University of Mississippi

Ask the Experts: Policy Changes for a Brighter Retirement

CardHub recently published an article featuring the insights of Jon Moen, associate professor of economics and department chair, discussing potential retirement policy changes.

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Jon Moen, associate professor and chair of economics

We’ve all heard there’s something of a perfect storm brewing on the retirement front, what with the U.S. population aging rapidly, Congress preoccupied with partisan politics, and the Great Recession wreaking havoc on our net worth.  But do those of us who aren’t facing imminent retirement really care?

Probably not, especially in a non-election year.  We simply have too many other, more immediate (and perhaps less boring) issues to deal with – from how to find a job in a down economy to vacation affordability to whether or not Robert Griffin III will start Week 1.

Assessing the Current State of Financial Planning

That should come as no surprise either, given our overall lack of financial literacy and apparent aversion to strategic planning.  For example, only two in five adults keep a budget and more than a quarter of us don’t pay our bills on time, according to the National Foundation for Credit Counseling.  How, then, can we even begin to worry about retirement?

To be fair, most of us could stand for a bit of improvement in a variety of different aspects of money management.  Just consider the fact that we emerged from the recession with plastic in hand, racking up more than $82 billion in credit card debt over the past two years and putting ourselves on pace to addnearly $47 billion more this year.  But, as a number of leading financial planning experts recently told CardHub, procrastination and a lack of specific spending/saving plans are the enemies of a secure retirement.

Social Security in Jeopardy

A sizable segment of folks – 38%, according to a 2011 Yahoo Finance poll – merely “plan” to live off Social Security in retirement.  And therein lies the rub.  Social Security is running out of money.  In 2010 the program operated at a deficit for the first time in decades, and while it was able to leverage trust funds to meet its $49 billion shortfall, Social Security’s reserves are due to run out by 2033 (or even sooner, depending on whom you ask).

Social Security is funded primarily through payroll taxes, and while there were roughly 16 workers paying for each retiree’s benefits in 1950, that number shrank to 3.3 workers per retiree in 2010 and is expected to fall to a 2.4 – 1 ratio by 2025, according to government statistics.  In other words, the math doesn’t quite add up for future generations.  We aren’t saving enough on our own, the government is cash-strapped, and many folks won’t even fully realize their predicament until they find themselves continuing to work into their 70s or 80s, rather than on a beach somewhere.

The good news is that while the average person may worry very little about the fate of federal retirement benefits, there are a number of very smart people who get paid to do so.  We at CardHub reached out to a number of them for ideas about the types of policy changes Congress can implement in order to improve our retirement outlook.

So, check out what the following experts had to say and maybe even drop a line to one of your representatives if you like any of their ideas.

  • Keith Fevurly – Professor of Finance at the Metropolitan State University of Denver
  • Andrew Samwick – Professor of Economics at Dartmouth College
  • Ron Rhoades – Chair of the Financial Planning Program at the Alfred State SUNY College of Technology
  • Karen Holden – Professor Emeritus of Public Affairs and Consumer Science at the University of Wisconsin-Madison
  • Steven Weisman – Senior Lecturer of Law, Taxation, and Financial Planning at Bentley University
  • Theodore Anagnoson – Professor Emeritus of Political Science at California State University, Los Angeles and a Visiting Professor at UC, Santa Barbara
  • Douglas Hershey – Director of Oklahoma State University’s Retirement Planning Lab
  • Eileen St. Pierre – Author of “The Everyday Financial Planner” website
  • Ellen Bruce – Director of the University of Massachusetts Boston’s Gerontology Institute
  • David Littell – Codirector of the New York Life Center for Retirement Income at The American College of Financial Services
  • Alan Gustman – Professor of Economics at Dartmouth College
  • Norman Stein – Professor of Law at Drexel University
  • Jon Moen – Chair of the Department of Economics at The University of Mississippi
  • Laurence Kotlikoff – Professor of Economics at Boston University
  • Jeffrey Brown – Director of the Center for Business & Public Policy at the University of Illinois
  • James Swan – Professor of Applied Gerontology at the University of North Texas
  • Janet Henning – Aging Supervisor-Direct Services for the Area Agency on Aging at the North Central Texas Council of Governments
  • Sewin Chan – Associate Professor of Public Policy at New York University
  • Brigitte Madrian – Aetna Professor of Public Policy and Corporate Management in Harvard University’s John F. Kennedy School of Government
  • Ricardo Ulivi – Associate Professor of Finance at California State University, Dominguez Hills

Expert Opinions:  Policy Changes for a Brighter Financial Forecast

  • If you could make one policy change to improve the retirement outlook for the average American, what would it be?

“Make saving for retirement tax free.”

  • Beyond that, and aside from overall economic improvement, what needs to happen for our aging population to enjoy a secure retirement?

“Allow part-time work with no Social Security penalty for older workers (65 and older, for example). As most jobs no longer require physical stamina as in factory work of the past, complete withdrawal from the labor force is not obvious in the future.”

  • What, if anything, will actually happen in the next 5-10 years?

“I doubt much will change in the next 5-10 years, apart from slightly higher SS taxes.”

Jon Moen, University of Mississippi
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