the cap, get in more money.”
  — Teresa, [25:15]

7. The Thrift Savings Plan (TSP): An Overlooked Model

• Description:
  • Ultra-low-fee, robust government plan open only to federal employees and members of Congress.
  • “It is well designed, it’s really cheap … [and] if you take money out of it, you don’t get the same kind of benefit.” — Teresa, [29:06]
• Policy Proposal:
  • Open this plan, or a similar one, to all Americans as a public option ([29:30])
  • Even this individual account-style plan would be a massive improvement over the status quo
• Political Feasibility:
  • Bipartisan support for expanding a TSP-like plan already exists in Congress.

8. What Does Retirement Mean, and Why Does It Matter?

• Societal Perspective:
  • Retirement should not be a “failure to work,” but an earned, dignified phase of life ([24:48], [34:00])
  • U.S. “workism” causes shame around leisure in old age, unlike French or Dutch cultures, where elders enjoy visible social lives ([24:44])
• The Psychological Value of Retirement:
  • Retirement brings happiness, mental coherence, and opportunity for elders to construct a life narrative ([34:00])
  • “Retirement really made people happy… Time at the end of your life is… precious… [It’s] a time when people want to create a personal narrative.” — Teresa, [34:54]

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Notable Quotes & Memorable Moments

• On U.S. Retirement Rankings (05:08):

  “The United States fell below Kazakhstan last year at about a C-minus…"

• On 401k System Failure (15:18):

  “Ted Benna… said, ‘I created a monster. It has failed.’”

• On Financial Predation (11:56):

  “It’s like putting $10,000 bills on the lapels of old people...and give them a pamphlet on financial literacy…”

• On Why Retirement Should Be Celebrated (24:48):

  “I'm trying to lift up…the status…of the word gray…this is just gray and proud, you know.”

• On What Individuals Can Do (36:59):

  “I'm going to tell you what you don't want to hear… Save 5% of your pay… for your future self.”

• On the Universal Need for More Retirement Income (25:15):

  “We are a grown up country and we're very wealthy… We can raise the payroll tax for Social Security…”

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Timestamps for Key Segments

• Elder Poverty in Japan & U.S. vs. Europe: [01:52]–[04:50]
• What Makes a Good Pension System: [05:08]–[07:03]
• The Problem with Individual Accounts & Accidental Bequests: [07:03]–[12:00]
• Origins and Limits of 401k System: [13:01]–[16:32]
• Portability & Leakage Dilemma: [16:32]–[18:39]
• The Myth of Working Longer: [20:06]–[22:43]
• ‘Gray New Deal’ Proposal, More Social Security: [24:44]–[27:45]
• The Thrift Savings Plan as a Model: [29:01]–[30:27]
• Why Retirement is Psychologically Essential: [34:00]–[35:20]
• Pragmatic Advice for Individuals: [36:59]–[37:35]

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Summary & Takeaway

Ghilarducci makes a powerful case: America’s retirement failures are not due to fate, demography, or individual error — they’re the result of flawed policy choices. By learning from European models, expanding Social Security, introducing universal government-facilitated pensions, and reframing retirement as an honorable life phase, the U.S. can restore financial security and dignity for older Americans. The road ahead requires both broader policy reform and a cultural makeover for how we think about elderhood.

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Recommended for anyone concerned about aging, economic policy, or the future of work in America.

Transcript

[A]

Hello and welcome to Money Talks from Slate Money. I'm Felix Salmon of Axios and this is our series of interviews with amazing and fascinating and brilliant and awesome people. And we have exactly one such person here today, Teresa Ghiladucci. Welcome.

[B]

Hello. Thanks a lot.

[A]

We are going to talk to you about retirement. This is the subject of, well, not just your new book, but basically your entire career. You are the world's leading expert on all things retirement. So this is what we're going to be talking about. But first, yeah, introduce yourself.

[B]

I'm Teresa Ghillarducci and I'm an economist at the New School for Social Research, came from UC Berkeley, taught at the University of Notre Dame, which a football team with a university attached. And now it's a new school in Greenwich Village, New York City.

[A]

So, yeah, we're going to be talking all about how retirement is broken in the United States and how we, you and I, single handedly are going to fix it. It's all coming up on Money Talks. Okay, so I feel like instead of starting off with a Felix question, I'm going to start off with a Brett Clements question. Brett is a Slate Money listener who wrote in out of the blue saying he's been listening to the show for a decade and he's never heard of segment about retirement in Japan. And they have how does it work when they have an average retirement age and they live very long? We know this about the Japanese and like can we learn from Japan here in America?

[B]

Well, Japan kind of took over a lot of American institutions and ideas and frameworks after World War II. And so Japan and the United States stand out from all the other OECD countries, the ones that we think of as our peers in the G20, G7 with having very high elder poverty rates. We win. The United States wins. We're at 23% of our elderly population is in poverty, which is a chronic state of want. And the Japan is in 21%. In contrast, the Dutch are at 3% and the French are like maybe high fives, et cetera, et cetera.

[A]

And this is not because the Japanese are living longer than the French or.

[B]

Not mainly because of that. So here we have two countries, Japan and the US and you would wonder what we can live learn from each other. Both of us have a disastrous retirement system and that's why the Japanese, or as bad as we are, it doesn't really have anything to do with living longer, it's just they're probably poorer for longer. And there's also some suspicion that they really aren't living as long as we think they are because there was a big scandal about five, six years ago where people went to the homes, the government officials went to the homes of people who were 110, 105 and found out that they had been dead for far 20, 30 years. And the family was, was still reporting that they were alive and taking their checks. So the Japanese longevity, the Japanese longevity.

[A]

Is like, is you live longer if you can keep on living after you've been like buried.

[B]

But the Japanese eat better than we do and so they do live longer.

[A]

They, they don't, they don't have like a fentanyl problem that I know of.

[B]

Yeah, they, but they have a really bad old age problem. They're. There is a lot of stigma against being old and disabled. And so a lot of the elderly are in isolation. There is a very high labor force participation among men who are elderly men in Japan, not so much with Japanese women. And so there's big shortages of the labor force that takes care of older people. The good news for that, I know you're an optimist and so you always like to, you always like the sweet side of isolated elderly. One of those sweet sides is when they go to the nursing home and there's no one there to really help them work because the Japanese don't have a good record with immigration or to fulfill their labor supply problems is that they're automating their nursing homes. So there's a lot of machines and capital equipment in the nursing homes. There's automated lifters and beds and wheelchairs. And so there's some innovation.

[A]

There you go. The Japanese are the bleeding edge of having robots take care of us when we're old.

[B]

It could be our only hope.

[A]

So explain to me, what is it that the Dutch and the French are doing right, that the Japanese and the Americans are doing wrong?

[B]

Right? So there's an international survey of pension systems that happen every year and every country gets graded all the way to Kajikistan, to, you know, Kazakhstan, Tajikistan, US, French, and we all get A's, B's, C's, D's and F's. And the United States fell below Kajikistan last year at about a C minus, CC minus, whereas the Dutch, the Finns have A's. And why do they have as? Because they have a well designed pension system that has three elements. Now it's a lot easier to do pensions than healthcare or windows or electricity or anything else. That's why I probably do pensions. It's really Money in, money out. And so a well designed pension system puts money in, everybody's covered, everybody contributes. People who can't contribute very much get tax incentives from the government, which is indirect money from the government, or they get direct contributions from their employer. So money goes in. Well, once the money is in your account, you have to invest it well. And so those countries pool those investments. And the portfolios are efficient portfolios. They get the highest amount of return for the least amount of risk and expense. It's a professional portfolio. And the best thing about those systems is the money is kept in until you need to take the money out, which is about 35, 40 years later. And they have a process of paying out those benefits in a form that's a benefit for life. It's called an annuity. So the money goes in, the money's well invested and the money goes out to last a lifetime. We have not managed to do that in the United States.

[A]

So, yeah, this is, I think, the big intuition about pension plans, which would include Social Security but would not include 401ks, which once you realize it, everything starts making a lot more sense, is that if you have your own personal money, as in 401k, and you want to be reasonably confident that you're going to be able to live on that money for your entire life until you die, then there is an unbelievably high probability that when you die, you will die with a bunch of money. And that money will not do you any good after you're dead. But you're going to need to have all of that sort of posthumous money to ensure that you are okay while you were living. Pension plans don't work that way. Pension plans, if once you're dead you have no more claim on the plan, and then so effectively what happens is the dead subsidize the living. The people who die, who are members of the plan who die earlier, wind up subsidizing the members of the plan who live to 120. And that seems fair and right and just. And so it seems to me that like one part of what you're saying, and it's probably not the only part or even necessarily the main part, but an important part, is just this idea of having a collective plan. If everyone all belongs to the same plan, it doesn't even need to be a government plan. It can be like a corporate plan or anything else, but. But if you're all part of the same plan, then you don't have the people who die young, like absconding with a bunch of money that they won't be able to spend and instead that money can be used to cross subsidize everyone else.

[B]

Yeah, well, yeah. And the words for those are insurance.

[A]

Exactly.

[B]

So it's a form of life insurance. It's life. Life insurance. And so that's exactly right. And so the systems that get an A and you know, even an A minus are ones that arrange their pension systems to be like a big social insurance or insurance plan. And what happens, you get mortality credits, meaning that the system people don't know when they're going to die. Just like we don't know when we're going to need a kidney transplant. But because we have health insurance, we don't put away $75,000 just in case we need a kidney transplant. But in our pension system people are having to to put away another 20% just in case. They're the lucky ones that live until 97 or unlucky depending on you do. And so what we have is you love this term accidental bequest so that we have.

[A]

You do like it's a good term that the accidental bequest. I feel like that that should be a stage play.

[B]

Well, most inheritances are accidental and most financial advisors say look, if you want to give your kids something, give it to them while you're living, you know, but make sure that you can, that you'll have enough. There's another sad story to this, is that people that we have an experiment here, there are people, Americans who have one of those plans. They have a defined benefit plan. They got it from a union company or they got it from a state and local government which got it because they're unionized as well. They live their lives, work their jobs and then at the end of their working life they get a benefit for life defined benefit plan, just what you described. And a person who's just like them in every way. But instead of having a stream of income maybe worth a half a million dollars, they have a half a million dollars at 65. When we look at that person's health well being, mental state, cortisol levels, self reports of anxiety, the doctor's report of their own mental health. The person that has to manage $500,000 to last their entire life is facing almost impossible mathematical and financial problem does have higher levels of cortisol and higher levels of self reported depression. And it's just at the time where you have to do one of the most complicated kind of math. Financial problems at 65 is right about the your risk of cognitive decline Hits. And so it's not a well structured system for the kind of humans that we have. It's almost like. And then also, Americans are five times more at risk of financial predation than elders are in Denmark or the Netherlands or any other country that has their money coming in their mailbox, you know, every month.

[A]

It's much more profitable to predate upon someone with half a million dollars of assets than it is to predate upon someone who's just getting a check every month.

[B]

Yeah, that's right. Because they have half a million and you can drain it because you're going to restore their Amazon account, you know, or, you know, or another story, you know, pay off their timeshares also, especially if that someone is, you know, is older, you know, we're. We're all at risk of cognitive decline. And we see this happening. So it's like putting $10,000 bills on the lapels of old people. Put them on the bus and give them a pamphlet on financial literacy about how to be careful with the money. So it's badly designed on that, what we call the deaccumulation side of it, like just spending it down. But even the investment side is just a little bit nuts. And I've been saying it's a little bit nuts since 1982. The reason why I'm kind of interesting is that I started going to school right when the 401k was born, which was in the Reagan era, right around the time that Social Security was cut. I'm a late boomer and I've been part of this big experiment on do it yourself pension plans. And I think one of the reasons why my book.

[A]

There is this great new book out called Work, Retire, Repeat by youy. Which is the whole reason why you're coming on the show in the first place.

[B]

Yeah. And the subtext is the uncertainty of retirement in the new economy. The reason why this book is getting a lot of attention is because there's millions of us, tens of millions of us, for whom the experiment has been run. And it did not work out the way the architects thought it would work out in the 1980s. Ted Benna is an accountant and the consultant who is called the father of the 401. So what happened? This is the story in the land. There were many, many large firms that had unionized rank and file. And the executives got a little jealous that the rank and file unionized members had a defined benefit plan, just a regular traditional pension plan. And they said, hey, wait, I want a way to save my money pre tax for my retirement. I'll call it for my retirement. Of course I want access to it and I want to decide where it's invested, but mainly I want it pre tax. And so a big company went to the Treasury Department, lobbied for this and was able to pass a regulation, put another code in the IRS code called the 401K. And it was really allowed to let elites and executives, high paid executives, save tax free. It was really sort of a tax dodge. If it were meant to be the great American retirement plan, it probably would have been called that and not after an obscure part of the tax code. So Ted Benna saw this little thing come through and said, hey, this could be really attractive to a whole bunch of employers. And so he marketed it, he said, hey, you don't have to put money into this defined benefit plan, or you could offer your employees just a way, your low income employees to put money into the 401. And you don't have to bother with invest the money in a proper way or to distribute it after the person retires. You can just have these accounts and everybody wins. You employer don't have to put any money in it if you don't want to. You employer don't have to pay for the administrative cost because the employees can. And your employees will like it because they can see their money build up. A couple of years ago Ted Benna said, I created a monster. It has failed. So kudos to Ted Bennett to also realize the result of the experiment. So back then, about 65% of households had a worker who had a defined benefit plan at work. It wasn't 100% but it was a supplement. And these were like middle class workers and lower middle class workers. And now only 50% of workers have access to retirement plan at work. So this whole idea that it would be really popular because it's so easy and cheap, that didn't even spread in.

[A]

Terms of the percentage of workers who have access to a defined benefit?

[B]

Yeah, exactly. It's tiny and it's not 65%. So whoever had a DB plan, it got transformed into this inferior plan. And I'm gonna talk about why it's inferior. And also the inferior plan didn't even spread cause it is better than nothing. But most people approaching retirement in the 90 bottom 90% have nothing.

[A]

Now the obvious advantage of of an individual account like a 401k over a pension plan is that it is more portable in the, in this day and age when we switch jobs, you know, every few years, when we don't have A company that we stay with for 30 years and then they we get a percentage of final salary. It seems to be like an advantage to be able to move around and keep my plan. Like how, how do other countries solve that problem? How do you have a pension plan when you don't have like a lifelong relationship with your employer?

[B]

They have kind of industry occupational plans so that all the companies in a, in a similar institution like in France, it's all public employees. If you move from one employer to the other because a lot of people don't change their industry sector, then it just accumulates in that plan. But it's no problem if you go from teaching, you know, to accountancy and you go from the public to private sector because there's a plan in each of those sectors. And when you retire, you just draw from two plans. The most important thing is that you're covered all the time, not that you're in the old plan. So I used to think that way that, oh, it's great that you can go from fishing in the morning to doing economic analysis in the afternoon. And you could have a 401k and the fishing plan and the 401k in your economic analysis plan and it would all be portable and we would just be seeing a nation filled with people putting more money into their 401s while they were transferring jobs in this great new dynamic labor force. But it doesn't work that way. What happens is if you change jobs, you usually go to an employer where there isn't a 401k or you have a 50, 50 chance of going to a place without it. And you've also have job transition expenses, so you take a little bit out. So the portability is actually really dangerous for people because of what we call leakages.

[A]

Surprisingly high number of Americans. And I was just reading a piece of research, especially women of color wind up borrowing substantial amounts from their 401k, which I'm sure is necessary, but is also not going to help them in terms of their retirement. And one of the really stark messages of your book, which is this thread running through the book, is just not just, you know, the poverty rate of elderly Americans is very high, but just how little money Americans have in retirement and how people wind up being forced to supplement their retirement income by working and generally working really bad, unpleasant jobs that they really don't want. This isn't a kind of I get to work until I'm 80 job. This is like I am taking these, these terrible like hourly wage jobs that I really don't want. But I have to because I otherwise just don't have enough money to live. This is a problem because Social Security is inadequate. You have a solution. You call this the Grey New Deal, which I love. To what extent is the Grey New Deal? Basically just another word for throw more money into Social Security and improve Social Security. And to what extent is it actually something much bigger and not Social Security?

[B]

Yeah, so it's New Dealy ish because it deals with all sorts of aspects of people's lives and the economy. But I land on the great New Deal as the real solution. The fake solution, as you just talked about, is for all of us to work longer. You know, I spent some time about why it's such a popular idea. Well, we'll all just work longer because there's fantasy behind it and all sorts of hope. The idea is that we're all living longer means that most of us are living longer. And that's just not true. The longevity gains have gone to the top half of the wealth and income distribution. And if you've had bad jobs, I describe what a bad job is. It has low reward to effort ratio, or you can't control the pace and content of your work, or you're always under surveillance. Those are all aspects of jobs that cause cortisol levels and stress levels. Add some physical requirements on the job. Stooping and bending in Amazon warehouses, a big growing occupation, or lifting and stooping in personal home healthcare or in janitorial services and business services that are really exploding. Guard labor, sitting on your feet all the time, et cetera, et cetera. Add all those aspects to the job. And by the time you are in your 50s and 60s, you're pretty much done, or your employer makes sure that you're done by pushing you out. So most of the people who retire, it's a really. Let's just think of that word and that verb. Retire is a verb that seems to give agency to the individual. Oh, I get to do this thing called retire or sneeze or something that somehow you have control over it. But in fact, most people who are retired say, I didn't retire, I was retired. They were pushed out because of their health, health layoffs, age discrimination, or the health of their spouse or their skills just became obsolete. We do have a natural sort of a peak productivity and it falls off. And it's very different from other people for different occupations. All right, so that's a fake solution. It also kills off people. If we make people work in these jobs that you don't control the pace and conduct of your work, or it's a low reward to effort ratio. It does increase their morbidity and their mortality. And it works in this sick way to make retirement more affordable because you die sooner. And so I really do try to bring out that perversity that we can afford lunch by having everybody skip it.

[A]

Right.

[B]

So that's a fake solution. So what's the real solution? The real solution is what I call a gray New Deal. First of all, I'm trying to lift up the, the status, the social status of the word gray, because we spent a lot of time covering it and hiding it. And I don't want to be like Japan where we shove older people to the highlights. But you don't bring them out by making them work. You bring them out sort of like, I don't spend a lot of time in Paris, but I went once and I was just amazed that older Parisian women who were retired weren't doing charitable works or weren't. Weren't excusing themselves from being retired like an American would. Like, I'm really retired, I'm retired, but I'm not really not doing anything. They're out in the streets doing nothing and having a great time, wearing their red lipstick, their gray hair. And I thought, oh, this is so un American, you know, this kind of proud, dignified, older people consuming leisure is something that I wanted to lift up. That this is just gray and proud, you know. And then the New Deal aspect of it does give homage to the American notion that every adult who wants to have a job should be able to work no matter what your age is. And so in no way am I bringing back mandatory retirement, though it has a sweet side, and that is you have more legitimacy toward a better pension. But I'm not calling for a European mandatory retirement age. I'm calling for a whole list of ways to make jobs that people have who are old better. So there's like eight things. And the bottom of that list, because I'm an economist, like true and true is better pensions. Because the way you get better jobs, better wages, better working conditions is if you have power and if you have a good pension and you're out in the labor market, you have a good fallback position. And then if you're an older worker and you're working, it's more on your terms than the employer's term.

[A]

So when you say get better pensions, what are you talking about? And are you talking about Social Security or are you talking about something else?

[B]

No, I knew you Were going to ask that and I should have made that clear. So I mean, better pensions, I mean more income in old age. And yes, I want to throw money at Social Security. It's a big problem and it's not going to be solved by working longer or nudging people or financial literacy. That's gonna be solved by money. And we have it. And I spend a lot of time in the book saying, yes, we need more money, but we can afford it. We're a grown up country and we're very wealthy. And so we can raise the payroll tax for Social Security, which means that Elon Musk pays his Social Security tax about seven seconds after the new year because he makes $168,000 every seven seconds. That's right. Or it's two to seven. And if he paid out through the whole year, that would solve a substantial amount of the Social Security deficit. Well, add a few more thousand people who make very high incomes but stop paying after the first couple of weeks of the year or through the whole year. You get my drift. The Social Security system treats someone who makes over $50 million the same as someone who makes $168,000. So we lift the cap, get in more money. So we don't raise the tax rate on Social Security. We don't raise the rate, we expand the base. There's other things that we can do. We can cap capital gains. And the usual suspects in Congress who look after these things have a proposal to do that. Bernie Sanders, Elizabeth Warren, but also John Larson from Connecticut, very, very thought out, well detailed way to bring in more money to Social Security. We can talk about politics because it's really interesting that the Republicans just this week have openly said they would cut Social Security benefits. And that just seems like dumb economics because people are going into retirement without enough money. And so cutting them even further doesn't even seem like good economics. But it also seems like really bad politics because most people, whether they're Democrats or Republicans or independents or green or blue, in all surveys, they say that they want to pay more money to keep their Social Security. And the other part of the better pensions is universal pension system. And it's just what it's really easy. It just force everybody to save for their retirement alongside their Social Security.

[A]

And so there's a big, basically defined benefit pension plan that everyone pays into. And I guess that plan will invest in the hedge funds and the timberland and all the rest of it.

[B]

Carefully, carefully.

[A]

And Social Security will continue just investing in yield.

[B]

Yeah. So it's like the systems that we started out with that get A's, they have this kind of hybrid system, a pay as you go as they call it. Like workers now pay into the system. We pay the current retirees at Social Security a little bit of a trust fund, but it's mostly flows, flows in, flows out. And then the other part is kind of clever. It's you pay for your own future self by putting some money in out of your own hide, out of your own paycheck. But the earnings from the stocks and the bond market and the timberlands and the hedge funds, they pay for most of it. So if you have a mature plan, 70% of the income coming out of your plan has come from the markets and only 30% has come out of your hide, you know, and decreased consumption. So there's a, in the model of provisioning for your older self. This hybrid mixture system makes sense. Advance funded and pay as you go.

[A]

And there is actually an American pension plan that exists and that no one knows about and that really it wouldn't be hard for us to all be able to join.

[B]

Yeah. So the only people that know about this plan are the people who make laws and work for the federal government. So I'm going to say the name of the plan, but no one's ever heard of it unless you're in the federal government. It's called the Thrift Savings Plan and it is well designed, it's really cheap. It's cheap. It's for only federal employees and members of Congress. You put money in and you do control a little bit about where it's placed. You have like three options or four options. But the federal government is so large that the fees that these plans are charge are very, very low. And they have a design feature that if you take money out of it, you don't get the same kind of benefit. You actually lose a lot by taking it out. So all this leakage problem is really avoided. And so I have proposed that everybody has access to a plan a lot like that. It's very simple if you don't have a plan at work because the industry that controls the 401k plans in the workplace had made the argument that their plans are better than the tsp. Good. You know, let's have a basic plan. Yeah, yeah, let's have a basic plan and then have them compete against it. And this plan is actually in Congress and it's supported by Republicans and Democrats.

[A]

So to be clear, the Thrift Savings Plan, this TSP that you want everyone to have access to is not what we were talking about earlier in terms of being a pension plan where the people who die early cross subsidize the people who live long. It is still an individual account kind of operation. But even that is so much better than what most Americans have right now.

[B]

I would like the defined benefit plan to come back in in most sectors, but this one is simpler and it is a lot. It is much better to have some wealth build up in a retirement account than have nothing at all. If you have nothing at all, you have almost 100% chance of being poor.

[A]

One of the things I tried to do a little bit a few months ago at Axios, and it was kind of interesting to me, and I think your book has answered this question as well, is I was wondering to myself, self, if you look at people in their 70s, in their 80s in America, there's this idea that people look back on their lives and they say to themselves, what I really wish is that I'd spent more time with my family. I wish that I'd gone traveling more. I'd wish that I'd had many great experiences. And what they don't say is I wish I'd worked harder and saved more for retirement. But in fact, as far as I can tell, if you actually look at the broad mass of septuagenarians and octogenarians in America, they actually do say, like, oh, I actually wish I'd saved more for retirement because they really don't have enough to live on.

[B]

They don't have enough to live on. That means a lot when you're older, living on. Maybe they have money for food and rent and heat, but when you're older, and most people have a very high risk of being alone when they're older, you need money to socialize. You need money to be able to go out to breakfast and hang. You've seen these guys at McDonald's. They assemble at these big tables. That's a really important part of growing old.

[A]

So much work in epidemiology, 100% in my retirement plan, that I'm going to have a budget there to go down to Squire's Diner every morning and have my coffee and my hash browns.

[B]

I hope you fund that liability. It's really important. I have the same dream. I like to hang out. It's like what I live for is hanging out. And it's really important to be able to talk to human beings and, and people who might know you even if they don't know you. But you need money for all that kind of socialization you need money to be able to spend $10 for your grandkid. You need money to lubricate these social ties that you don't have naturally, when you're living in big families or in a workplace. And workplace doesn't solve it. It'll just kill you faster for most people. So there is. I'm really glad you brought this up, because I was going to name this book and no publisher would go near.

[A]

It, not even the university.

[B]

Praise. Yeah, yeah. No. In praise of retirement. I had a hard time publishing. I published lots of books, and everyone. They kind of hoovered them up because it was about retirement. It was an economist. Economist book sells. It was actually much easier to publish this book because a lot of publishers and editors did not want to face this idea that they couldn't work forever. And so then I thought I should be in, like, Thanatos studies or some kind of psychoanalytic body of literature that I just didn't know or could navigate. But what I found in this data, and this took me longer to write this book, chapter four is like, there's blood, sweat, tears and time. In that chapter is the literature that was coming out of gerontology, psychology, medicine, that showed over and over again that retirement really made people happy. There's lots of literature that work broke down bodies and minds, but this whole literature that retirement mattered. And then I had Erik Erickson's book, He's a Psychoanalytic on Human Development, on my desk and all sorts of other writers that defined what it means to have time at the end of your life is not only is it precious because it's more scarce, and anything more scarce is worth more, but it's also a time when people want to create a personal narrative of their life. And whether it's generative doesn't really mean giving back, but they want to know why it all means. And if you're working at Walmart, you don't get the time to have that personal narrative.

[A]

And I feel. I mean, this is actually connected to my book too, where I was talking about the way that the pandemic came in and allowed people a certain amount of space to examine their lives and ask themselves, you know, is this how I want to live? Forced, in many cases, unemployment on people, with the unemployment rate spiked to 18% or whatever it was, and then created that kind of amount of, like, white space that you get when you're not going into work every day. And that then triggered the great resignation that then caused the big sort of economic growth story that we've seen since the pandemic of people like realizing, having these kind of YOLO realizations and saying like, now I actually know what I want to do. I don't want to be stuck where I was. That doesn't just happen to working people during a pandemic. It also happens to retire people every week. 1. After you retire, you find yourself with time and you can grow into something very good and noble. And so, yeah, and so that bit is, is the positive side of retirement. I would be remiss if I didn't spend like roughly 30 seconds, which is probably all it deserves on the sort of servicey aspect of if I am in a job, if I'm working, if I'm worried about not having enough money for retirement and I don't happen to be in a constituency where I can vote for Elizabeth Warren, like on a very individual level. And this is America, God damn it. So we have to be able to solve all of our problems ourselves. Like, is there any like, big obvious thing that people can, should be doing that they're not doing?

[B]

I'm going to tell you what you don't want to hear, which is tighten your belts and stick. Save 5% of your pay. If all the 20 year olds that are listening to us now just take, take 5% of whatever low wage you have and just put it aside for your future self. Don't put it aside for your down payment of your future house. Don't put it aside to pay off your student debt. That is money for your future self. You could draw gray hairs on that future self. You can empathize with it. Go to your therapist, but get in touch with your inner future self.

[A]

I am hopeful that even if we don't become Denmark, we might be able to become France.

[B]

Oh, dream on, dream on.

[A]

The Americans never become France.

[B]

The Dutch. The Dutch. The Dutch. Okay, Holland.

[A]

The Netherlands. Teresa Galazucci, thank you very much for coming in. Thank you for writing your book, Work, Retire, Repeat. Many thanks to Jared Downing, Ben Richmond and Shayna Roth for producing and we'll be back on Saturday with a regular slate money.