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Kitchen Table Politics: Can Americans Afford To Retire?

The 2016 presidential race has been filled with excitement and drama. But there’s another layer to American politics that gets less attention: how issues of home, family and wallet intersect with electoral politics and public policy.

In this podcast series, we’re tackling some of the issues that matter most to Americans’ daily lives and how everyone from the presidential candidates to local governments are taking on these topics.

Kitchen Table Politics comes in five parts, with each episode tied to a different stage in life from birth through retirement, which is our topic this time. (The series, hosted by yours truly, can be found within the FiveThirtyEight Elections podcast feed. If you already subscribe, you’ll get all the episodes.) We look into the changing ways that Americans old and young are saving for retirement; how to measure whether people have saved enough; and the shift away from saving through pension plans to defined contribution plans including 401(k)s. Plus of course we’ll look into what the 2016 presidential candidates have proposed when it comes to funding the future of Social Security.

Joining me this week are Andrew Biggs, a resident scholar at the American Enterprise Institute; and Christian Weller, a senior fellow at the Center for American Progress and author of the book “Retirement on the Rocks — Why Americans Can’t Get Ahead and How New Savings Policies Can Help.”

The Great American Retirement has been part of the classic American Dream. It’s a time when people who’ve worked hard their whole lives are supposed to have the time and money to enjoy hobbies, family … maybe even travel. Of course, the idea of retirement is relatively recent. Through the 1800s, many people simply worked until they became feeble or died. In 1935, the federal government passed the Social Security Act; the average life expectancy for an American man was just 58 years in 1930. As more context, in 1940, just 54 percent of American men made it to the age of 65. As of 2010 it was 76 years. And a person who was 65 in 2010 could expect to live another 19 years, into his or her mid-80s.

Fear of not having enough retirement savings has become the top financial concern of Americans of all ages, according to a 2014 Gallup Poll, more than not having enough money for monthly bills, medical expenses or college costs.

In an era of longer lifespans, we start by asking if the Great American Retirement is in crisis, or simply undergoing a major change. More than 40 percent of Americans age 55-64 have no savings in any type of formal retirement account. The median retirement savings for households headed by someone in that age bracket is just $14,500, according to 2013 figures from the Federal Reserve, analyzed by the National Institute on Retirement Security. For households in that age bracket with formal retirement accounts, the figure rises to $104,000.

There are different types of retirement plans, too. Defined-benefit (DB) pension plans pay the same amount each month once you’ve vested. But defined-contribution (DC) plans, like 401(k)s, rely on how well those contributions do over time as investments — and of course, whether people withdraw the money early, with or without a penalty. In 1989, two-thirds of working-age households with a workplace retirement savings program in place had pension plans. By 2013, that figure was just 40 percent. Andrew Biggs and Christian Weller debate whether the shift from DB to DC retirement plans has hurt people’s long-range security.

We also take a look at proposals from the candidates in the 2016 race. Donald Trump has said emphatically that he would not cut Social Security, breaking with some conservatives and Republicans who want to curb spending on the program and entitlements broadly. He says he’ll raise more money by broader economic reforms and trade protection. Hillary Clinton says she will tax wealthier Americans beyond the current Social Security payroll tax cap, which is currently $118,500. This would provide additional revenue to offset the fact that the number of active workers to retirees is declining.

Throughout this series, we’ve collected your stories and played excerpts of each episode. Below, listen to a few phone calls we received.

Sammy: “I still don’t really see … how I’m gonna put away enough money to live for the rest of my life.”

Chloe: “I asked a financial advisor how to plan for retirement, he laughed at me.”

Matt: “We have a very robust pension system, but I’m also not counting on it for our retirement.”

Jordan: “How am I gonna be able to do it when I can barely get by myself?”

Parker: “We can’t count on the government to be able to provide for us.”

Bobby: “We don’t want to ever — ever — end up in the same position as our father.”

To hear any of the five episodes in this series, including more individual stories, go to fivethirtyeight.com/kitchentable.

Here are some highlights from our conversation on retirement. These have been lightly edited for clarity.

Is there a crisis?

Farai Chideya: Is the Great American Retirement in crisis or is it just undergoing a change?

Christian Weller: I would definitely call it a crisis. The share of households who are ill prepared for retirement, who can expect to have to make substantial cuts when it comes to retirement in their spending, is growing. I prefer the estimates from the Center for Retirement Research at Boston College, and these show that at this point about 52 percent of working age households fall short of what they need in retirement. It used to be 31 percent in the early 1980s.

Other estimates also show that younger cohorts are worse prepared than older people were at the same time and same ages. So the problem is getting worse and there’s a substantial share, a large minority, possibly a majority, of households who are not well prepared for retirement, meaning they will have to make choices between paying their health-care bills and paying their utility bills when it come to retirement.

Farai Chideya: Andrew, what do you see in the big picture?

Andrew Biggs: Well, I’m always the optimist. Christian is right that there are different studies and different data sets you can look at. If I’m talking to an ordinary person, I’d sum the question up in two ways. First, is there a retirement crisis among today’s retirees? Are today’s retirees suffering from broadly inadequate incomes? All the evidence on that says no. Today’s retirees have lower poverty rates than working age, or Americans with children. They’ve had much higher-income growth over time than working age Americans have, and if you ask retirees, they’ll tell you flat out that they’re doing OK. Seventy-nine percent of retirees tell Gallup they have enough money to live comfortably.

But then you ask, are today’s workers saving as much for retirement as yesterday’s workers or as today’s retirees had? And again, the evidence on that is pretty encouraging. Participation in retirement plans is a lot higher today than it was in the past. If you go back to the mid-’70s, around 40 percent of Americans had traditional pension plans … today the Social Security Administration estimates based on tax data that about 62 percent of Americans are saving for retirement. We also have more money being saved for retirement today than ever before. Both Americans and their employers together are contributing more towards retirement plans than in the past.

Clinton vs. Trump

Farai Chideya: I wanna ask you about how politicians stack up on retirement concerns. Particularly the candidates in the 2016 race. So Donald Trump has said emphatically that he will not cut Social Security, which cuts against the grain of some conservatives and some Republicans. Hillary Clinton says that she will tax wealthier Americans beyond the current Social Security payroll tax cap, which is currently just under $120,000, and that would provide additional revenue to the system. So, Andrew, what stands out about these plans? Do either of them or neither of them have the answer?

Andrew Biggs: I think probably neither of them do. Donald Trump’s plan for Social Security, such as it is, is really just kind of waving a magic wand. You know, economic growth is not going to fix Social Security. We can’t make the problem go away without raising taxes or cutting benefits. So, if he wants to be a realistic candidate he has to start coming up with some realistic plans. I mean leadership is about making tough choices. The easy choices have already been made.

Hillary Clinton, I think has tried to dodge the Social Security issue, largely. Through pressure from Bernie Sanders on the left, she’s come out and said she won’t cut Social Security benefits for anybody. She’s looking to raise benefits for people at the bottom. The problem is, she’s talked about raising both the maximum taxable wage that is subject to Social Security taxes and making investment earnings subject to Social Security taxes. To do that and keep the system solvent, without cutting benefits, essentially you’re looking at us having very close to the highest marginal income taxes in the world and close to the highest rate on investment income.


Kitchen Table Politics is produced and edited by Galen Druke, Simone Landon and Jody Avirgan. Tony Chow and Lucina Melesio helped with production. Subscribe to the FiveThirtyEight elections podcast in iTunes or by searching “fivethirtyeight” in your favorite podcast app.

Farai Chideya is a former senior writer for FiveThirtyEight.

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