Solving New York City's Looming Retirement Crisis
Solving New York City's Looming Retirement Crisis
These days it’s not just the baby boom generation that’s feeling ill prepared and apprehensive about retirement—Gen Xers are feeling even more stressed about how they’ll fare in old age, according to a new AARP survey of New York City voters.
And that's no surprise, given the financial situation facing many New Yorkers. The AARP report found that some 38 percent of New Yorkers in both generational cohorts, or those between the ages of 35 to 69, have no retirement savings account whatsoever. The median retirement account balance for all working age households is $3,000, and it is only $12,000 for near-retirement age households.
Those who are part of Generation X carry nearly six times more debt than their parents did, according to a 2014 report from the Pew Charitable Trusts, perhaps a contributing factor to this younger cohort’s heightened anxiety. And yet six in 10 Gen Xers still expect to retire at 65, a fact that suggests a “perceptual gap,” according to the AARP report, which serves as a companion publication to a statewide survey release by the AARP in May.
“We call it ‘faith-based retirement planning,’” said Teresa Ghilarducci, an economics professor at The New School with an expertise in retirement security.
The implications are potentially dire, not just for the large swath of New Yorkers who face the prospect of working well past the retirement age of 65 and a diminished quality of life, but also for society as a whole, which will have to bear the brunt of health care costs and living expenses that an increasing number of people simply will not be able to afford. But while gridlock in Washington, D.C. means there isn’t likely to be a solution coming down from our nation’s capital anytime soon, states and cities are beginning to move on the issue—understanding that the cost of inaction would be higher than the price of implementing new retirement programs for private sector workers.
How to go about doing this was the topic under discussion at a panel hosted Wednesday by the AARP and City & State, in which public servants and policy analysts weighed in on what New York can do to avert the impending retirement challenges.
“We have a retirement security problem in this country and it’s worse in New York City than almost any place else,” said John Adler, director of New York City's Office of Pensions and chief pension investment advisor. “New Yorkers are substantially below the median in terms of access to workplace retirement plans, levels of savings and levels of retirement income.”
According to Adler, three-quarters of American workers rely “completely or overwhelmingly” on Social Security for their retirement income, which provides a median benefit of about $15,000 a year—hardly enough to subsist on alone. Adler said the Social Security system must be strengthened, and emphasized that, contrary to some right-wing rhetoric, it is on solid ground and should remain so for decades to come.
But the real key, according to Adler and other panelists, is first ensuring universal access to retirement plans in the workplace. Other states are already moving to do this.
“Starting with Massachusetts and California in 2012, there has been a blizzard of activity across the country, helped immeasurably by the way, by the efforts of AARP,” Adler said. “Four states have now passed laws to create state-sponsored retirement programs, at least six states are conducting studies, and legislation has been introduced in at least 15 other states.”
Both Illinois and Washington state, for example, recently implemented state-facilitated retirement plans for private sector workers whose jobs do not offer any pension or 401k plan.
“It’s not about intricacies of the plan and which plan is the best … We’re talking about very basic things,” said Scott Evans, chief investment officer at the New York City Comptroller’s Office. “The first thing we want to focus on with regards to this is ensuring that all New Yorkers have access to employer-based retirement plans. Those are table sticks. That shouldn’t even be up for debate.”
Panelists also stressed the need to figure out how best to encourage workers to opt into retirement plans, once available.
“One of the things that seems to work really well—creditors are really good at setting up automatic deductions or automatic payments,” said Angela Houghton, a senior research advisor at AARP. “If we’re talking about some sort of universal access to retirement or savings, that feature—sort of an automatic—right out of your paycheck it goes into a savings account—that’s sort of a quick win and it seems to work pretty well.”
Both Evans and Ghilarducci of The New School are currently part of a panel convened by city Comptroller Scott Stringer to investigate strategies options to provide access to retirement plans for all New Yorkers.
“We’re working behind the scenes, away from the political environment, to try and develop three options for the city to take a look at,” Evans said. “Fifty-seven percent of New Yorkers have no access whatsoever. We have to fund a solution—the private sector cant find a solution—the public sector needs to look at that.”
View the AARP report below: