WEBVTT - Teresa Ghilarducci Talks Retirement, Pensions 0:00:02.440 --> 0:00:06.800 Bloomberg Audio Studios, podcasts, radio news. 0:00:07.160 --> 0:00:08.800 I'm here with Teresa Gillarducci. 0:00:08.880 --> 0:00:11.520 She is the professor of economics at the New School 0:00:11.560 --> 0:00:12.719 for Economic Research. 0:00:13.520 --> 0:00:15.720 And you are a thought leader. 0:00:15.760 --> 0:00:17.960 A lot of folks on Wall Street go to you 0:00:18.160 --> 0:00:19.920 for advice on how to deal with what they think 0:00:19.960 --> 0:00:24.680 of as a retirement crisis. But there are some divergences 0:00:24.960 --> 0:00:27.639 here and what people think the solution should be. You 0:00:27.640 --> 0:00:30.639 think of Larry Fink, for example, Blackrock is now working 0:00:30.920 --> 0:00:35.519 to announce partnerships initiatives over years to even work on 0:00:35.720 --> 0:00:39.240 the average age of retirement, encouraging people to work longer. 0:00:39.320 --> 0:00:42.960 You recently came out with a book debunking a lot 0:00:43.080 --> 0:00:46.440 of that, thinking what's the discrepancy here? 0:00:46.840 --> 0:00:49.840 Well, if I was in a room with Larry Fink, 0:00:50.040 --> 0:00:54.600 I would say, look, what you do at Blackrock is 0:00:54.640 --> 0:00:58.760 a solution that you're managing money. You're managing wealth for 0:00:59.360 --> 0:01:01.480 all America to say for their retirement. 0:01:01.520 --> 0:01:02.760 That's a really good thing to do. 0:01:02.800 --> 0:01:06.560 And Americans need to build more wealth for retirement. But 0:01:06.720 --> 0:01:11.240 if you think, mister Fink, that people working longer, maybe 0:01:11.280 --> 0:01:14.680 just a one year or two years longer, will mean 0:01:14.760 --> 0:01:18.840 that people won't go into their old age without being 0:01:18.920 --> 0:01:23.119 downwardly mobile into poverty from being a middle class worker. 0:01:23.280 --> 0:01:28.720 Or you think that working longer will maintain people's living standards, you'll. 0:01:28.440 --> 0:01:30.720 Be wrong for eight reasons. 0:01:31.319 --> 0:01:35.560 The first reason is that he and everyone else might 0:01:35.640 --> 0:01:39.040 think it just makes sense to work longer because people 0:01:39.120 --> 0:01:43.760 are living longer, and that's actually not true. Not everyone 0:01:43.959 --> 0:01:47.960 is living longer. There is a slice of the population 0:01:48.640 --> 0:01:52.720 that have had good health care, have had the kinds 0:01:52.760 --> 0:01:55.720 of jobs that enhance their health and their well being 0:01:55.800 --> 0:01:59.640 and their skills, and they're living longer. So white men 0:01:59.760 --> 0:02:03.520 are definitely living longer than they had before. But there 0:02:03.520 --> 0:02:06.920 are some parts of our economy, of our America where 0:02:06.960 --> 0:02:11.919 actually the longevity is going down. Deaths of despair, the suicides, 0:02:12.000 --> 0:02:15.480 the opioids, the addiction, even the kinds of jobs that 0:02:15.520 --> 0:02:19.720 people have are foreshortening their lives. So the inequality of 0:02:19.760 --> 0:02:25.080 longevity and healthy longevity is really disproportionately distributed, so they 0:02:25.120 --> 0:02:26.080 can't work longer. 0:02:26.800 --> 0:02:28.640 I have six others. 0:02:29.160 --> 0:02:31.240 But let's harp on that for a moment, because a 0:02:31.240 --> 0:02:33.639 lot of people on Wall Street believe that working longer 0:02:33.760 --> 0:02:37.040 is a solution just because of how healthcare has gotten better. 0:02:37.120 --> 0:02:39.760 Let's get a little more specific on who it doesn't 0:02:39.800 --> 0:02:43.440 work for and how large is that population not being 0:02:43.480 --> 0:02:44.320 addressed if. 0:02:44.160 --> 0:02:44.920 This is a solution. 0:02:45.320 --> 0:02:48.239 Well, I've been in these rooms for about forty years. 0:02:48.560 --> 0:02:51.639 That's how long my career has and ever since I started, 0:02:52.000 --> 0:02:55.520 when Social Security was being cut and pensions were going 0:02:56.560 --> 0:02:59.440 on the wayside and there were more four one k's 0:02:59.480 --> 0:03:02.160 or do it your self type systems, we all knew 0:03:02.200 --> 0:03:05.000 that people would not have enough given that we did 0:03:05.000 --> 0:03:09.079 not have a good pension system, and so people thought, well, 0:03:09.400 --> 0:03:11.840 for the small group of people who are blue collar 0:03:11.880 --> 0:03:16.399 workers brick layers, they will be able to be disabled earlier, 0:03:16.400 --> 0:03:20.240 but for everybody else, the work is going to get easier. Well, 0:03:20.320 --> 0:03:24.600 in forty years, that has not happened. Now think about 0:03:24.639 --> 0:03:27.919 it for a while. A lot of jobs that aren't 0:03:28.000 --> 0:03:32.400 blue collar work have become pink collar. And pink collar 0:03:32.560 --> 0:03:35.800 jobs are jobs that women do very much in the 0:03:35.840 --> 0:03:40.360 service sector, taking care of older people, taking care of children. 0:03:40.760 --> 0:03:44.560 That requires a lot of heavy lifting, a lot of 0:03:44.600 --> 0:03:47.160 stooping and bending, a lot. 0:03:47.000 --> 0:03:49.560 Of physical activity. 0:03:49.360 --> 0:03:53.720 And those jobs break bodies down. There are also a 0:03:53.720 --> 0:03:58.200 lot of light blue collar jobs or semi pink collar 0:03:58.280 --> 0:04:01.400 jobs that require a lot of engagement with the computer, 0:04:02.040 --> 0:04:05.880 and the computer has made some aspects of jobs easier, 0:04:06.040 --> 0:04:12.120 easier on the knees, but the requirements for intense concentration, 0:04:12.760 --> 0:04:17.720 keen eyesight, and actually be able to speed up your 0:04:17.720 --> 0:04:21.680 work because of increased surveillance has actually made those jobs 0:04:21.720 --> 0:04:22.320 harder too. 0:04:22.640 --> 0:04:24.160 And when you add up all the. 0:04:24.120 --> 0:04:30.560 Complexities involved in jobs that older people have, those jobs 0:04:30.600 --> 0:04:36.960 actually can raise cortisol levels, increase inflammation, and cause more 0:04:37.520 --> 0:04:40.800 metabolic disorders and early death. So a lot of the 0:04:40.920 --> 0:04:44.400 jobs that people have are expected to have in old 0:04:44.440 --> 0:04:47.360 age are actually the kinds of jobs that will break 0:04:47.680 --> 0:04:51.320 bodies down and are accelerating sickness. 0:04:51.400 --> 0:04:53.000 That's the impact on the individual. 0:04:53.160 --> 0:04:55.440 It seems like the retirement burden in a lot of 0:04:55.440 --> 0:04:59.240 ways has shifted from employers to the individual. At the 0:04:59.279 --> 0:05:02.200 same time, there's a question of whether a lot of 0:05:02.240 --> 0:05:05.440 these jobs will be supported at that age level. 0:05:05.560 --> 0:05:07.200 How do you see that conundrum working out? 0:05:07.400 --> 0:05:12.400 Yeah, well, there are some businesses that are hoping that 0:05:12.440 --> 0:05:15.080 they'll be a big supply of desperate. 0:05:14.720 --> 0:05:16.239 Older workers ready to work. 0:05:17.080 --> 0:05:19.880 Those jobs are in home health care and personal care, 0:05:20.520 --> 0:05:24.560 So we have one of the biggest industries. Everybody is 0:05:24.720 --> 0:05:29.160 in this personal care. They're destined to add over a 0:05:29.200 --> 0:05:33.240 million jobs in an economy where we'll only add about 0:05:33.240 --> 0:05:35.920 eleven million jobs over the past ten years. A good 0:05:36.000 --> 0:05:38.920 ten percent of the new labor force will be these 0:05:39.040 --> 0:05:43.039 jobs and just that one occupation. But business services janitorial 0:05:43.120 --> 0:05:47.080 work again disproportionate amount of older workers. I think those 0:05:47.080 --> 0:05:50.640 businesses really like the fact that these workers are very, 0:05:50.760 --> 0:05:55.400 very cheap, and they're very desperate. The fact that jobs 0:05:55.440 --> 0:05:58.240 are breaking down their bodies really isn't of a concern 0:05:58.720 --> 0:06:02.680 of the employers, but we will. Part of the crisis 0:06:03.200 --> 0:06:05.000 is that the lucky ones. 0:06:04.760 --> 0:06:06.400 Will be able to get those jobs. 0:06:06.960 --> 0:06:10.920 The part of the crisis that I think that many experts, 0:06:10.960 --> 0:06:15.680 including Larry Fink, doesn't understand is that most people cannot 0:06:15.720 --> 0:06:20.880 decide when they retire. They are retired. They don't retire. 0:06:21.040 --> 0:06:24.279 The verb and the agent is really on the wrong person. 0:06:24.760 --> 0:06:27.720 So fifty two percent of people who say they are 0:06:27.760 --> 0:06:31.599 retired said they were forced to forced to retire either 0:06:31.680 --> 0:06:35.760 because of their knees or their metabolic disorders, or just 0:06:36.000 --> 0:06:39.200 the stress of the job they couldn't take, or they 0:06:39.240 --> 0:06:41.880 had to take care of their spouse, but also because 0:06:41.920 --> 0:06:45.080 they were pushed out or laid off. So this idea 0:06:45.200 --> 0:06:49.560 that workers can just decide to work longer is also 0:06:49.640 --> 0:06:53.120 a myth, because most people cannot decide whether or not 0:06:53.160 --> 0:06:53.800 to work or not. 0:06:54.040 --> 0:06:56.680 There's another problem here, whether you're on a state or 0:06:56.760 --> 0:07:01.640 local pension plan. Here, pensions across the entire country are underfunded. 0:07:02.240 --> 0:07:04.440 There's a separate issue as well with the four oh 0:07:04.440 --> 0:07:06.760 one K plans, where a lot of people are not 0:07:06.800 --> 0:07:10.720 saving enough to retire on. Whose responsibility ultimately is it 0:07:10.760 --> 0:07:13.400 to make sure that there's enough money for this population 0:07:13.840 --> 0:07:14.440 to retire on. 0:07:15.760 --> 0:07:17.920 We can say that it's up to the eighteen year 0:07:17.960 --> 0:07:22.800 old to be financially literate and to understand that when 0:07:23.560 --> 0:07:28.160 they get out of school or start work. Because half 0:07:28.560 --> 0:07:31.600 of eighteen year olds don't even try college, it's not 0:07:31.680 --> 0:07:36.320 an appropriate place for them. And you could think so 0:07:36.560 --> 0:07:38.760 it could be on the individual, and then people say, well, 0:07:38.800 --> 0:07:41.040 it's up to their parents to tell them what to do. 0:07:41.440 --> 0:07:44.239 Well, a lot of children did not pick the right parents. 0:07:44.600 --> 0:07:48.360 That was a joke, But it's really important for us 0:07:48.360 --> 0:07:51.760 as society to realize that there's a lot of wealth, 0:07:51.840 --> 0:07:55.160 including knowledge and wealth actual wealth that it's handed down, 0:07:55.520 --> 0:07:57.160 and a lot of debt and a lot of burden 0:07:57.240 --> 0:08:00.320 that is also handed down So the answer to your 0:08:00.480 --> 0:08:04.320 very point of question, whose responsibility is, I'm going to 0:08:04.360 --> 0:08:09.440 say it is unreasonable to think that is just the person, 0:08:10.240 --> 0:08:16.360 individual person's responsibility. No other country requires the individual to 0:08:16.520 --> 0:08:20.680 do so much for their retirement planning than the United States. 0:08:20.920 --> 0:08:22.640 So when we moved away. 0:08:22.360 --> 0:08:27.000 From traditional pension plans where if a worker worked, they 0:08:27.000 --> 0:08:29.560 were just put into a plan that money was managed 0:08:29.560 --> 0:08:31.840 for them, they couldn't choose, and we moved to four 0:08:31.920 --> 0:08:34.800 oh one ks where the worker had to decide how 0:08:34.880 --> 0:08:38.319 much to invest, whether or not to invest, and had 0:08:38.320 --> 0:08:40.720 to choose an employer that actually provided the plan. 0:08:41.040 --> 0:08:42.160 Most employers do not. 0:08:42.840 --> 0:08:46.920 Most people now eighty three million workers right now today 0:08:46.960 --> 0:08:51.320 as we're talking, are employed, but they're not employed in 0:08:51.440 --> 0:08:53.840 any kind of setup where they can save for work. 0:08:54.200 --> 0:08:57.599 So the employer doesn't even have to have any responsibility 0:08:57.640 --> 0:09:01.080 for it. And the government's responsibility is to give a 0:09:01.120 --> 0:09:06.200 tax deduction to an employee that happens to save. Well, 0:09:06.200 --> 0:09:10.080 who are those They're the highest paid and they have 0:09:10.320 --> 0:09:14.080 the sort of the best employers. So the tax deduction, 0:09:14.200 --> 0:09:18.880 the government's responsibility for savings is only going for the 0:09:19.040 --> 0:09:23.400 very top, So that eighty percent of our two hundred 0:09:23.400 --> 0:09:27.400 and seventy billion dollars we spend the government spends on 0:09:27.520 --> 0:09:30.080 retirement savings is going. 0:09:29.800 --> 0:09:32.480 Eighty percent of that is going to the top. Twenty's 0:09:32.480 --> 0:09:33.400 got a. 0:09:33.080 --> 0:09:35.440 Call to eliminate the tax deduction. 0:09:35.559 --> 0:09:42.320 Now, yes, my colleague Delicia Manel and her Republican counterpart 0:09:42.840 --> 0:09:45.480 came together to call out what I'm calling out, So 0:09:45.520 --> 0:09:50.200 we're agreement there. This is a very expensive and regressive tax, 0:09:50.600 --> 0:09:54.000 but it does help some people save for retirement. 0:09:54.480 --> 0:09:57.239 So why get rid of something where. 0:09:57.160 --> 0:10:00.120 If it works for one slice of the population. All 0:10:00.120 --> 0:10:03.920 I'm saying is, don't leave the eighty three million people 0:10:04.360 --> 0:10:08.720 who don't have access to retirement plans out of this 0:10:08.960 --> 0:10:12.880 big bonanza. So perhaps we can put a cap on 0:10:12.960 --> 0:10:17.000 it and make it less expensive and more efficient by 0:10:17.080 --> 0:10:19.480 not giving away thousands of dollars a. 0:10:19.480 --> 0:10:20.840 Year to people who don't need it. 0:10:20.920 --> 0:10:24.960 So we could cap it, but we also could broaden 0:10:25.000 --> 0:10:28.840 it so that everybody can get some help from the government. 0:10:28.880 --> 0:10:29.679 I'm still going. 0:10:29.520 --> 0:10:33.199 Back to your question whose responsibility is it? And it 0:10:33.240 --> 0:10:39.280 is the system's responsibility to get people to accumulate money 0:10:39.880 --> 0:10:45.000 for their retirement earlier in life they accumulate Social Security credits. 0:10:45.440 --> 0:10:46.560 You know, there's no. 0:10:46.559 --> 0:10:49.000 Choice about whether or not you're in social security or not. 0:10:49.440 --> 0:10:54.600 We would even the most conservative Republican would not call 0:10:54.720 --> 0:10:59.000 for making social security voluntary. So why do we have 0:10:59.080 --> 0:11:02.720 our pension system, the other vital part of the pension 0:11:02.760 --> 0:11:07.840 system accumulating money, having it managed by Black Rock or whoever, 0:11:08.920 --> 0:11:12.120 why would we make that voluntary? And the countries around 0:11:12.120 --> 0:11:16.000 the world that have a system that's graded A or 0:11:16.120 --> 0:11:20.199 A minus, there's an international grading system of pension systems. 0:11:21.520 --> 0:11:25.800 None of their advance funded, pre funded part of their 0:11:25.840 --> 0:11:27.640 pension system is voluntary. 0:11:27.720 --> 0:11:30.720 This idea of voluntary social security. There are real concerns 0:11:30.800 --> 0:11:33.320 under the surface and how to fund social security for 0:11:33.400 --> 0:11:36.080 the long term. A lot of concern outside of the 0:11:36.080 --> 0:11:39.760 baby boomer generation on how America's money gets filtered into 0:11:39.800 --> 0:11:41.520 America's youth as they age. 0:11:41.800 --> 0:11:42.480 What's the fix? 0:11:42.679 --> 0:11:47.120 Yeah, so the fix for social security is to put 0:11:47.160 --> 0:11:50.560 more revenue in it. We are past the point where 0:11:50.559 --> 0:11:52.760 we can fix social security. 0:11:52.200 --> 0:11:53.280 By cutting benefits. 0:11:53.720 --> 0:11:56.720 That is a non starter because the benefits for social 0:11:56.720 --> 0:12:01.240 security are keeping almost all of the people on social 0:12:01.240 --> 0:12:06.200 security above the poverty level, everybody below a certain amount, 0:12:06.280 --> 0:12:09.760 so it is a vital anti poverty device. Cutting it 0:12:10.160 --> 0:12:14.080 would just make the system even more grim, so we 0:12:14.160 --> 0:12:15.560 need more revenue into it. 0:12:15.920 --> 0:12:19.079 The Social Security actuaries back in the day. 0:12:19.040 --> 0:12:21.320 I mean this is in the thirties again renewed in 0:12:21.360 --> 0:12:25.360 the forties, fifties, sixties said that social security will need 0:12:25.520 --> 0:12:29.720 revenue from general revenues. We should not just be dependent 0:12:29.800 --> 0:12:33.480 upon the payroll tax to fund the whole thing. So 0:12:33.520 --> 0:12:37.880 there are many, many easy fixes to social security, and 0:12:37.960 --> 0:12:40.200 it really requires just more money. 0:12:40.400 --> 0:12:41.720 Pot from other pots. 0:12:41.760 --> 0:12:44.760 Capital gains, lots of other places we can get social 0:12:44.760 --> 0:12:48.520 security revenue. The key thing as an economist is whether 0:12:48.679 --> 0:12:51.360 or not the amount of money needed will break the bank, 0:12:51.480 --> 0:12:54.559 you know, will break the economy. And we're nowhere near that. 0:12:54.720 --> 0:12:59.000 We spend much less in terms of our GDP on 0:12:59.040 --> 0:13:00.800 the elderly that their countries. 0:13:01.160 --> 0:13:03.400 Even if we fully funded. 0:13:03.080 --> 0:13:06.840 Social security, we would still be under the international averages. 0:13:06.920 --> 0:13:09.400 It's less than half of a percentage. 0:13:09.720 --> 0:13:11.760 It's interesting to hear you say that capital gains can 0:13:11.760 --> 0:13:13.360 help find social security. 0:13:13.360 --> 0:13:14.800 How much would that help fill the gap? 0:13:14.840 --> 0:13:17.679 And also wouldn't that be a transfer of wealth from 0:13:17.720 --> 0:13:20.040 the investor class to the broader public. 0:13:20.520 --> 0:13:23.360 Well, you know, the investor class is part of the 0:13:23.400 --> 0:13:27.280 broader public and part of the conversation we've been having 0:13:27.320 --> 0:13:30.000 for the past five years is that if you only 0:13:30.120 --> 0:13:33.360 try to protect the investor class and let them be 0:13:33.520 --> 0:13:37.960 involved in the wealth accumulating part of our economy, the 0:13:38.080 --> 0:13:41.480 investor class may be threatened by the collapse the very 0:13:41.559 --> 0:13:45.160 economy they're benefiting from. So I think with Ray Dallio 0:13:45.440 --> 0:13:50.160 and even Larry Fink, there's a very much a recognition 0:13:50.240 --> 0:13:51.560 from the investor class. 0:13:51.960 --> 0:13:53.320 I was just the Milk And. 0:13:53.360 --> 0:13:58.200 Conference that if we have a wealth building institutions in 0:13:58.240 --> 0:14:00.679 this country, everybody has to be part of it. 0:14:01.240 --> 0:14:03.640 So back to social Security. 0:14:04.040 --> 0:14:08.360 I did a calculation that if Elon Musk paid for 0:14:08.640 --> 0:14:13.040 social Security just on his salary for the entire year, 0:14:13.559 --> 0:14:16.400 and some of his capital gains were taxed to fund 0:14:16.480 --> 0:14:20.960 social security, just one person, it would save one twentieth of. 0:14:21.000 --> 0:14:22.840 The deficit in social security. 0:14:23.440 --> 0:14:27.000 Imagine broadening that out to maybe twenty thousand other people. 0:14:27.520 --> 0:14:30.480 To gently this is not very much. 0:14:30.480 --> 0:14:32.400 You don't have to raise a tax rate to any 0:14:32.480 --> 0:14:37.840 perceptible amount, but just helping share in the funding of 0:14:37.840 --> 0:14:42.400 social security, we could solve that problem overnight. The problem 0:14:42.480 --> 0:14:45.440 with not funding social security and not having an actual 0:14:45.880 --> 0:14:48.680 report to say, hey, it's funded for the next twenty. 0:14:48.440 --> 0:14:50.040 Five years, is it? 0:14:50.040 --> 0:14:55.680 It depresses the savings rates of ordinary Americans. I we're 0:14:55.800 --> 0:15:00.440 finding out in surveys that people are saying, I'm not 0:15:00.520 --> 0:15:04.120 saving for I'm not saving for retirement, I'm not building 0:15:04.240 --> 0:15:09.240 wealth because social security won't be there. The worst as 0:15:09.320 --> 0:15:15.480 the worst cultural norm that you could flame that would 0:15:15.520 --> 0:15:20.040 reduce the savings rate is fatalism, and not dealing with 0:15:20.080 --> 0:15:24.760 social security is inducing a fatalism that is suppressing the 0:15:24.800 --> 0:15:29.200 savings rate, which actually suppresses the motive for people to 0:15:29.880 --> 0:15:31.239 save for their own retirement. 0:15:31.640 --> 0:15:32.680 So it's interconnected. 0:15:33.040 --> 0:15:35.880 So the fix for those eighty three million people, as 0:15:35.880 --> 0:15:38.360 you're talking about, is social security part of that fix 0:15:38.440 --> 0:15:39.240 or is it something else? 0:15:39.400 --> 0:15:42.040 It's social security has to be part of it, but 0:15:42.240 --> 0:15:46.520 there has to be something else, which is much bolder 0:15:46.960 --> 0:15:50.280 than the kind of moving the needle legislation we've seen in. 0:15:50.240 --> 0:15:51.360 The last forty years. 0:15:51.640 --> 0:15:57.280 And almost everybody everybody I talk to agrees, from the 0:15:57.400 --> 0:16:00.960 very highest investor class to the person who just did 0:16:00.960 --> 0:16:03.720 my makeup this morning, is that we need to get 0:16:03.800 --> 0:16:08.880 people saving for their life cycle needs, their retirement earlier 0:16:09.160 --> 0:16:13.440 as early as possible. So as soon as someone starts 0:16:14.040 --> 0:16:17.920 working and having to pay into Social Security is exactly 0:16:17.960 --> 0:16:19.119 the moment they should. 0:16:18.840 --> 0:16:20.920 Start paying into their own account. 0:16:21.360 --> 0:16:24.760 And there is a bill in Congress, not even just 0:16:24.920 --> 0:16:26.960 in the House or just in the Senate, but both 0:16:27.080 --> 0:16:30.120 in the House and in the Senate, and not supported 0:16:30.160 --> 0:16:34.080 by just Republicans or Democrats, but supported by both Republicans 0:16:34.120 --> 0:16:39.840 and Democrats. So it's a bipartisan bi camerole simple fix, 0:16:40.120 --> 0:16:47.640 and that's called the Retirement Savings for Americans Act are SAA. 0:16:47.760 --> 0:16:51.040 And what it does is everybody who's not in a 0:16:51.080 --> 0:16:55.040 pension plan now, So all of your listeners who are 0:16:55.040 --> 0:16:58.080 in the business and selling for one keys to companies, 0:16:58.560 --> 0:17:00.480 this does not apply to them. 0:17:01.160 --> 0:17:03.760 It only applies to all the people. 0:17:04.640 --> 0:17:07.240 Over half of workers who do not have a retirement 0:17:07.240 --> 0:17:11.520 account now and won't next year, that they will be 0:17:11.600 --> 0:17:18.720 automatically enrolled into a government administered pension plan, a national 0:17:18.720 --> 0:17:23.480 pension plan. Automatically they'll save three percent. And if their 0:17:23.520 --> 0:17:27.359 earnings are below the median, so that's half half of 0:17:27.480 --> 0:17:33.840 workers in this eligible set, the government will match five percent. 0:17:34.520 --> 0:17:41.560 And everything we know from behavioral finance, from just case 0:17:41.560 --> 0:17:45.880 studies is that when you include a match, something flips 0:17:46.119 --> 0:17:47.040 in people's brain. 0:17:47.200 --> 0:17:50.160 They're not fatalistic about retirement anymore. 0:17:50.240 --> 0:17:53.200 It's interesting, this sounds very close to what we see 0:17:53.240 --> 0:17:55.840 in some other countries, similar to something like a super 0:17:55.840 --> 0:17:59.160 fund or even a sovereign wealth fund of its own kind. 0:17:59.240 --> 0:18:01.360 For America, that kind of idea. 0:18:01.280 --> 0:18:04.480 Is something that you and a lot of the folks 0:18:04.560 --> 0:18:07.680 that are running these big financial institutions would agree on. 0:18:08.920 --> 0:18:10.760 Why would that be the fix? How hard is that 0:18:10.800 --> 0:18:12.320 to accomplish? Who manages the money? 0:18:12.400 --> 0:18:12.640 Yeah? 0:18:12.680 --> 0:18:15.800 What I've been working for a lot of years with 0:18:16.560 --> 0:18:20.560 many different people, many of them you know on Wall Street. 0:18:21.000 --> 0:18:24.199 I co authored a book with Tony James, who was 0:18:24.200 --> 0:18:24.920 the president of. 0:18:24.840 --> 0:18:27.359 Blackstone at the time. This was the fix. 0:18:27.760 --> 0:18:32.600 I wrote a paper with Kevin Hassett, who is Trump's 0:18:32.600 --> 0:18:37.879 top economic advisor. We all agree that we should take 0:18:38.080 --> 0:18:42.439 examples from other countries where they build a capital fund. 0:18:43.600 --> 0:18:47.000 Capitalists love it because it provides a capitalist fund and 0:18:47.040 --> 0:18:50.000 everybody is involved. And the Democrats love it, you know, 0:18:50.040 --> 0:18:54.359 because it actually provides economic security. Republicans should care about 0:18:54.359 --> 0:18:59.040 economic security as well. But there's something for everybody. It 0:18:59.119 --> 0:19:03.479 is like a soft and wealth fund, which is a lot. 0:19:03.600 --> 0:19:07.400 It's an asset that matches a liability, and that liability 0:19:07.880 --> 0:19:11.240 is that a population ages and can't work forever. 0:19:12.440 --> 0:19:15.040 So one big problem that a lot of Americans have 0:19:15.400 --> 0:19:17.879 is getting down, as you've been saying, to save early on. 0:19:18.080 --> 0:19:19.639 Yeah, some people are living. 0:19:19.760 --> 0:19:22.960 Many people are living meant paycheck to paycheck in which 0:19:22.960 --> 0:19:24.359 they find it difficult to save. 0:19:24.520 --> 0:19:27.960 Yeah, I'm so glad you asked that, Sonali. We are 0:19:27.960 --> 0:19:33.000 finding in fact, in practice and in surveys that the 0:19:33.119 --> 0:19:36.879 lowest paid workers are the ones that want to save 0:19:37.000 --> 0:19:41.320 the most. They're not financially illiterate. It's actually the opposite. 0:19:41.400 --> 0:19:46.879 They're keenly aware of the hardships that they're facing, and 0:19:46.920 --> 0:19:50.240 they know that having a wealth cushion is really important. 0:19:51.040 --> 0:19:53.760 I've interviewed Latino mothers in. 0:19:53.800 --> 0:19:57.760 Chicago and Los Angeles as part of a project that 0:19:57.840 --> 0:20:01.520 did that, and they said, to us, give me a 0:20:01.560 --> 0:20:05.800 pension plan that's my own and that my family does 0:20:05.840 --> 0:20:08.600 not have access to, because if I try to save 0:20:08.720 --> 0:20:12.600 anything for my retirement, I have to use it for 0:20:12.680 --> 0:20:16.840 my family members. That's very much part of what wealth 0:20:16.920 --> 0:20:18.080 building is for. 0:20:19.960 --> 0:20:20.960 Different communities. 0:20:21.840 --> 0:20:24.280 So if we don't have a place where people can 0:20:24.359 --> 0:20:28.600 save for emergencies and also save have it protected for 0:20:28.640 --> 0:20:33.359 their life cycle, no one, not except the elites will 0:20:33.400 --> 0:20:36.040 be able to take advantage of compound interest. 0:20:37.080 --> 0:20:39.280 The question of who manages the money, yes, fun like this. 0:20:39.320 --> 0:20:41.240 I think it's an important one because you know, I 0:20:41.240 --> 0:20:42.840 think the money management industry. 0:20:42.520 --> 0:20:45.920 Wakes up every day to try to meet these retirement needs. 0:20:46.400 --> 0:20:48.280 But at the end of the day, are they meeting 0:20:48.280 --> 0:20:48.640 that need? 0:20:49.359 --> 0:20:49.679 Well? 0:20:50.760 --> 0:20:54.479 The retail managers have a very different platform than the 0:20:54.480 --> 0:20:59.280 institutional managers. I'm a big fan of traditional pension plans, 0:20:59.320 --> 0:21:02.560 the ones that state local workers have, and many of 0:21:02.600 --> 0:21:06.280 the unionized workers in big companies or the companies that 0:21:06.280 --> 0:21:08.320 don't want to be unionized, so they provide a good 0:21:08.320 --> 0:21:13.680 plan like the like the non union car companies. What 0:21:13.720 --> 0:21:16.679 they do is they pool money. And this is what 0:21:16.720 --> 0:21:19.320 the government plan would do. The government would not manage 0:21:19.320 --> 0:21:22.040 this money. It would be managed just like the defined 0:21:22.080 --> 0:21:26.760 benefit plans of actually the World Bank or the State 0:21:26.800 --> 0:21:30.919 of California. They would be managed by institutional investors. But 0:21:31.119 --> 0:21:36.399 more importantly that the dollars invested into those kinds of 0:21:36.440 --> 0:21:40.159 pool professionally managed funds will go a lot further than 0:21:40.200 --> 0:21:41.800 the four oh one K money today. 0:21:42.320 --> 0:21:44.240 Right now, we provided. 0:21:43.840 --> 0:21:48.800 A system to American workers that is guaranteed to not 0:21:49.000 --> 0:21:53.159 give them the best fee adjusted risk adjusted rate of return. 0:21:53.440 --> 0:21:57.960 Because the poor individual has to decide where to what 0:21:58.000 --> 0:22:02.639 portfolio to get them on the efficient frontier, completely impossible 0:22:03.160 --> 0:22:05.800 for a worker who has to deal with building a 0:22:05.840 --> 0:22:09.480 building or teaching an English class, you can possibly do. 0:22:09.960 --> 0:22:13.560 So we have a system that is not aligned with 0:22:13.640 --> 0:22:18.440 the capabilities of the people that have the most responsibility. 0:22:18.760 --> 0:22:21.520 So the money would be funded in the sovereign Wealth 0:22:21.520 --> 0:22:24.040 Fund by professional private money managers. 0:22:24.680 --> 0:22:27.280 So there was a recent story in the New York 0:22:27.280 --> 0:22:30.120 Times with the question was the four oh one K 0:22:30.280 --> 0:22:33.359 a mistake? In cites your research, was the four to 0:22:33.440 --> 0:22:34.320 one K a mistake? 0:22:34.480 --> 0:22:37.960 Yes, the four oh one K system was a mistake. 0:22:38.200 --> 0:22:41.679 If it was meant to be the retirement system for 0:22:41.800 --> 0:22:45.439 all Americans, it would have been called the retirement system 0:22:45.480 --> 0:22:49.080 for all Americans. Instead, it was named after an obscure 0:22:50.359 --> 0:22:53.480 part of the IRS Code, and it was meant for 0:22:53.520 --> 0:22:58.040 a completely different purpose. It was meant to supplement social 0:22:58.080 --> 0:23:03.320 security and traditional pension, but because of several factors, it 0:23:03.440 --> 0:23:08.440 became a retirement savings plan for just a privileged part 0:23:08.560 --> 0:23:10.880 of the of the American economy. 0:23:10.960 --> 0:23:13.600 This idea of a pooled retirement plan, a giant. 0:23:13.520 --> 0:23:15.680 Super fund let's call super fun of the super fun 0:23:15.800 --> 0:23:19.119 for the sake of this conversation. For in Australia, this 0:23:19.240 --> 0:23:21.440 is kind of one of the closest examples that there 0:23:21.600 --> 0:23:23.320