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The retirement crisis illustrated
Just 30 years ago, most American workers were able to stop working in their early sixties and enjoy a long and comfortable retirement.” So begin the three coauthors—two from Boston College’s Center for Retirement Research (CRR), the third a noted investment advisor—of a lay-friendly book on Social Security and retirement, published in December. If their introduction seems somehow ominous, the reader is not in suspense for long, as they continue: “This brief golden age is now over.”
The authors are Alicia Munnell, the Peter F. Drucker Professor of Management Sciences at the Carroll School of Management and CRR’s director; Andrew Eschtruth, CRR’s associate director for external relations; and Charles Ellis, who for 30 years was managing partner of Greenwich Associates, a research-based consultancy. They consider their book an alarm—”a little like Paul Revere’s famous ride,” they write. The Wall Street Journal called it “clear, concise, and convincing.” Money magazine called it the “best new book on retirement.”
In 128 pages of text and charts, Falling Short: The Coming Retirement Crisis and What to Do About It addresses the fact that most Americans lack the savings they need (“six to 11 times their earnings, depending on when they retire”) to live as comfortably in retirement as they do now. The authors describe working Americans’ three options—”our only options,” they say: “Accept that we are going to be poor in retirement”; “save more”; “work longer.”
Under “save more” they include recommendations targeted and substantial: to older individuals, consider your home equity (sign on for a reversible-rate mortgage in retirement, if you need to); to the nation, “Fix Social Security.” Payouts from Social Security already represent a declining percentage of pre-retirement earnings, they say, “and additional cuts could cause steep drops in living standards and higher poverty.” With that prospect, say the authors, we should focus first on injecting funds into the Social Security system, not reducing benefits.
The multidisciplinary Center for Retirement Research at Boston College was created in 1998 with a grant from the Social Security Administration, to form part of the external Retirement Research Consortium that now includes centers at the University of Michigan and the National Bureau of Economic Research. The CRR’s mandate is three-pronged: to conduct research and evaluations (sometimes on “a quick turnaround” at the Administration’s request); to share findings, not just with specialists, but also with the public and policymakers; and to train the next generation of research scholars.
The charts and text are drawn and adapted from Falling Short: The Coming Retirement Crisis and What to Do About It (copyright © Oxford University Press, 2014).