Is Retirement Extinct?

good morning welcome to welcome to day three at the Milken Institute global conference my name is Paul Irving I chaired the Senate for the future of aging at the Institute it's a pleasure to have all of you with us and it's also my great pleasure to have a terrific panel of experts for our session on retirement the title of our of our session is retirement is extinct but I think maybe what what we'll do is change it to two what is the future of retirement with a particular focus in the in this group in the United States but certainly some of the things that we'll talk about or relevant to to other societies and to kind of the broader question of what should later life look like so joining us today maybe let me start on my left penny Pennington and penny is is is the I guess your title is managing partner but effectively you're the CEO of Edward Jones as many of you know the large securities and investment firm next next if any is Kathleen Kennedy Townsend our pal welcome Kathleen on my right Teresa keelaurow do G from the new school and on my far right our very good friend a longtime Milken Institute participant our art builder who's the founder of among other thing is working Nation that I'm sure he'll talk a little bit about later so we we have a complex series of topics to cover today and and and they're complex for for a range of reasons but let me just kind of identify maybe two big buckets for you to think about one is what should retirement look like what it what is what does it mean and is the is the definition of retirement which if you look it up in Webster's you'll see things like decline and removal and dis and disengagement is that an appealing vision for the last quarter or third of our of our longer lives as bio science has done its work in extending the possibility of longer life are we doing all we can to realize the the blessings that that science has provided us but at the same time we have the question of affordability does this notion of a different a different kind of retirement present a reality for for most of our most of our fellow citizens and what are the challenges in realizing that so maybe before before I start I'm gonna ask each one of our panels let me just read read a little snippet from a recent piece in The Wall Street Journal this really kind of goes to the to the initial point so the the this the statement was in our Russia's to not rush to leave the office we don't realize the retirement also has a downside especially over the long term many retirees and indulge in unhealthy behaviors they become sedentary and watch too much television they eat too much they drink too much they soaps they smoke too much without the purpose of a fulfilling life retirees can feel adrift and become and become depressed without the camaraderie of their co-workers retirees risk becoming socially isolated without the intellectual stimulation that work can provide retirement can accelerate cognitive decline so before we talk about this question of affordability let's paint what could be maybe a did a different picture of retirement maybe a more appealing picture maybe penny if we if we can start with you what should retirement look like as we go forward well I'll answer that channeling seven million clients at Edward Jones so those of you who may not know a lot about Edward Jones just very briefly we're a firm that helps people achieve financially whatever it is that's important to them we've been doing that for ninety seven years since 1922 and today we have seven million clients in whose kitchens and living rooms we sit they allow us to care for a trillion dollars of their assets and many many of those clients have as one of their ultimate goals that they're working with our financial advisers on an ultimate dignified retirement of their choosing one where they are able to have agency over their own lives and determine what they're going to do in retirement who they're going to do it with where they're going to do it it's all a matter of choice and what we help them with is is to talk to try to discover deeply and very personally what retirement means for them we believe that every single one of their retirement scripts is likely to be different so we seek not to impose a script on them but to really understand what is most meaningful to them and I think very broadly because every one of those scripts is is hyper personalized some of them probably do look like Broadway plays some of them might look a little more like Chekhov short stories but where's we're searching for whatever it is that drives them to help them to achieve that and from a financial standpoint point from a money standpoint and from a mindset standpoint I think what we all desire at every stage and age of our life is choices optionality so creating that through the tools that we have available to us at Edward Jones is is how we help build help people build their futures in that way Kathleen what about you we've talked about the fact that that rich rich and poor black and white men men and women in many ways we come at this from from kind of different perspectives and certainly with different resources different education and all the rest but somehow there's this common ground so what do you what do you see as the as the potential for for a better retirement for the future well I think what everybody wants is a sense of a purpose and of a peace of mind and that they have friends and family close close to them or at least on call and that they can make a contribution in their community what we've seen is that there are seniors who get to volunteer and especially volunteer with younger people do better than anybody else because they were young I see my mother who's 91 and all her friends are younger than I am which is really young and and that's what people keeps people alive so they volunteer or they take classes because they want to learn something new where they travel and that's really lucky and she's been lucky so that that's true of those who are well off and obviously for a large part of our population they have to worry about money and one of the things that when I look at what we should do with retirement is to make sure that all Americans can live with a peace of mind and don't have to worry about the money part which we'll get into later but really so many people have talents so many people have so much to offer and if you give them the opportunity they'll take it and that's what we need to create for our country give give something back and if they do they're much happier and we're going to talk a little bit about how we how we get this conversation to a higher level in our political discourse a bit later but but Theresa what what about you you think about this that at a population level what are these kind of common characteristics that we all see there's great research now about the health and well-being of people in retirement and there's a lot of differences and it's important to have facts fact-based conclusions it turns out that for a significant number of people who are having to work in after age 62 63 that work is actually eroding their health and their well-being it's because many people without sufficient retirement assets are in very low paid gig work the data shows from the health and retirement surveys that for women who are in service work work after 65 actually increases their morbidity there are certainly many people in this room and our income group who can voluntarily retire or not and who can control the pace and content of their time and if you look at all the job characteristics from the Department of Labor match to an Occupational title it's the sense of being able to set your own I'm set your own content that actually brings joy and well-being to work after 65 if you can't do that then you are doing a lot of intense concentration you're bending and stooping a lot more physical labor and I think that is behind the reason why we are reversing our longevity yep yeah so our Pilger I remember when you started working nation as I recall you you did a bulk purchase of of a book and and maybe that was that was one of the drivers you want to talk about what you're as you've spent a lot of time traveling in the country I would last couple years talking about the the future of work very much thinking about this intersection between between age age and and work what do you what do you see is as this kind of aspiration for the for the latter of part of our lives well I'm going back to your reference about the book just so every working nation is a not-for-profit media enterprise that I created to basically educate the people of this country as to one what is the most critical issue facing our nation in my mind and that is a potential massive structural unemployment and then but the central mission is to then highlight where the jobs of the future will be and mitigating strategies and solutions we've got journalists and we've got TV producers Academy award-winning documentarians and we launched two and a half years ago so our focus isn't just on you know old workers but clearly we have focused on older workers what really got us there is the we found ourselves in the middle of the carrier corporation situation when Donald Trump elevated it to all of our view and my team ran off there to try to help these workers and these were people not 60 something years old 48 and 50 etc and came away quite surprised that these people at least at that moment were more comfortable with the idea of the unemployed than being read and Reese killed and so I do believe one of the greatest challenges as we talk about taemin is that this whole area of how do you help people move into these areas and going back to the word you know the word purpose was used earlier that has been a major theme of us working nation because I thought about my own life and I thought about just put aside dollars and cents just the things I did and how motivating it was and then thought about the assembly line worker told to be concluded day two was showing up and working with friends and part of a community producing bringing home income etc and then to Paul's reference a woman shows up on my doorstep with a book and if you haven't read it please read it Victor Frankel's book man's search for meaning it's on the the Library of Congress's I think 10 most influential books have a published and it's all about the importance of meaning in life in a psychological theory that he developed having been in three concentration camps having watched those who survived and who didn't and that really got me onto this whole purpose and life thing and as we now focus on older workers and retirement the mechanisms to have to engage people such that they do have continued to have meaning in life beyond just showing up for work and making some income I think is one of the most important things we have to focus on particularly given the numbers of people who are going into that stage here this is a major major issue for United States so so if it's not about disengagement and and diminishment and removal and irrelevance and and what it is about is purpose and meaning and dignity and dignity we could just stop the panel the panel now but but but but the problem is they're impediments to to to achieving that so let me let me come back to Teresa let's talk about this again kind of at a popular at a population level I'm when I asked penny about some of the experience experience specifically with some of her clients that added for Jones but so so tell us tell us what what we have to do to or at least what our challenges are to get to those aspirational goals I really like how you're trying to bring us together to share our values a civilized society allows people to have the right to retire to control the pace and content of their life and the right to work if they if they want to every adult who wants to work should have a job I would like slide one no surprise I'm a professor you're going to just a level set we know it seems like a free lunch that if we don't have enough retirement income people can just work a little bit longer you hear it in Europe you hear it here you heard it from the Reagan administration when they started cutting Social Security let's ban mandatory retirement we stand apart from the g7 in banning and Ettore retirement and setting forth this idea we should be protected from age discrimination that's great but what did it bring us this is data from the OECD and I just looked at the g7 nations because while it's interesting to know what's happening in cynllun Estonia and Norway and Morocco it we really have to just look at where the bulk of the people are because policy said and these big nations really do influence everybody else and the first thing I want you to focus on is the elder poverty rate the elder poverty rate in the United States is the highest in the g7 if you look at the OECD we're a little bit lower than Korea and Mexico you know this is not we are stand apart by tolerating these high levels of poverty and the definition of poverty is a chronic deprivation chronic deprivation one out of five of our elders well you might think well they just need to work longer in order to get more income to raise themselves above the poverty line so now I want you to look at the effective retirement age that's when half of the people are retired half the people aren't we are the highest and in the in the g7 even a little bit on where under Japan for a lot of other reasons but in everywhere else we our effective retirement age of 65 but the Japanese do live longer and therefore they're working longer they gain their retirement time at the end of their lives in the United States the most stunning event is the separation in longevity gains virtually all the longevity gains and the health at older ages have accrue to the top half of the income distribution and both sorry and most of it actually to the top 20% so they get the income they get the wealth they're also getting the time and my dream is that everybody in America be able to have the chance to live a normal lifespan we are now seeing some evidence that there's a downturn in longevity gain and for some people in the United States they're actually the prediction of years left at 65 is actually shrinking may have the second slide does the last one just have to I'm really proud of these numbers because it took ten years of research waiting for enough people to die in the sample I thought it was a great day when I got 44,000 this is from the University of Michigan's health and retirement survey and it's gold-plated data because we're matching actual people through their lifespan at age 50 on beyond we know their wealth we know their health we know the jobs that they're in we know their transitions and now we're beginning to collect genetic data everybody in the sample now has a swab so we're able to control for all the factors and we had this hypothesis that because of the erosion in retirement security in our country and that the 401k plan has worked for some and not others and because the tax policy really gives benefit to the top 20% that people who live less long higher mortality are the very people who don't have enough retirement income and they're trying to work longer and the people who are gaining their life their years of life actually have enough wealth to either retire or not and finally last year I had enough people in a sample to look at their wealth and look at their lifespan and I always get emotional when I see these numbers and they're all significant that if you're in the lower third of our of our society you have if you're a woman only fifteen point nine years of retirement and the numbers aren't here but a third of that time is spent sick you're not controlling the pace and content of your time because you have a lot of ADL's you can't walk 900 feet you can't feed or bathe yourself but if you're in the top third you have 20 years of a retirement not a third of your lifetime just 20 years and you were healthier men's retirement time is a lot less men dude I do die sooner but they're less sick and again the class differences are there and so I want the goal that everybody gets to live a normal human lifespan and instead of half the people involuntarily being retired that I have everyone who is retired voluntarily retired living at the same standard of living they did when they achieve in retirement less poverty and that everybody who wants to work and be renewed by work no matter what they a their age be able to work so the right to retire and the right to work thank you so so penny I'm going to come to your to your client soon that's but I know that that Kathleen I want to I want to ask you this is going to require require change in business it's gonna require change in in kind of personal engagement is very much gonna require change in policy and I know that one of the things the things you're a hungriest about is how do we get this question of retirement security let's call it financial security more significantly the the prospects for this large and growing popular people not just in poverty but in middle class who as a result of the of the risks of health challenges and all the rest may may devolve into into poverty ultimately how do we how do we talk about this in a more public way how do we thank you for us yet it didn't to the into the into the zeitgeist great question well first of all you can see from the slides we've got a challenge right we let's just have this question i let just went from frank luntz his presentation he said you should start every talk with a question what's the person what's the mean receiving rate in the united states does anybody want to answer that question median median savings rate come on you zero right you know that zero and what does that led to eighty percent of Americans fear retirement more than they fear death did anybody know that it's Gaelic that scallop that's a Gallup poll eighty percent fury time and why does why is the median savings rate fifty percent does anybody have an answer any other answer okay I'll give you another answer it's better to have audience participation I believe in democracy I think you can't just have me entertain you you have to think you know what we're not even a half an hour into this and I've lost control already it doesn't matter I'm the oldest of 11 children I try to maintain control it never works 50% of all businesses don't offer a retirement plan so we're so therefore people don't have a place to save because they work at businesses that don't offer retirement plan and all the behavioral economic economists say the easiest place to save is it business it's done automatically it's taken out of your paycheck you don't have to think about that's what we want to do so Teresa and I and Tony James at Blackstone developed a plan they developed the plan which says you take one and a half percent from your self if you work for an employer that doesn't offer a plan you take one and a half percent from your salary match it by your employer you the individual employee gets to decide where that should be invested that's your money nobody can take if government can't take it and when you retire you get a monthly paycheck for the rest of your life and that's a plan that's worked in countries around the world including Australia and if you make under forty thousand dollars a year you get a tax credit so it really doesn't come out of your paycheck because the richest as you know get a tax deduction but the if you don't have any money you don't get a tax deduction because you don't have any money to direct from so that's the plan we tested that plan with four thousand Americans now if you have ever done polling you know usually you pull 780 people we polled we tested it and we found that 77% Republicans and seventy-seven percent of Democrats and eighty-six percent of Millennials liked this idea now you made question why do so many Millennials like this idea why does anybody want well you can speculate are you telling me to move on the reason the millennial I know is law I lost I lost control so a few minutes ago Kathleen's losing control that's okay anyway the reason the Millennials like it so much is because they see that their parents haven't been able to retire and they are in the gig economy that doesn't offer retirement plans they want a plan that is portable across businesses across state lines that is easy to implement and we'll give them retirement security when they retire and when I went to a class and said it was one and a half I've done I've gone to so many college campuses to talk about this when I went to a class and said it's one and a half percent and one and a half percent and they said in unison that's not enough you have to make us save five percent so absolutely although other I want to come back on this on this question of political speak great okay so so but but so we might think that that the challenges are our only challenges for for those a in poverty or be those in in middle class who run the risk of frankly degrading as a result of health expense and and like but kind of the anxieties the the confusions the concerns about about what retirement will look like well retirement be meaningful will I be isolated will be I'd be alone particularly a challenge for women really exist across class so penny you've got this kind of spectrum of clients from let's let's call it you know reasonably comfortable to vit to very to very wealthy and yet you know you see these kinds of questions across this entire group talk a little bit about every everyone has some of the have had some of these similar anxieties no matter what their resource level was and we do work with a pretty wide wide demographic range notwithstanding some of the some of the the data that Teresa is is showing us and it's such important information there are anxieties about what retirement looks like for everyone and speaking into the issue of employer retirement plans they are really important one of the chief delimiters between a successful and comfortable retirement and not is whether you early on contribute it into your employers retirement plan today there are 60 million Americans who are working who don't have access to an employer's retirement plan and many of those companies are companies that have 100 or less employees now that is where the growth rate in our economy is today is in is in the vitality of new businesses forming services service businesses product based business what have you but they are smaller businesses and those businesses are challenged sometimes in developing retirement plans they're busy they're busy growing their businesses there is some administrative expense to that and so there are two things that can help with that policy can help with that and there are bills in Congress right now to raise the tax credits for small business owners from 500 for $500 administrative expense to $5,000 in administrative expense to help them open these employer retirement plans that are so critical to retirement success and you mentioned Millennials Kathleen there's some good news with Millennials because they are seeing their parents in whatever stage or age they are with the anxieties and and the challenges that they have around retirement Millennials on average are beginning to save much earlier than the baby boomers 22 years old versus 35 years old savers are saving up to 13 years earlier than those of my generation time is one of the most important elements in saving for retirement so there are three things that I know this sounds odd that are really in the control of folks for a comfortable retirement time savings rate and returns and I know you'd think well how do you how can you possibly control those things well you can start saving early and small dollars saved early over long periods of time the magic of compounding it's sort of like gravity it's that powerful that's very very important and so then what those Millennials who are becoming educated about this are saying yeah my parents told me how to save earlier because they didn't and they're seeing that after-effects of that so we can control time we can also control our savings rate and the way you do this is by delaying gratification and Theresa you ought to rightly say penny there are some people who are not going to delay the this kind of gratification because you're talking about food on the table I have a lot of respect for exactly what you're saying there but there are many many people in our country who can delay gratification in pursuit of understanding their their long lives ahead of them and if they have purpose around those long lives there is there's more reason and meaning and delaying their gratification in order to put some money away and then the third thing that we can control and I know this sounds crazy but we can control returns and the way that you can control returns is with great diversification good asset allocation buying high quality investments remaining investments remaining invested and rebalancing those investments a long perspective and again too with with all with all due respect there there are some folks who are not able to have such a long perspective but whatever your perspective is lengthening your time horizon is a way to control returns and so though when people feel barriers to those three things and those barriers come from misinformation one more reason why it's a it's an excellent idea to get some professional advice or education at your place of employment and that's another reason that employer retirement plans are so important because people come in and give give employees education about their financial futures and their options when we avail ourselves of those things retirement can be a much more powerful and productive opportunity so so we have what you you mentioned time and I reminded I think of a quote by a famous physicist who said the greatest recognition of humankind wasn't the theory of relativity it was the effect of compounding yeah so so so art I know you think a lot about this this kind of question not just of retirement security financial security generally but the dignity of work and the threats to work and since for this section and I promise you we're gonna get to solutions here in in a moment but we're kind of thinking about threats we're thinking about about issues yes we need policy shifts yes we need behavioral yes we need a ploy or employer engagement but this at the same time there are these kind of things going on in in the in the in the ether if you will that that are gonna affect so many to so many jobs impact lives of so many people you think a lot of a lot about this talk to us a little bit about those threats yeah I think they're quite significant and that's why I'm doing what I'm doing with working nation really three motivations that really got me going on this first one was and there was the title of the first piece we put up in September 2016 on CNN's platform it's called slope of the curve the slope of the curve of the change in jobs and skills when measured against time has never been so steep it is happening so quickly and there's really so little recognition out there yes I've heard you go to a conference like this you hear some panels and here's a very good discussion but in the broader mix of people across the country there's very little understanding the second motivation that really was driving me and working nation is this time it's also about the heart of America it's about you know it's not just about the bottom 20% and the two examples I've used for five plus years is one the driverless vehicle you're talking about the number one job in 32 states in this country and I don't know if it's five years or ten or 15 or 20 years but that middle class job is going to be disappearing in you know significant numbers the other example I always use is how a marketing department of 10 will become a marketing department of 2 because of data and analytics and those eight jobs disappearing our terrific white collar middle class and up with middle-class jobs across this country the third real motivation and this is the hardest one because we can think of ways to deal with the other to much more easily the third motivation really ties in with what we're talking about here and the way I describe is never before have we had to rescale and re-educate all the 48 year olds and that is a phenomenon that we're faced with in this country and it's you know continue accelerating so one of the themes that we push forward at working nation is the whole idea of lifelong learning that really is gonna be a critical thing that people are gonna have to do I don't care who you are you're not going into a job for 35 years and not you know and then just retiring without having a significant amount of additional education learning etc when I speak to Kay the K through 12 education conferences I tell them look you don't need me to talk about STEM education and no I'm not an educator so I don't know how to do this but I think the most important thing you can instill in young people all young people not just the strongest in class is the whole concept of lifelong learning and I really believe as a society we've got to be thinking about that whether you're an employer whether you're not for-profit whether you're an academic institution or local government those types of solution and enhancing the learning and that will then push off the years of retirement as opposed to my concern as we this group has talked outside of this room my concern is okay are we going to be you know the title of the panel was is retirement extinct my concern is is retirement going to come at a much earlier age as in the past so so I want to make sure that the audience has time to to do some questions but but so it may be in about ten minutes I'm gonna I'm gonna reach out and ask you four for your input so so we know we have a lot of challenges institutions across society have to change we need policy changes we need changes in business we need changes in personal behaviors for those of us who can afford lattes we should stop drinking them for those of us who can't afford lattes we should make sure that that choice exists let's spend maybe two minutes each if we can on on maybe a solution do we do we have do we have an idea again we can't boil the ocean we can't solve all the problems of the world certainly in an hour do we have do we have a two minute each solution let's go to Theresa first and then we'll move across Theresa that was inspired by Lady garment workers union that negotiated of a pension plan for their very low income workers and the workers loved it they started early accumulated pennies per dollar and had a life long retirement income it was inspired by my pension plan ty kress you know as a professor I go from job to job but I always have money in my retirement plan that I can't take out so from that not even looking at Norway but looking at America my plan is to add a personal account what what Kathleen you described on top of Social Security not a privatization of Social Security without Social Security without expanding Social Security all is lost but we need that as a base this would be what we call a guaranteed retirement account and it is Universal the 63 million American workers now who have no chance to save on the job and the others who have a k plan or other kind of plan who employers might want a better more efficient option would have it so we start with 1.5% saved by both the employer and the employee partnered with a refundable tax credit for that for that savings but it's not just accumulation an accumulation early on that money has to be invested well and has to be invested in a short term medium term and long term assets so we have to stop allowing people to withdraw from what we call retirement savings and we give tax breaks for retirement savings until retirement so one solution yesterday we all agreed on the panelists who are experts said we should stop the ability to withdraw in qualify plans before retirement it's really simple but it's not just accumulation investing well it's also d accumulation so we need to figure out a system to allow people who at 6263 can do something with their lump if they have it of twenty thousand fifty thousand you know a million dollars so we need a due accumulation plan the guarantee retirement account where I've partnered with a very unlikely partner of me I'm a professor in a progressive university with Tony James who was just the president of Blackstone we wrote a book called rescuing retirement published by Columbia University Press which establishes a guaranteed retirement account Kathleen is communicating that vision from the Economic Policy Institute we want all Americans to get behind the senators and representatives who will just add on a layer to Social Security have professional managers invested well and then they can be accumulated to a higher claim age from Social Security Social Security is a great annuitize ER or a commune or suspended for the rest of their lives so it's simple I'm so glad we're not doing healthcare another panel but a very important issue so so so so Kathleen so Teresa Teresa's described the accounts I don't want you to read to read ascribe the account but what I what I do want you to talk about is because you got a little bit of personal experience in this and this batter in the midst of the political Maelstrom I'm not sure who's polling best today but we'll find out them I do we have 30 in or how many how many how many do we have running around Iowa today and in the midst of all of all of this how do we get this broader question of security for older Americans into into into the conversation right thank you so much well first of all I want to thank you for asking Teresa and me to talk about retirement and I want to thank each of you in the audience for coming because as we've talked about yesterday AARP has discovered that there are three words that Americans hate retirement and planning and aging so you're very brave to have to a panel on retirement most people when they hear the word retirement retreat into a fetal position which has met it's been very difficult to get people politically involved so just to give you an example there are ten states who have passed laws on retirement security including California including Maryland I was chair of the task force to do this and when I was lieutenant governor we had 50 task forces I was chair of it which 200 people would show up on retirement security which Gallup has showed is the number one issue that Americans are worried about seven people showed up so I wondered why people would show up on drug addiction crime guns glad you're all laughing so funny anyway but seven people and the reason is is because people feel guilty about retirement and they feel it's their fault they haven't saved they haven't done the right thing all the advertisement says we will help you as though it's your doing that you haven't done the right thing the answer says we need Rita educate financial education as though financial education is going to teach somebody how to invest I mean it's really hard to learn know how to invest correctly so but the messages from the for most people is that it's your fault you haven't saved right you haven't earned enough money and people feel badly about themselves so as I was saying yesterday we took a poll funded by the American Federation of Teachers and tested 13 messages found what we tested lots of messages 13 messages didn't work and what we discovered and I want all of your help on this because you are powerful we need to talk to the presidential candidates about retirements we would call it peace of mind we have a slogan breathe easy to get them interested and talking about the need to save for retirement for their later years we can't even use the word retirement you can see it's hard to run a campaign if you can't use the word that you can laugh about we're all hunting for a new word yeah we are looking for a new word so anyway what we found is that the the message that works the best is a consumer message you do this you put your money in here and when you want to you can get the money out it's your money and you'll have a monthly paycheck for the rest of your life that's the message so that works we can help you now at this point I think Senator Brown is taking on this bill senator Klobuchar and Senator Coons have taken up another retirement bill so we're slowly making a difference and I talked to Eric SWA well from California who's also interested but if you have any friends that are interested in running for president or members of Congress or if you're running or if you yourself would like to run for president I've had four members of my family run for president so I know please get them to adopt this what we've found from our polling people want an answer people are eager to have an answer you can talk about it I can give you the language to talk about it and I can give you my email and I'd love to talk to you thank you very much you'll find campaign efforts Thank You Kathleen so so so so penny your what we're talking about here is two minutes of summation is a range of solutions right so it's probably not going to surprise you that I'm gonna go to the personal agency range of solutions and again channel our clients the clients that I had as a financial adviser that clients that eighteen thousand of our financial advisers have and I will tell you what they say when we're with them they will say I wish my children could hear about this right now because if I'd known what you're teaching me and sharing with me and helping me plan for right now if I'd known this 20 years earlier I'd be much better off so it really is you kind of quipped about financial education and that's that's kind of a cliche but it really is getting perhaps wisdom workers I'm gonna from from y'all's articles I'm gonna go back to our home office we have all these affinity groups we have a young professionals group I'm gonna start a wisdom workers group and ask those wisdom workers to share with younger professionals all about personal agency around their financial futures and we're where we are working programs to help older investors help younger investors when I used to go into community the community rec center and do investing 101 seminars older older investors would bring younger investors so talking sooner about this I think is critically important I do think that there are policy solutions around employer retirement plans and utilizing the frameworks that we have today around personal IRAs and Roth IRAs these are very workable solutions but people need to know about them they need to have the power to access information information in them and then the third thing that I would suggest is Theresa used the word Dee accumulation I was sitting in a legislators office last fall and they used the word de accumulation and he said I really hate that word I said how how about living comfortably in your later years he said that's a great term maybe we'll ask you to come and speak to Congress about that I'm like no please don't use the term butt out but but please don't ask me to do that but the point is how investors create a paycheck for themselves after the paycheck for the employer is gone so creating a paycheck for yourself comes from the accumulation it comes from solutions that help create a reliable sustainable income over a life of fifteen to thirty to forty years and there are private sector solutions that can and should get better insurance kinds of solutions and new at a chanute ization kinds of salu Asians that can and should get better and we need to call on those manufacturers to do a good job of that so so art I see my friend Catherine Collins is sitting in the audience who does really interesting research on on on retirement inclin'd inclinations both the United States and across the world and the reality is is that most people a majority say that they want to work longer they don't want to retire at 65 but they also want to work differently they want they want flexibility they want transitional retirements they want more opportunity to do new things to redefine their work around mentorship and around around helping helping younger workers it's etc so you've identified this very significant challenge and risk of the the risks of AI of technology of increasing consolidation globalization etc in in two minutes or a minute and a half do you have a one idea for us about about ways to ways to address these challenges well you just actually used the word that I was gonna use which i think is one of the most important things we can do in this country for many reasons including for the benefit of these older people and that is used the word mentorship I think as you look across society and whether it's you know the youngest members of society broken homes or even intact homes but the world is changing so quickly that older people who've gone through decades of experience really can bring a tremendous amount to the table and you know there are organizations out there that you know do this type of thing but I think one of the most important things we could do is really as a society think more and more about how to engage older people in as I said I'll use the word the word you use mentoring and engagement and not just you know younger people but also you know those people who are 48 and are all of a sudden hitting a point in time in life 35 I think that's one of the most important themes that we should be pushing out there and that's not something you do it a federal government level I really believe that's done at a much more local level and our mechanism as I referred to before it working nation is is using all kinds of media in today's world you can to educate people across the country upon themes that otherwise you couldn't so that's that's top of my list the other I'll just add one more thing a primary investment area of mine is in the area of education and training related technology I actually got my first investment was an O to a guy named Milken called me up and said art I'd like you to invest in this online education company and I was already thinking about education and technology because my kids were going to the finest private schools in LA and five miles down the road it could be a very different situation anyway I've met with the founders and all and I finally told Mike I said yes I will but only if I can go on the board and on the executive committee because I have no idea if I'm gonna make any money but I want to learn about this anyway that has been a primary area that I've invested in and continued and in today's world of augmented reality and virtual reality these are things that can allow older people all people but older people to learn much more in terms of skills and on a continuing basis so that's like one other thing I've mentioned so so I'm having trouble seeing the audience but I but I want to go out go out to you if it does anybody have any questions comments reactions to to Danny this we can certainly could continue the conversation I think that here's here's a question over here I think that we have a mic floating around gentlemen in the in the second row who we know yeah hi Rick McKay from the news school it's been a great conversation that there's a wide range of issues not just about the finances but about meaningful life in retirement but I did want ask a finance question because I think penny said we have a set of tools that are out there now that just aren't used enough so I guess the question is do we have is it just a matter of not participating in the existing tools or is there something more that we need that our existing toolkit doesn't provide yeah we so the the existing toolkit for example includes IRA mechanisms personal IRA and Roth IRA mechanisms right now those mechanisms are set up that you have to begin withdrawing funds at 70 and a half well there are many people who are working with purpose or working because they have to and they're being forced to withdraw from those tools that really doesn't make a lot of sense so we're talking about we're talking to legislators about bills that are before Congress right now that lengthen the amount of time in which those assets can continue to accumulate things like that are just like Social Security that was set up at a time when life expectancy was quite different those rules were set up at a time when working lives in life expectancy were quite different so altering those mechanisms is is one way to handle that Kathleen yes yes I think we need a new product because right now they're people who have pensions can invest in private equity private credit in a range of alternatives at very low fees because you can have large numbers of people invest in those cookies and people who have family offices have have enough money and they can invest in in real estate that's not going to come for a long period of time so they have a lot more flexibility as to what they can invest most Americans can only invest in IRAs or 401 case and which means they have a limited they have basically daily liquidity and so and as you know how many Americans take money out of their 401 case okay high percentage right which is what Teresa was getting in earlier so they are taking money out there which means that they can't invest in the best long-term investments and if you heard some of the panels in another panel about how I think CalPERS was saying they were they were gonna put a lot of money in private equity because they're gonna get better returns and private equity so I think there are a lot of Americans who should have an the opportunity to invest in a range of investments in which that money can be patient for 40 years it's supposed to be retirement money why do they need daily liquidity do I make sense to you it makes a lot of sense there it really done from an investment standpoint it doesn't make much sense to have 40 year money invested in cash yeah 401k and IRA money can be invested long term but often it takes it takes a certain amount of of Education in order to know how to do that to your earlier yes so that's it mechanisms are there well my view is why you don't so if you're a government employee if you're a janitor and you work as a government employee you don't need any education it's done for you and then when you retire you get a monthly paycheck so we are trying to set up a system that says there are a lot of Americans who don't want so much education or dare adopt like my daughter I'm gonna I'm just gonna boast she's gonna be graduated from med school in two weeks Oh Thank You Kathleen so she wants to focus on being a doctor she doesn't want to focus on where her investments are that takes to be that educated is really difficult a more automatic mechanism so I thank you agree so that's what Theresa I mean I know I'm stealing what you should be talking about Theresa so go right ahead no any penny I think both that's proposal affects a very small number of people the idea that they can extend the time at which they can withdraw from their IRA because they're working once you talk about that group they're at the very top they have money and they're working so think portal class where we're talking about we're talking about middle class all right anyway it's ink bold okay thankthank bold all the people that don't have anything a universal plan the automatic investment okay let's take another question for a front woman in the front row and then the woman in the second row so we can see hi I'm winning on the cart I work as a banker and I'd like to also put forth that there is a very large issue for Millennials with student loan debt and so I'm I'm excited to hear that they want to save starting at 22 but I know that there are so many who are doing all the right things to get all the big jobs who are burdened with like $200,000 of student loan debt by the time they come out of graduate school and I'm wondering how corporations and you know if there can be some save up programs or debt pay down programs out there that can help out all of those students as well I think that may be a tremendous barrier to starting early on the 401k contribution even if they're at a company that offers it that that's another panel altogether trite matreya Lee is an issue that we have to deal with and art to your point about lifelong learners are those students with that debt set up to be lifelong learners or are they set up to just have a ton of ton of debt but it but it is a goal that many of our millennial minute millennial clients are are adding to the checklist are part had a quick let me make just quick comment here and again it's a focus of ours a working nation experts I'm not I'm not one of them but experts will tell you that 25 percent of the four-year colleges and universities in this country will close within the next ten years and it's a combination of what you're talking about massive amounts of debt as a result of the cost structure and coming out the other side the employability issues and so one of one of the areas that we emphasize a working nation is much more education that's guided for employment I purpose I'm not talking about the people at Harvard or Yale or wherever your daughter's going to med school but in one of the story areas that we've told quite often probably half a dozen times a really interesting Community College efforts where corporations are partnering with them to construct a curriculum that leads to you know more enhanced employability so yeah the debt problem is a major problem but it's I think you're gonna see some significant changes over the next minute the other side of that is parents are eating into their retirement accounts in order to send their kids to these schools that they're going to come out with a lot of debt so it's it's hitting multiple generations think about whether universities should invest their their time and resources in rock crime Rock Climbing Walls and and smoothie bars or in services and supports for for students and faculty Katherine okay hi I'm Katherine Collinson and a question for all of you and thank you for asking the Millennial student debt question and this sort of leads to an even bigger question that we heard the term financial wellness a lot these days and in this panel we've heard a lot about saving for retirement how we can do a better job of helping people save but it also seems like we need to look at the other side of the balance sheet because many people are facing debt that our credit card debt or other types of debt or lack emergency savings so what I'd like is your thoughts and you know in terms of solutions how we build those components in so that as people are saving for retirement they can address their other shorter term needs as well good penny thank you it's a balancing act and so we share with our clients there are three things we're gonna talk about the the first time that we get together your emergency fund your retirement what that looks like to you and how you're going to protect whatever plan we put in place so financial well-being wellness is its comprehensive it's not one thing or another and there's a certain amount of financial hygiene that goes with that part of it is delaying gratification part of it is getting out of debt if you if you are in debt and balancing that with some amount of savings early on because the earlier you began saving the magic of compounding is going to go to work for you so so it's complicating it as are all these questions so I would just come in commend all of us to have a bigger conversation about about getting old and about this question of retirement security to encourage it at our dinner table that's coming wide in our our political groups we keep going for another hour I could just keep going for another hour with Kathleen with Kathleen alone but unfortunately we're at Ratatat we're out of time for our panels so so please join me in thanking penny penny penny Kathleen headed a recycle of energy and

Channel: Milken Institute

Views: 2,011

Rating: 5 out of 5

Keywords: Milken, Institute

Id: BQ2ab-4Q900

Length: 60min 37sec (3637 seconds)

Published: Tue Jul 23 2019