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The Long View
Anne Tergesen: What Retirement Looks Like Today
00:55:56
The veteran Wall Street Journal reporter discusses her interviews with retirees, the state of the US retirement savings system, and key pain points for retirees and preretirees.
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- [00:01]
A
At Jackson, we've created a digital retirement planning experience with you in mind. Visit Jackson.com to explore our easy to understand resources and user friendly tools that are designed to enable financial professionals and clients to plan a path to financial freedom. Jackson is short for Jackson Financial, Inc. Jackson National Life Insurance Company, Lansing, Michigan, and Jackson National Life Insurance Company of New York, Purchase, New York. Please stay tuned for important disclosure information at the conclusion of this episode.
- [00:33]
B
Hi and welcome to the Longview. I'm Christine Benz, Director of Personal Finance and Retirement Planning for Morningstar.
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C
And I'm Amy Arnott, Portfolio Strategist with Morningstar.
- [00:43]
B
Our guest on the podcast today is Anne Tergosson. Ann is a reporter covering retirement for the Wall Street Journal. Her stories often explore how retirement and preparing for retirement are changing. Today, she writes frequently on Topics related to 400 plans and retirement savings, spending, and legislation. She also writes about employee benefits, longevity and aging. Before joining the Journal, ann worked for BusinessWeek magazine covering personal finance together with colleagues. She recently won a Front Page award from the Newswomen's Club of New York and was a finalist for a Gerald Loeb Award. She was awarded a Knight Badget Fellowship at Columbia University's Graduate School of Journalism and won a Best of Night Badget Award. In 2006, Ann started her career covering local news at the Philadelphia Inquirer. Ann, welcome to the Longview.
- [01:34]
D
Thanks for having me.
- [01:36]
B
Well, thanks so much for doing it. You and I have talked for a long time and it's really exciting to have you here. We want to talk a little bit about your background because you were a local news reporter before you began to focus on personal finance and retirement planning. Can you talk about what your initial attraction to journalism was?
- [01:53]
A
Yeah.
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D
So I was thinking about this when I saw the questions that you sent over. And I think I've actually wanted to be a journalist ever since I was little. And like, I weirdly credit the Mary Tyler Moore show for that. I mean, I would just love that show.
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C
Oh, that's great.
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D
I loved her. I wanted to be like that. And I always had a thing about journalism, so it was like a thrill when I got to try it out. And I got to try it out in this fantastic newsroom at the Philadelphia Inquirer. It was the suburban newsroom, and there were just all sorts of kind of characters in that newsroom, including the guys who covered the cops and a guy who covered the Mafia. And it was just so riveting to be like, in that room. And I feel that way about every newsroom I've been in. It's just, it's an exciting environment.
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C
So what motivated your switch into personal finance and then to your current focus on retirement planning?
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D
Yeah, so that was. I did this fellowship program at Columbia University at the business school. And it's a really great journalism fellowship program. It's billed for mid career journalists. I certainly felt like more early career than mid career and was very lucky to have been selected to do that. So they send you to the business school for a year for free and they actually pay you to go. And I kind of knew that if I wanted to stay in New York, which I did, I knew that business journalism would be a good way to go. So that's why I applied for that program. And then I was really surprised at how fascinating I found the curriculum there and how I just, I loved accounting, I loved finance, I loved macroeconomics, I did not like microeconomics. And so that was sort of my segue into covering business and economics. And really I was most fascinated by the nexus between macroeconomic data and the financial markets. So that was sort of a springboard for me to focus on personal finance and investing.
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B
When you think about your work today on an ongoing basis, what would you say are your major sources of inspiration when deciding what to work on next? Because I assume that you do have a fair amount of leeway when deciding what stories to pursue, pursue or when you're pitching stories. So can you talk about that process?
- [04:25]
D
Yeah, so I feel like that process has actually changed a bit recently. I mean, I still really focus on, you know, academic studies and sort of interesting, you know, what's new and interesting out of academia that relates to real world investing decisions and you know, behavioral economics. Those studies are always, you know, great to look to 401k data also, I mean, we're sort of in the era of big data. And I love the fact that a lot of the 401k providers, especially Vanguard, has really made a dedicated effort to publishing a huge amount of data. And so that data is available to be mined by reporters like me. So that's been great. And then, you know, any kind of like regulatory changes, legal changes like Secure 2.0, those are big sources. But I think also just like we're increasingly focused on two other things that are somewhat new here. One is surprisingly, what's going on in the news. So, for example, we published this week an article about the financial disclosures of J.D. vance and Tim Waltz and what we can kind of learn about them as investors, which may or may not shed any light on them as people, but it kind of does, actually. So that's very much like in the news. So we're very focused on what are the broader news stories and is there a personal finance take on those? The second thing is that we're always trying these days to bring real people, their voices and their experiences into what we're writing so we can write a story about, I don't know, investing for retirement or whatever. But it's increasingly important for me to have interview people and talk to them about how the things I'm writing about affect them in the real world.
- [06:18]
B
I want to follow up, or we want to follow up on several of the things that you've just referenced, Ann, but you mentioned that Vanguard How America Saves Report, which I always dig into and find so interesting too. As you think about the latest dispatch, are there any things that kind of jump out at you in terms of headlines from that research?
- [06:38]
D
Yeah, I think that as you know, as you guys Both know, the 401k world changes very slowly. So you just see these sort of long term trends sort of gaining momentum from one year to the next. And I think the automatic features, the automatic enrollment, the defaults into target date funds, the automatic escalation, you just see those things really gaining momentum. And I think the increase in savings rates and, you know, savings rates just keep climbing and climbing and climbing. And so I think that that kind of stood out to me. And the other thing that stood out to me is the flip side of it, which is the leakage. And so, you know, I feel like we have a system for better or worse, where there's sort of a, you know, that the leakage is kind of a feature here, like as opposed to, and I may be not remembering this right, but I feel like in the UK and in Australia, those systems are a little more airtight. You know, it's, you put the money in and you can't really get at it. But here there's a growing tolerance for allowing people to reach in and take the money when they, when they need it. So it's kind of interesting. So those are the things that kind of stood out to me.
- [07:56]
C
So you mentioned the growth in auto enrollment and automatic investment options. Do you think those defaults have been a success story overall?
- [08:09]
D
I think they have, but I think that, you know, it's sort of, I felt like this with when my children were really little, you know, like any milestone they reached, like, oh, he's walking. Well, it was sort of, or he's toilet trained. You know, it was Sort of like it was like two steps forward and one step back a little bit. So I feel like those defaults are. And the automatic stuff is similar for the reason I described, which is the leakage. So you get these higher savings rates, you get more people swept in, you get more people saving, you get all these exciting outcomes. But there's always this ebb and flow. And I think just because people, a lot more people are being swept in at a lot younger ages, people who have lower salaries, and that's all wonderful, so they have retirement saving. But I think there is a tendency of people, when they kind of hit a rough patch financially to kind of say, oh, gee, look at that. I've got this account sitting there. Can I get to it? And especially when people change jobs or leave a job, that's a real opportunity for them to get to it. So I think we do see that two steps ahead, one step back, kind of dynamic a little bit.
- [09:22]
C
Do you think that flexibility that people have to tap into their 401 balances is helpful in the sense that if they didn't have that kind of safety valve, maybe they wouldn't participate or wouldn't contribute as much?
- [09:38]
D
I think that's probably true. Right. That's always the argument. And you hear that from policymakers and politicians and you hear that from academics who focus on this, that there is that element to it. And I do feel like when you have the automatic situation, you know, especially if you have people who have like, you know, fairly low salaries, like, you see this with the state run programs where, you know, the state auto, IRA programs, you know, there's no employer match, they're sweeping people in. Often these are people who have fairly low paying jobs. And so it is a little bit of a benefit to them to being able to tap that account when they have a financial emergency. I mean, I just remember back when I was in my 20s, and, you know, what if I needed a new set of tires or whatever, you know, it was like I, you know, I had to, I had to be pretty disciplined to weather those storms. And I do remember, you know, borrowing money from friends. So I think, you know, I think that it's helpful to people to have that as a sort of a pseudo emergency fund at times.
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C
Yeah, I remember back in my 20s, when I was first starting my career at Morningstar, there was a real trade off, you know, because obviously wanted to contribute as much as I could to the 401k, but, you know, I wasn't making that much money to start out with, so it was, you know, sort of like every percentage increase in my contribution rate. I would definitely feel it and, and had to think about, you know, what would I do if, you know, I have to make a large purchase or something like that.
- [11:19]
D
Yeah, absolutely.
- [11:22]
B
Anne, I wanted to ask about the system more broadly because you referenced the fact that there is this leakage. People change jobs a lot. I read that the typical worker has like 12 jobs in his or her lifetime, and it seems like among younger workers that job hopping is alive and well. So I guess, you know, as you step back and think about it, and I know you're not a policymaker, but does it make sense to have our retirement plans tethered to our employers in the way that they are?
- [11:53]
D
Yeah, that's a really good question. I mean, I feel like, you know, I periodically, I'll write stories where I interview people who are sort of experts on our retirement system and say, you know, like, if you could do anything here, what would you do? And I feel like a lot of times the answer is if we could start over from scratch, then it might make sense to do something that's more like the Australian system or, you know, I'm not an expert on that, but I think, you know, I think the idea there is that you just have this one account and as you change employers, the money continues to feed into it, but just from a different source. Right. And so it kind of sticks with you throughout. And I believe they have fewer opportunities to take money out and maybe even not any. So, I mean, a system like that, I think, you know, it probably makes a lot more sense in an era where we do have this incredible mobility in our labor force system. However, I don't think we really have the opportunity to go back and redesign it from scratch. I think we kind of have what we have, and I become increasingly aware of the political factors in this country and how they influence our design of these benefit programs. And I just think that there is this real faith in the private sector in this country. And so the idea that you could have some kind of centralized, almost like government, not necessarily government run, but government backed centralized system where you have one account, and I feel like people in this country are very, very skeptical of that. So unfortunately, I feel like we kind of have what we have and it does have imperfections, but building off that has proven to be pretty successful for those who have access to retirement plans at work, which is not everybody thinking.
- [13:43]
B
About that idea of sort of the way I've heard it described as kind of like a thrift Savings Plan for the masses. And the Thrift Savings Plan is the plan for federal government workers that's very minimalist, all index funds. I've heard that idea floated as a possibility as kind of an alternative to 401s. Like if you work for Microsoft and they field a gold plated 401k, by all means you can stick with it. But this other plan would be an alternative if your home team's plan was crummy. What do you think about that idea? I feel like there's some enthusiasm among researchers who I talk to for that sort of thing.
- [14:24]
D
Yeah, that's an interesting idea. And I feel like that's sort of what Mark Ivry and David John were trying to get at with that national Auto IRA program that they proposed back, I don't know when, but maybe like 2005 or maybe 20 years ago. And that I think it has a lot of merit. Now obviously we're seeing a lot of states kind of step up and because we don't have the, I guess the political backing to do a national program like that, you know, states are, some states are kind of adding their own programs to that effect, as you guys both know. You know, California, Oregon, Illinois and a bunch of others increasing numbers. So that's kind of interesting and admirable. But it definitely, a state by state approach leaves this sort of patchwork effect where some people have access and others don't. So I think there would be a lot of merit to doing something like that if we had the political kind of backing to do it.
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C
And as you alluded to, there are also a lot of workers out there who don't have a company retirement plan that they can contribute to at all. So have you seen any other innovations that might help this problem?
- [15:44]
D
Yeah, I mean, I do think, you know, you've got the examples in the UK and Australia where it's sort of like everybody in the pool, you know, they have like, they have like mechanisms to make this mandatory and that's what happens. And I think in Australia actually, I mean, maybe correct me if I'm wrong, but it's something like a 12% savings rate or maybe 15%. It's high. The combination of the employer and the employee. So, you know, I feel like ultimately something like a national auto IRA program might be a good idea for us if we really want to ensure that everybody has access. I mean, of course there's a lot of people who, who dispute that everybody needs access, but you know, that's, that's another whole issue. But it does seem like it's a benefit to people to save, whether they end up using it for retirement or for emergency savings. It seems like there's a benefit there, right?
- [16:44]
C
I guess if you were, you know, a lower middle income person, but you were still able to consistently contribute to a traditional IRA or a Roth ira, as long as you started early enough and were consistent, you could end up still in a pretty good place.
- [17:02]
D
Yeah, I would think so. And then, you know, I think there's also the issue of if you're a lower income, you know, person who is sort of permanently at that lower income spectrum, then it might be really helpful to have a pot of money for the kind of bumps along the way as well.
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B
So I've concluded though, that payroll deductions are just incredibly powerful as a mechanism. You know, just to the extent that you can remove frictions, make it as painless as possible. It seems like people really respond to that. So, wanted to ask about the defaults that are part of plans. You recently wrote that default Savings rates in 401 s are going up. Can you talk about why that's happening and also whether there are any potential negative side effects?
- [17:53]
D
Yeah, I do think that that's happening in at least in decent part because of auto escalation programs that, you know, where you get automatically enrolled at, say, you know, 3% or 5% of pay. And then every year the plan automatically bumps you up by usually by 1 percentage point. So you just kind of ride that escalator up and over time. It's interesting because like, I think maybe over 10 years ago, I wrote an article about how in plans that did not have automatic enrollment, where, you know, plans that left it up to people to enroll themselves and choose their own savings rates, you ended up with higher savings rates than you did with the automatic enrollment where you started at 3%. So that was definitely, you know, there was evidence there that when, that when people were swept in under automatic enrollment, even if left to their own devices, they would have enrolled themselves at a higher savings rate. They just stayed at 3%, you know, which is exactly sort of what automatic enrollment banks on is this inertia that people have to not mess with it. Right. Just to go with where they're put. So anyway, so it's kind of interesting though, now what you see when you look at savings rates in plans with automatic enrollment is that they're actually higher than in plans that don't automatically enroll, where people choose their own savings rate. So I think that's a big statement about the power of automatic enrollment over time and combined with automatic escalation to get people to higher savings rates. So that's all very positive. You know, I do think that the negatives are number one for people who are swept in and automatically escalated who literally aren't paying attention and are very hands off. I think there is some evidence that some of those people take on more debt. And often it's mortgage debt. You know, it's the sort of positive side of debt, but maybe not always. It could be possible for people to run up higher credit card bills because they're saving more aggressively in the 401k without even realizing it. So that's sort of one negative. And then another negative is that for people who might have chosen a higher savings rate on their own, maybe it causes them to save less than they could have. But, you know, as I said, the evidence seems to be that that's happening less and less over time.
- [20:24]
C
As part of your work at the Journal, you and your colleague Veronica Dagger have collaborated on a series of profiles about real world retirees with a variety of asset levels, which, and I found those profiles just fascinating to read. How do you find those people and get them to agree to be profiled and, you know, open up about their financial situation?
- [20:51]
D
So for the first two that we did, the first one was just this monster hit. It was like, it was a really, a big revelation to us. And I should give my editor, Jeremy Olson, a lot of credit because he was the one who kind of identified this as, hey, let's just try it, let's see how it goes. And it was really, really successful. So what we did was we looked for four people who fit into a certain category. Like, the first one was four people who retired on about $2 million. I think the second one was 1 million. And since then, we've done a lot of different permutations. Like we looked for people who are retiring, living on boats or RVs, living abroad, single women, so all sorts of different categories. And the first two that we did, it was really, really hard to find people because like you said, these stories, people have to be willing to really open up their financial lives to us. How much do you have in, you know, retirement accounts? How much do you have in brokerage accounts? How much income do you have, Social Security, et cetera. So it's really, it's not everybody who wants to do this, but it's interesting because there are certain people who really do. And I think, you know, they, they fall into two categories. One is that they're just Very open personalities. And you know, I think this is increasingly, you can kind of see this on social media, people willing to share. There are certain people who just really are willing to share. And then the second is people who are just really into investing and this is something they love to think about and they're happy to talk about their own because this is just where they spend a lot of their mental energy. And so we really had to cast like a massive wide net to find people at first. And just like sending out dozens and dozens of emails to people we knew and professional networks and just any association group that we could think of, the American association of Individual Investors comes to mind. You know, napa, the, the Advisor network. So we, we really had to cast a wide net and then we got smart and we said like, hey, why don't we embed in our articles some reader feedback form that says like, would you be willing to be interviewed for future installments? And we can gather some basic information about people, get them to fill out information about how much money they have, where they live, et cetera. Just are they working at all? Are they fully retired? Just the basics. And that has been huge. So at this point it's a lot more efficient. We can generate leads on people from that form. Every time we run a new installment of this, we put a new feedback form on. So we just have a lot of people who have raised their hands and they're willing to do this.
- [23:39]
B
One of the things I love about this series, Ann, is that you've got these great accompanying photos of people in their homes with their dogs, whatever. It's just lovely to see. Are you able to go on site to interview the people and if so, what does that in person aspect add to the reporting process?
- [23:57]
D
I wish we did. I wish we had the, you know, the budget and the time for that because it would be. First of all, it'd be really, really fun just to meet these people in person. Right? They're fantastic people usually. And it's just amazing how interesting everybody is. You know, I mean, again, this is a self selected group who's raising their hands to be interviewed for the Wall Street Journal. But everybody's got their own story and it's just so. Especially when you're talking to people who are in retirement age, whether they're working part time or not. I mean, you know, they've lived a lot of their life and they have a lot of very interesting things to say. So totally fine and it would be great. Especially recently I interviewed a woman up in Nantucket And I was like, oh, wouldn't it be great to go interview her in person? But no, not happening. So we, we spend a lot of time with them on the phone, like probably more than they bargained for. But they're all very willing to keep the conversation going. So we'll have like a, I mean, I often have like an hour to two hour conversation with people. Like at first it'll be more like a half an hour and then it'll be the hour to two hours and then we do a lot of follow up conversations to make sure we got everything right. So at the end of the day I feel like we've spent like, you know, an afternoon with these people, the equivalent of an afternoon.
- [25:16]
B
Have the interviews sparked ideas for things that you should be working on? Like, oh, I should follow up and do an article on X beyond this profile that you're doing of the specific investor. Have you gotten story generation from this?
- [25:33]
D
So no, I feel like not so much. And maybe that's just because we haven't. I feel like what we get is ideas for future installments of this particular format with the four people who've maybe fit into a different format. So not as much as you'd think. We did do one on regrets, and that was a little bit sparked by this. And it's not because these people tend to have regrets. In fact, I find generally they don't. But just sort of thinking through that aspect that a lot of them bring to the table of looking back on life and kind of thinking about where they've benefited and, you know, lessons that they've learned. So that kind of sparked that thought. But otherwise I can't think of any great examples.
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C
And you've said that one thing that has really jumped out at you from doing the series is just how happy people are in retirement even when they don't have a lot of financial assets. Can you talk about any common threads behind what makes people happy or, you know, things that tend to make people more successful at thriving in retirement?
- [26:44]
D
So it's interesting because like I was. You guys maybe are more aware of this. I was not aware of a lot of the academic literature in the field of psychology, the literature on adult development. So, you know, I feel like we're very good at understanding that across the early part of the lifespan there's a huge amount of development that occurs. I mean, most obviously the physical growth that occurs, you know, with children and even into the 20s. And then there's, you know, the period of childhood and adolescence and you know, we're very good at understanding that developmentally people change over time. But I feel like where I never really understood is that people continue to grow and develop in adulthood. And you know, you go through these different phases of life and there's a lot of like academic literature that shows that over time people become more positive, more glass half full. Their life satisfaction tends to grow. They tend to focus more on the things that really matter to them. Whether it's the friends and family members that matter to them, the activities and pursuits. They just sort of pare down their life a little bit to the things that they really want to focus on. I very much have seen that with this series that people are, they're really very positive and they tend to sink their time into things that bring them a tremendous amount of satisfaction. It doesn't mean that they're like super happy and joyful all the time, but I just feel like there's a lot of life satisfaction that these people exemplify.
- [28:21]
C
That's great. You know, you've probably read some of the academic research on this U shaped curve of life satisfaction during different phases of life where people tend to be very happy, you know, maybe in their 20s and 30s and then experience a downturn during middle age and then another upturn as they get older. So I guess that would maybe help to explain why so many people do tend to be happy and content during retirement.
- [28:55]
D
Yeah, I absolutely think so. Yeah. And interestingly for myself, just coming out of that sort of down trough period where, you know, it's not unhappiness, but it was like maximum juggling, you know, between like work, children, elderly parents and just feeling like wow, it's just, you know, pedal to the metal all the time and then you can kind of stop and smell the roses a little bit or whatever. You know, that's sort of a cliche, but I think there's something to it.
- [29:25]
A
At Jackson, we've created a digital retirement planning experience with you in mind. Visit Jackson.com to explore our easy to understand resources and user friendly tools that are designed to enable financial professionals and clients to plan a path to financial freedom. Jackson is short for Jackson Financial Incorporated Jackson Jackson National Life Insurance Co. Lansing, Michigan and Jackson National Life Insurance Co. Of New York Purchase, New York.
- [29:51]
B
I've heard retirement researchers say that because self reported happiness among older adults is so high, we don't have a retirement crisis. Do you think that's a bridge too far?
- [30:04]
D
So that's really interesting actually. And I mean, I guess yes and no. I mean, in some ways I feel like this series, we've interviewed some very wealthy people, people with 5 million, 2 million, you know, a lot of money. But we've also interviewed people who live on Social Security alone and single women, some of whom have significant savings, some of whom have like no savings. And so interestingly, what I see with the people who don't have a lot of savings is that yes, they have concerns and they are financially a little bit anxious, but they really have these kind of great ways of making do, you know, which maybe is not their preference or choice. Like one woman, I love talking to her. She was really inspiring. She came home to Ohio where she grew up. She never thought she would come back there. And she's sharing a two family house with her brother who owns the house, he's her landlord, so that's a bit of a financial safety net for her. Other people who just gave up their houses entirely and they are traveling as nomads or living on boats. You know, there's an element of risk there, but there's also an element of like kind of making do in a way that brings them joy, traveling. So it's interesting, this idea that their resourcefulness and their glass half full and their focusing on what they enjoy, they're able to kind of cobble together something that sort of works even on a very low budget. So from that perspective, I can see what you're saying, you know, that maybe the U shaped curve and the increasing satisfaction and happiness of later years kind of acts against this idea of a financial, of a retirement crisis. But at the same time, you know, some of these people. Absolutely. There's one person, I won't say who she was, but you know, I just thought, oh, a reader had said, I'd like to donate some money to this person. And I thought, oh, this person isn't going to want that. This person's very independent. But I contacted the person and said, would you be open? And the person said, absolutely, I need all the resources I can get. So despite the positive attitude and the resourcefulness, the person absolutely felt they needed more money, which is sort of the opposite, which sort of speaks to the retirement crisis idea of being real.
- [32:37]
B
So people are working longer. It seems like the border between work and retirement is becoming really porous. And it seems like one thing that people with tight financial resources can perhaps lean back on is working in some fashion. So can you talk about that? Whether that's been a common theme among the people you've profiled, that they haven't just like said, I quit and hung it up that they've continued to do a little bit of work or a lot of work into their later years.
- [33:06]
D
So I've seen a little bit of that. I mean, I feel like what I really haven't seen is the people who, like, they're working full time, you know, in whatever field like financial services or something, you know, and then they say, well, I want to go part time, so I'm just going to downshift in this career job that I have and work, you know, fewer hours and give up some money. I really haven't seen that a whole lot, but I've seen a huge amount of is people kind of shifting gears, for example, and really often it's volunteer work where I see people focusing on, you know, this one woman I spoke to, the woman who I mentioned in Ohio who's living with her brother, she began volunteering at this LGBTQ community center and she just loved the work. So she's like 30 hours a week or something there. You know, it's almost like a full time situation. So I've seen that kind of thing quite a bit. Or another woman I just interviewed is extensively renovating a house in Nantucket, and she's got contractors, but she does a huge amount of the work herself. So I've seen a lot of that kind of thing where people really focus on something they love.
- [34:19]
C
You've also said that you've been inspired by how retirees often reinvent themselves in retirement. Do you have any other examples of kind of reinvention later in life?
- [34:33]
D
Yeah, I do have some. Like, there was this couple who I so enjoyed talking to them, Harry and Anne. And they live on a boat and they sail around the Caribbean. And for them, that was something that Harry had always really been interested in, learning to sail and sailing. And so I can't remember even what their career jobs were, but they left those behind and now they're. They're sort of full time sailors. There's another woman, Deb, in New Jersey, I love talking to her too. And she was a consultant and then she became a caregiver to her parents. And then she got laid off and she just decided to go full time into sort of an entrepreneurial, caregiving type of work that she does. So those examples come to mind of people who just like, out with the old, in with the new, you know, something unrelated. I mean, not to say they're totally unrelated. Deb is still a consultant, but just in a totally new realm, which is caregiving. But I think the more common thing is people building on old interests or even career interests, but in whole new ways. Like there's this one doctor I loved who I spoke to and he had learned to play the guitar as a teenager and then just had never had time to play. Then he retired and he went back and took guitar lessons. And now he performs in London on the street. When he travels, he'll do like street performing. So that's like a sort of a reinvention. But at the same time, as a doctor, he has really doubled down on a lot of like medical related pursuits. Like he volunteers at a clinic in rural New Mexico to help the one and only doctor there get some time off. And he still goes to medical conventions. He's so he's very, still very involved in his actual career. But he said it's interesting. He said he loves to read academic studies, medical studies, about topics that have nothing to do with his specialty. So it's almost just like, like he's learning anew and encountering new aspects of medicine as opposed to what he was, you know, very focused on in his career. So I find like, that's kind of what people do often and sell. Like the guys who were in finance, they might actually do some trading on their own accounts, you know, that kind of thing.
- [36:53]
B
So those are all really inspiring stories. But how about the pain points for people in retirement you mentioned? Obviously, scarcity of resources is a huge pain point, but there. Are there any other specific aspects of retirement that you found that people struggle with?
- [37:09]
D
Yeah, I think that for people who aren't yet 65, health insurance is a pain point. Most of the people I've spoken to who retire like around age 60, they tend to have a lot of resources, they have a lot of savings, so they can kind of afford it. But at the same time, I feel like they're a little bit shocked by how much it's costing them to either continue COBRA or to do Obamacare. I think property taxes in high tax states, I mean, one really powerful yes, sitting in Illinois, me in New York, our first couple of installments, we started to notice that like a lot of the people we were speaking to as prospects had moved from high tax states like New York to specifically North Carolina. We're like, what is it with North Carolina? And then we talked to them about their property taxes. It was like, you know, one guy who told me he, this was. He left New York in 2015. He was paying probably almost $20,000 a year in property taxes in North Carolina for a much bigger house, like on the seacoast. He was paying Like I can't remember, like 3,4000 a year. Wow. So, yeah, yeah. Insurance costs.
- [38:26]
C
It's beautiful in North Carolina too.
- [38:29]
D
Yeah, yeah. And he loves, you know, being out in the water and his lifestyle. His grandchildren were down there, he was having a great time. So I think those are the pain points. Yeah, yeah.
- [38:41]
C
One of your recent pieces in the series looked at retirees who are living off of income from rental properties. What were some of the key takeaways from those conversations?
- [38:53]
D
Yeah, I think some of the key takeaways for me and I've seen this in my own life because my sister and my brother in law have a rental property. I feel like it's a lot of work. You know, there's this sort of idea that people have that they can just kind of scoop in, buy up, you know, a house or you know, and just turn it into rental income. But I think that where it often works best is when you have people who have the skills. My brother in law, for example, is he's a contractor. He sort of does a lot of different kinds of work, but he has a lot of contracting skills. He can go in and if there's a problem, he gets a call and he has to go fix it or find someone who does it. So I think it's for people who have the expertise. I think it's a better risk reward for them. Or for example, there's one guy I spoke to who doesn't really have those skills, but he's willing to pay, you will pay property managers to do this for them. Because I think there's a lot of time and work that has to go into some of these properties, into refurbishing them, sometimes keeping them competitive in terms of market rents and getting those calls in the middle of the night. Also dealing with like tenants who just maybe they don't pay the rent, maybe they just up and leave and don't give you adequate notice. And so I think there's, there's a lot of risk involved in that as well as the risk that we all know of in the stock market. So I think it just depends kind of what makes you more comfortable.
- [40:26]
B
So dialing out to discuss retirement decumulation more generally. You recently wrote about the age at which people are retiring and you were examining data from the Employee Benefits Research Institute. What are some of the key trends there?
- [40:42]
D
Yeah, so I found this. I've covered that Employee Benefits Research Institute study for years. And the great thing about that study is that I think it has been going on since like 1990 or something, and they ask a lot of the same questions year to year. So you get this, like, directly comparable kind of data points. And over time, I just started noticing, like, everybody says they want to retire later than they. They do on average. So that, to me, that was kind of interesting. And we turned that into an article that really resonated with readers. And I think that data shows, like, people want to retire at, say, 65, 66, but they really are retiring more like 63. And often, you know, people speak to these unexpected things that happen, whether it's layoffs, often it's health issues, whether it's their own health or somebody else's health, and they need to provide caregiving. So I think that's just a very, very persistent, common trend over time. Even over Those years, since 1990, we have seen the US retirement age go up. But often I think people are maybe a little overoptimistic about how long they can continue working.
- [41:57]
C
So one topic that has come up frequently on this podcast is how difficult it is psychologically for people to switch from saving to spending. Is that something that you've encountered in speaking to actual retirees?
- [42:15]
D
Absolutely. I think for big savers, that is a huge thing. And I think some of it. It's so interesting. I think it's a habit, right, that they. I spoke to one guy who retired at 60, and he had a decent amount of savings, approaching $5 million. And he said. He said that it was just, you know, that he had just lived for so long. He'd lived very well, but he had lived relatively modestly compared to what his means would have allowed. He had nice house, but it wasn't like the big giant house. He had decent cars, but they were, you know, I can't remember whether they were used cars. It just. He didn't go in for the big, splashy lifestyle. Instead, he saved a lot of money. And he said when he started his retirement, he spent a huge amount of time, you know, running around, comparison shopping and, you know, just looking for, like, the cheapest paper towels. And. And then a couple months into this, he just thought, like, this is ridiculous. He's like, this is making me miserable. I can't pinch every penny. I have to have some faith that, you know, that I've saved adequately. And so luckily, in his case, he really did, you know, same thing with a guy I spoke to recently who has a real estate portfolio that is worth, you know, approaching $10 million. I think he said it just was a habit. And he and his friends would sit around and They've sort of had conversations like that where they're sort of coaching each other on how to let go a little bit and have more fun. And he's now starting to travel more. But he said it just took him time to realize that he was going to have enough.
- [43:55]
B
So another dimension of retirement decumulation is just figuring out how much you can spend. You and I have talked about this. And also just figuring out how to extract cash flows from a portfolio. You've been in savings mode and you've been accumulating. It's kind of a different problem versus the spending in retirement. I'm curious, when you talk to actual retirees, do you hear from them that that is something they struggle with, Figuring out safe spending rates as well as how to construct their decumulation portfolios.
- [44:28]
D
Hmm, that's interesting. I feel like some people have a strong preference for like income investments, I think just because that kind of does the work for you. So if you've got dividend paying stocks and bonds, et cetera, they live off the income. The Social Security, if they're lucky enough to have a pension, that's kind of the way they go. Other people, I think they have financial advisors who do that for them or help them with it. And then other people who are living off Social Security, that's just the way it is. Right? I mean, it's a monthly budget. So you know, wait, nobody's really coming to mind in terms of speaking to that issue of like, how in the world do I approach this? I feel like white people have their guided ways. You know, whether it's income investments or a financial advisor, I feel like they seek some kind of help often.
- [45:23]
C
I think you touched on this earlier, but you know, we hear a lot about the notion of a retirement crisis in the United States. What's your take on that question?
- [45:35]
D
So I had that same question which was, and I can't remember when this was. It might have been more than 10 years ago where I was in this beat covering retirement. And I heard constantly about the retirement crisis. The retirement crisis. And you know, you hear a lot about that. You hear about it from academics, but interestingly you also hear about it from industry. You know, you hear about it from financial services companies that have a huge interest in having people save more. Right. Because that's where they, they make their. So I thought to myself, like, is this real or is this something that's kind of being overblown or overhyped? And so I wrote this Q and A with Alicia Manal, who is an economist at Boston College, and she publishes something called nheri, but I forget what it stands for, but it's this, like, index of, you know, what percentage of the American population isn't saving enough to be able to support their current lifestyle? And the numbers bounce around, but it's often like about half is the estimate. So she believes there is a retirement crisis if only half of the public. When she looks at the underlying numbers, she can see, based on government data, that only half of the public can support their current level of consumption in retirement on their savings. So that to her is a retirement crisis. And then on the other end, I had Andy Biggs, who's a more conservative voice. He's an economist, too. I think he's at the American Enterprise Institute. Not positive about that, but they both very generously gave their time to me, and we did this on email. So I would ask them each a question and they would answer on email. So we cobbled together a Q and A about whether or not we have a financial crisis. And they're both looking at the data that's out there, and they're both coming to different conclusions. So it was interesting, you know.
- [47:23]
C
That's interesting.
- [47:24]
D
Yeah, yeah, it really was. And I feel like it's often worth maybe understanding that, like, I mean, Andy isn't arguing that nobody is in crisis.
- [47:34]
C
Right.
- [47:35]
D
I mean, there's absolutely people out there who are in crisis, but he's saying that it's not nearly as pervasive as what people like Alicia, who her yardstick of crisis is, can you support your current level of consumption? Well, often people in retirement do cut back their spending. So I found it interesting and I thought, well, maybe there's a midpoint that is more accurate or maybe it just depends on your perspective.
- [48:04]
C
Yeah. And David Blanchett, our former colleague at Morningstar, I think, has taken the position that talking about a retirement crisis just isn't a helpful way to frame the issue. I mean, maybe there are problems that we can address, but it kind of drifts into fear mongering endpoints. And, you know, I think just it's such an emotionally fraught topic for a lot of people that I think if you can kind of dial down the panic level, it seems like that might be helpful.
- [48:42]
D
Yeah, I think it's an interesting point. It's so smart. And I also do feel like when people are far away from retirement, it's just such an abstraction. You just can't even imagine it. And you also can't ever imagine having enough money. You know, when you sort of do the math in your head and you think, okay, this is I need to save, you know, whatever $1 million or just something that sounds impossible. And one of the really interesting conversations I've had with one of my colleagues here, Laura Saunders, who covers tax, is that, you know, as you hit, say 50, 55 or whatever, the compounding, assuming the market goes up, starts to just really work for you in a very powerful way. And so I think it was one of David Blanchett's co authors on some research, it was Michael Kitces, I think, who pointed this out to me, that at age 50, assuming the market, you know, goes up by whatever 7%, I can't remember the number, you know, over time, age 50, you're only going to have about half of what you're going to end up with at age 65. And don't hold me to that exact number. But Even at age 50, you might look at what you have and say, I'm never going to get to where I need to go. But assuming the market goes up and there's that powerful compounding effect you will, or your odds of coming close to that are decent. So I just think that you have these numbers in your head like, I need to save a million, I need to save one and a half million, whatever the number is. And it just sounds impossible. And so people get very fearful.
- [50:15]
B
And I'm curious, in your time on this beat, how has your perspective on your own retirement changed?
- [50:24]
D
I think that I still don't really think very concretely about my own retirement, which maybe is kind of a mistake. You know, I feel like I'm finally at a point where my kids, my youngest is in college now and I've been taking care of my parents, but unfortunately my dad died this year. So the kind of upside of being in a different phase of life is that I actually, I think, will have time to think a little bit more concretely about retirement for myself and what that might look like. And I also feel like one thing that has occurred to me on this beat is I remember when I was like 40 or something and I was covering retirement and I would talk to people who were in or near retirement and be like, how did you ever figure it out? How did you ever. And one thing that I didn't understand at that point is that your perspective just changes over time. I mean, again, getting back to that adult development idea, I had this idea that you become an adult and your development just freezes in time and you have the same perspective as a 40 year old, as you do as a 50 year old and a 60 year old, which is not true. You know, I feel like as you get older, you become a lot more mindful of like a. What matters to me, what things do bring me joy, you know, where do I enjoy spending my time, who do I enjoy being with? And you also become a lot more conscious of this idea of legacy. And I saw this with one of my grandfathers was very, very like generative, it's a weird word. But he was interested in giving back. He spent a lot of time with his grandchildren. He spent a lot of time on like community focused events. And so, you know, I just feel like over time some of these things take care of themselves. And I'm a real planner. So I'm inclined to be a little bit panicked about the fact that like I haven't planned, I don't know what I want to do. I never know what I want to do, which is part of the reason why I'm a journalist, because you don't have to know what you want to do. You can kind of hop from topic to topic and interesting person to interesting person. And, you know, so I am a little bit worried about my lack of concrete planning. But I think I also just have to have faith that over time these things take care of themselves and your perspective changes and you sort of, your attention just naturally shifts over time.
- [52:44]
C
Yeah. And if you're fortunate enough to have a long life, you know, retirement, you could have 20 or 30 years in retirement. So within those couple of decades, you might go through many different phases and interests and you know, maybe you spend the first couple years after retirement just, just playing golf and having fun and you know, and then once you kind of get that out of your system, maybe you need a little bit more structure after the first few years. But it seems like you don't really have to have everything figured out the day you retire.
- [53:20]
D
Right. Which is part of the great thing about retirement, I think, because I. For so long I've been doing the, you know, wake up, like, you know, just like shoot out of bed, get the kids ready, you know, take everybody to school. It's this crazy structured, overly structured life. And there's a certain amount. I was talking to some friends recently about how much fun it is just to wake up and kind of poke around, like have some coffee, just drift around, you know, do the. Do a little of this, do a little of that. Yes, eventually get ready for work. So I don't know, I just think there's a real pent up desire on my part to just be a little bit more like Freeform.
- [54:01]
B
Well Ann, we've loved spending time with you today. Thank you so much for taking time out of your busy schedule to be with us. We've really loved this conversation.
- [54:10]
D
Oh thank you. It's been really fun to talk to you guys.
- [54:13]
C
Thanks Ann. This has been great.
- [54:19]
B
Thank you for joining us on the Longview. If you could please take a moment to subscribe to and rate the podcast on Apple, Spotify or wherever you get your podcasts. You can follow me on social media, Ristine Benz on X, orinebenz on LinkedIn.
- [54:38]
C
And Amy Arnott on LinkedIn.
- [54:41]
B
George Cassidy is our engineer for the podcast and Carrie Grecick produces the show Notes each week. Finally, we'd love to get your feedback. If you have a comment or a guest idea, please email us@thelongvieworningstar.com until next time. Thanks for joining us.
- [55:01]
A
This recording is for informational purposes only and should not be considered investment advice. Opinions expressed are as of the date of recording and are subject to change without notice. The views and opinions of guests on this program are not necessarily those of Morningstar, Inc. And its affiliates, which together we refer to as Morningstar. Morningstar is not affiliated with guests or their business affiliates unless otherwise stated. Morningstar does not guarantee the accuracy or the completeness of the data presented herein. This recording is for informational purposes only and the information, data analysis or opinion it includes or their use should not be considered investment or tax advice and therefore is not an offer to buy or sell a security. Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from or related to the information, data analyses or opinions or their use. Past performance is not a guarantee of future results. All investments are subject to investment risk, including possible loss of principal. Individual individuals should seriously consider if an investment is suitable for them by referencing their own financial position, investment objectives and risk profile before making any investment decision. Please consult a tax and or financial professional for advice specific to your individual circumstances.