51茶馆

An editorial in the聽New York Times聽yesterday started off this way: 鈥淭here is no overstating how unprepared Americans are to retire.鈥� You agree?

I think this is a really serious situation, yes. But one theme of our book聽Falling Short聽is that we could fix things pretty well within the current financial infrastructure that we have.

What鈥檚 the fix?

You need to get people to save more and work longer. We鈥檙e big proponents of working longer. If you claim your Social Security benefit at 70 instead of 62, your monthly benefit is 76 percent higher, which means you鈥檝e got this base of income adjusted for inflation that goes on for as long as you live. We need to聽. We need to cover the 50 percent of private-sector workers [who don鈥檛 have a pension or IRA]. And we need people to recognize that their house is a major asset they could use in retirement, either by downsizing or taking out a聽聽or some way of tapping their equity. But nothing I鈥檝e said means we鈥檝e got to scrap the current system and start all over. This is all just fixing the components of the existing system.

And what about Social Security, which some say can鈥檛 survive because of the retiring Baby Boomers?

In terms of Social Security, there鈥檚 no news. We always knew the Baby Boomers were going to retire. They were born between 鈥�46 and 鈥�64, so they can鈥檛 be a surprise to anybody. We鈥檝e always known that at some point the Social Security Trust Fund was going to be exhausted as the Baby Boomers retired. I think that鈥檒l happen in 2032, and that鈥檚 of concern. Sometimes policymakers characterize that as the program going bankrupt, which is not correct because even when the Trust Fund is gone, payroll taxes already on the books will be enough to pay 75 percent of the benefits. So when people, especially young people, tell you the program鈥檚 鈥渘ot going to be there for me,鈥� that鈥檚 wrong. It鈥檚 important to clarify that the exhaustion of the Trust Fund does not mean the program disappears. It means you need to either cut benefits to fit into revenues, or increase revenues to cover promised benefits, which is what I prefer. But it鈥檚 not like Social Security will be gone.

You鈥檙e known for conveying hard truths about retirement funding. Are the truths getting harder?

I think they鈥檙e becoming more generally accepted. I don鈥檛 think the situation has become worse. It鈥檚 just that we haven鈥檛 taken the steps necessary to make it better. But I think with our help, the message has really gotten out鈥攖here are big flaws in the retirement income system. People are going to retire with inadequate money. That鈥檚 a tragedy because people don鈥檛 have a lot of options at that stage. I think our message of working longer has also gotten out, or at least the public debate has moved to this notion of working as long as you can.

鈥淎s long as you can鈥濃�攖hat鈥檚 an important caveat.

You鈥檙e absolutely right. There鈥檚 about 30 percent of the population for whom it鈥檚 very difficult to work longer. That鈥檚 why, when people say, 鈥淥h, let鈥檚 raise the age at which you get full monthly benefits,鈥� it sounds harmless. What that means is that people who have to retire early [for example, due to health] are going to see their benefits cut more and more.

What can people do?

Most people do have control over how long they鈥檙e going to work. They should plan on working five more years, let鈥檚 say. And that means convincing your employer that you鈥檙e engaged, you want to be considered for promotion, you want to be involved in training. You can鈥檛 sit at work and look at property in Florida and achieve that. You have to persuade the employer that you鈥檙e there for another 10 years, and that should start in your 50s. And obviously, if your employer provides a 401(k), you should join it. You should contribute enough to get the full employer match, and you shouldn鈥檛 take your money out.

When you have this pile of money, you can鈥檛 help but think, Do I want my kids saddled with these [student] loans or do I want to make sure I鈥檓 secure in retirement? We generally say make yourself secure, first. It鈥檚 like on the airplane, putting on the oxygen mask: put your own on first and then help your child. Make sure you鈥檙e not going to be a drain on your children鈥檚 resources once you retire.

Was there a moment when you decided 鈥渢his is what I鈥檓 going to do with my career, with my life鈥�?

Students sometimes ask me, 鈥淒id you always want to be an economist?鈥� The answer is no. I was a normal person, I wanted to know where the party was, what the latest dance or music was. I didn鈥檛 do all that well at Wellesley College. I was basically in the bottom third of the population in terms of abilities. I had reconciled myself to that. People live happily being in the bottom third. But then I got out and I started working, and I enjoyed working. Ended up at Brookings [the Washington think tank] in the 1960s, and said I want to do this. I had two children and went to Harvard in the late 鈥�60s, early 鈥�70s, and got a Ph.D. Then I went to work at the Federal Reserve Bank of Boston for 20 years and became research director halfway through. The thing about the Fed is if you wrote on monetary policy you were scrutinized to death. If you wrote on tax policy or the budget or infrastructure or pensions, nobody paid much attention to you. So I just went off on my own. I had written my thesis at Harvard on the impact of Social Security on personal savings, and I continued writing some books on related topics.

Then around 1993, after Bill Clinton was elected president, somebody called from Washington and said: Would you like to be Assistant Secretary of the Treasury for Economic Policy? I said, without thinking about it very much, sure, that sounds great. Because I thought, If I stay at the Fed I鈥檓 just going to be doing the same thing. So I went off to Washington for five years.

After that, I didn鈥檛 know what I was going to do, and 51茶馆 came down and sort of saved me. So no, it鈥檚 a very circuitous route. I got here, and I was used to having many phone lines and a card that said what I was going to do all day. I didn鈥檛 have 20,000 appointments.

So an RFP came across my desk to set up a center on retirement in 1997. And I thought, I know these topics, I can do this. I had never applied for a grant. I worked for the Federal Reserve鈥攚e just printed money. I worked for the Treasury鈥攜ou want money, you just tax people. Applying for grants was just not something I did. I had a young senior who helped me here, and we put in this grant for $5 million, a huge amount at that time. We got it, and that鈥檚 our center.

It鈥檚 an academic center. Why do you spend so much time on briefs, blogs, media interviews, etc.?

We feel it鈥檚 not just important to figure out the answers for ourselves and write journal articles. We believe that translating research results into coherent, digestible pieces is really our mission. That鈥檚 why we鈥檙e on the phone, why we spend a lot of time issuing briefs and so forth. We care a lot about that. It鈥檚 not just studying the stuff in the abstract; it鈥檚 trying to tell people what鈥檚 important, where things are OK and where they鈥檙e not.

People don鈥檛 want to think about whether they鈥檒l have enough money in retirement. They feel like they鈥檝e failed, they just go in a fetal position. So we need to let people know there are millions like them. And we need our legislators to take some action so that more people can be secure when they stop working.