Working Longer Won’t Fix America’s Retirement Savings Crisis, Says This Expert | Global News Avenue

Many retirees end up leaving the workforce without having enough savings to survive in retirement. Although some experts believe working longer hours Labor economist and retirement security expert Teresa Ghilarducci believes this could be a solution to the lack of retirement savings.

Instead, she advocates changing the existing retirement savings system to improve savings opportunities. One example is the Retirement Savings for Americans Act (RSAA), a bill that has been introduced in Congress. RSAA automatically enrolls workers who are unable to participate in a workplace retirement plan into retirement accounts. Low- and moderate-income workers will also receive matching contributions and refundable tax credits.

Investopedia spoke with Ghilarducci, professor of economics and policy analysis and chair of the economics department at the New School for Social Research, to find out what changes she thinks need to be made to the U.S. retirement system and how people should save for retirement.

Here are excerpts from the conversation, edited for brevity and clarity:

Investopedia: Why do people have to work longer or delay retirement than they expect?

TERESA GHILARDUCCI: I have to mention the story of two Americas, or two retirements. Some people (a minority, I would estimate about 12% of people between 62 and 70) work longer because they love their jobs. But most working people between the ages of 62 and 70 do so because they don’t have enough money to retire and maintain their standard of living.

We also have to worry about another group of people who can’t work longer and don’t have enough money to retire.

INVESTOPEDIA: Why aren’t you considering extending your working hours to address the retirement crisis?

TERESA GHILARDUCCI: So, I agreed before that longer hours are a good thing because we don’t have to spend taxpayer money or increase savings rates. People can work longer, which is good for workers and the economy. But over time, and as I did more research, I discovered that these three big myths were not true.

First of all, extending working hours is not the best solution because most people No option to work longer hours—A better solution is to help people save for retirement and expand social Security and provide full funding for it.

The second misconception is that work is good for people. My research shows that working has benefits for the people who set pension policy, such as politicians and professors. But their work has status and they can control the pace and content of their work. For those who didn’t, data showed they had higher stress and cortisol levels. For most people, their jobs don’t bring meaning, satisfaction, or personal growth.

The final myth is that working longer hours is good for the economy because you add more workers. If you want to add workers productivity It’s declining and you can’t get productivity without fully employing young people. we will have higher gross domestic product If seven-year-olds work, we have decided that the wealth of our economy depends not just on our output but on the quality of our lives. By saying people should work longer, we are eroding the characteristics of a good economy.

INVESTOPEDIA: Are there other solutions that could address some of the problems with the U.S. retirement system?

TERESA GHILARDUCCI: Half the workforce doesn’t have 401(k) or pension planso they have no way to save for retirement. These people are gig workers or self-employed, working as freelancers or Uber drivers, and they make up a growing share of the workforce.

We should provide workers with the ability to automatically contribute to retirement accounts. That’s why I support a bill in Congress (RSAA) that stems from the following research: Kevin Hassett I did it.

Investopedia: While people wait for Congress to act, what’s the best way to save for retirement?

TERESA GHILARDUCCI: If you’re in your 20s and 30s, saving 3 to 4 percent of your salary for the rest of your life should maintain your standard of living while supplementing Social Security. When that 3% compoundyou will be able to replace approximately 45% to 50% of your income.

If you start at age 40, you have to save 10%. When you are over 50, you must save 50% of your salary.

How do you know you’re on track? you want to save 10 times your salary In your retirement accounts. If you are 30 years old, you want 1x your salary. By the time you’re in your 40s, your salary should be about 4 times that.

The rule of thumb works. When you’re young, own more stocks than bonds. As you age, transfer it to bonds. If you follow a low-fee 60/40 portfolio and don’t take it out, you may not maximize your returns, but you’ll do just fine.