March 18, 2016

Socking away money for your 401(k) used to be the mark of responsible adulthood, and retirement was a dream full of comfort and stability. But in the past few years, our perception of life after work has changed dramatically.

We’re on the precipice of a crisis fueled by two huge demographic groups: baby boomers and millennials.

Thanks to the boomers, we’re creeping up on a wave of retirement. And millennials promise to create another wave in 30 or 40 years.

“We’re going to see an uptick in poverty,” says Teresa Ghilarducci, a professor at The New School who specializes in retirement. There will be “more middle class people becoming poor when they’re elderly, and a lot of changes in the elderly population in terms of their anxiety, nutrition, planning, and inheritances.”


Ghilarducci blames the failure of our retirement system on the move away from pensions and towards the “do-it-yourself” system that is the 401(k), a system that didn’t even exist until the 1970s.

The 401(k), Ghilarducci says, was invented mostly for highly-paid executives to help pad their pension plans. Some companies began offering every worker a 401(k) in addition to traditional pensions. But as they became more popular, they began to replace pensions, instead of supplementing them. And, according to Ghilarducci, that came at a cost to workers.

“It’s as if we transferred our dentistry system to do-it-yourself teeth pulling.” It may work for trained dentists, but not for anyone else.

But Ghilarducci has a solution. She believes employers should be required to pay into a professionally-managed retirement fund for employees. Instead of a lump sum received at 65 years old, a retiree would get a stream of regular payments that would last her entire life. It’s a 21st century take on pension plans.

Of course, Ghilarducci needs buy-in from employers, governments, and workers. But in the past two years, over twenty states have introduced bills that propose various forms of mandated pension systems, in addition to social security. “I’m perceiving a huge amount of momentum… for a federal solution,” she says.

Business, retirement, Teresa Ghilarducci

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