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Preserving Your Pension In Tough Times

Your 401(k) might not be the secure retirement plan you think it is. Economist Teresa Ghilarducci examines pension plans and offers advice on retirement security. Ghilarducci's new book is When I'm Sixty-Four: The Plot Against Pensions and the Plan to Save Them.

44:57

Other segments from the episode on July 7, 2008

Fresh Air with Terry Gross, July 7, 2008: Interview with Teresa Ghilarducci; Review of the first season of "Mad men."

Transcript

DATE July 7, 2008 ACCOUNT NUMBER N/A
TIME 12:00 Noon-1:00 PM AUDIENCE N/A
NETWORK NPR
PROGRAM Fresh Air

Interview: Professor Teresa Ghilarducci discusses retirement
saving accounts, 401(k)s and pensions
TERRY GROSS, host:

This is FRESH AIR. I'm Terry Gross.

Have you looked at your 401(k) lately? Lots of people who have their
retirement money tied up in the stock market are worried about how the tanking
market will affect their chances of a decent retirement. My guest, Teresa
Ghilarducci, is the author of the new book, "When I'm 64: The Plot Against
Pensions and the Plan To Save Them." She's a professor of economic policy
analysis at the New School For Social Research, and for the past couple of
years has been a fellow at Harvard Law School. In her book she writes,
"American workers wonder if the promised pensions, Social Security and medical
care will materialize in their old age." She analyzes how retirement prospects
have changed now that more and more workers don't have traditional pension
plans, they have 401(k)s, plans that are optional, voluntary and require that
the worker make smart investment choices. I asked her if saving for
retirement has gotten more difficult because the money has to cover more time
now that the average American is living longer with the help of modern
medicine.

Professor TERESA GHILARDUCCI: I thought that was the issue, like everybody
else, that the problem with retirement insecurity was that people were living
longer and longevity was just taking off. And then I looked at the data, and
I discovered that longevity improvements really haven't improved for white
women. The number of years you're expected to live after 65 has really
flattened out for white women. For white men, it has really taken off, mainly
because white men are actually taking a little better care of themselves.
They've stopped smoking. And for black men, it's increased a little bit. For
black women, it's increased a little bit. The data's not fine enough to look
at other demographic groups. And when we had more retirement security was
exactly the time that people were really gaining--Americans were really
gaining in longevity, and I'm referring to the time in the '70s and the '80s.
So this idea that retirement planning is more difficult or retirement security
is more difficult because we're living longer is actually one myth that I'm
convinced is just that.

The problem with retirement insecurity is because of the new kinds of pensions
systems. That's the reason. And the new kinds of pensions systems depend
upon more people than are doing so saving consistently. It depends upon
people investing correctly, investing in ways in which they don't pay high
fees. And it depends upon actually pretty healthy increase in wages. And
none of those things are happening.

GROSS: Let's look at 401(k)s. And this is the type of retirement plan that
most people have now.

Prof. GHILARDUCCI: Right.

GROSS: And basically the employer puts in a percentage of each week's
paycheck into the 401(k) account. And the employee puts in a certain
percentage. And there's usually some leeway in terms of how much the employee
can put in, right?

Prof. GHILARDUCCI: Yeah. You know, that's a little bit off. But that's
actually the way most people understand 401(k)s. What's really stunning about
our retirement system in this country is that most people don't have any kind
of pension. So you're right, of the half of the work force that has a
pension, most of those now only have a 401(k). But there are really half of
the working population at any one point in time don't have any pension at all.
And that is one of the biggest reasons we have no improvement in retirement
security.

But let's go back to the people who have a pension. These 401(k)s are
optional for the employer. The employer makes a decision to make available a
paycheck deduction from every employee. So if an employee opts to
participate, the employer provides an administrative function. They take the
money out consistently. And that's actually a good thing. That's a way
people do save automatically. What's optional for employers is whether or not
they put any money into a 401(k). And when we have economic slowdowns, you'll
see about 20 percent of employees contributing nothing to their 401(k)s. So
401(k)s really is just a way that workers can decide how much money to put in
each month.

Now, often, you know, in that 80 percent of the time, and even more...

GROSS: I didn't know this. Let me just stop you. I didn't notice...

Prof. GHILARDUCCI: Yeah. Exactly.

GROSS: ...that a company can decide, well...

Prof. GHILARDUCCI: Right.

GROSS: ...times are slow, so we're just not putting any money into your
401(k)?

Prof. GHILARDUCCI: Right. Right. Right, no, and it happens in economic
downturns especially. You know, in general and when a company is in bad
shape, they'll often stop contributing. Yeah. It's voluntary, and it's not
consistent. Most people don't realize that.

GROSS: OK, so the employee, what are the employee's options in terms of how
much...

Prof. GHILARDUCCI: OK. Right.

GROSS: ...and whether to put any money into the 401(k)?

Prof. GHILARDUCCI: Yeah. Well, the employee can't decide. The employer
first has to make the decision that they make this tax deduction available to
them. So you, as an employee, you've made this decision, you're going to
contribute to your 401(k). Then you have to decide where you're going to put
your money, and the employer offers a number of investment options. And it's
the employer, without any input from the employees, is the one that offers you
a Merrill Lynch fund, an Ameriprise fund, an American Express fund, you know,
all sorts of options. And there's really nothing in the law that prevents the
employer and those investment companies from making side deals. And we
actually are finding out that many of the investment options that the
employers offer are usually because, not because they are the best options or
they have the lowest fees, but because the employer has some other kind of
relationship, business with those banks.

GROSS: Like what? What kind of side deal are you talking about here?

Prof. GHILARDUCCI: Well, insurance companies will have 401(k)s, and almost
all of those 401(k)s are filled with insurance products or products sponsored
by the insurance company. Or the company will offer a investment product from
their investment banker, whose loaning money for their expansion into China.
These are all perfectly legal. They have a prior relationship and they add on
top of that, `Hey, I'll offer your product, you know, in my workers' 401(k).'
And the worst abuse really is that employers often don't contribute cash to
people's 401(k)s, but they contribute company stock. That famously got the
Enron workers in trouble when all the contributions from Enron was Enron
stock. And then they couldn't sell it and then their 401(k) contributions
were worth nothing because it was only in employer stock. And after Enron,
that practice was supposed to end, and none of that legislation was passed,
and we still see about 35 percent of all assets of 401(k) participants still
in company stock.

GROSS: You know...

Prof. GHILARDUCCI: So it's just riddled with conflicts.

GROSS: One of the things that people seem to like about 401(k)s is the
flexibility. You can...

Prof. GHILARDUCCI: Yeah.

GROSS: ...if your company has one, you can put in the minimal amount or you
can put in the maximum amount or something in between. And you also have the
opportunity to withdraw money from your retirement 401(k).

Prof. GHILARDUCCI: Mm-hmm.

GROSS: There's a penalty for doing it, but if you need money really badly,
you can do it. So that flexibility is perceived as a real advantage. But you
see the disadvantage in that advantage, too. What's the disadvantage of those
advantages.

Prof. GHILARDUCCI: Yeah. Right. OK, well, those are all very attractive
features of a savings account or a Christmas club account. And those are all
attractive. But they're very poor characteristics of a retirement plan
because one's younger self is very bad at taking care of one's older self. So
we find people not contributing to a 401(k) unless they have an option to take
it out. And people actually take it out for pretty good reasons. When
they're going to buy a house, they take it out. Or, crucially when they
change jobs. So what we have in our nation is not really a national
retirement system with these 401(k)s but we have a national unemployment
insurance supplement system, which is, you know, a laudable goal, but we
should call it what it is.

401(k)s basically help provide savings to people for those rainy days. But by
the time people get to retirement age, the money is just not there. The
average account for an older worker is something less than, now I think it's
$62,000. You know, and it fluctuates, and it's probably going to fall because
the stock market is in the doldrums and people aren't saving as much. And
$60,000 when you're 65 to last for the rest of your life will give you about a
dinner and a movie, you know, every couple of months.

GROSS: OK, another perceived advantage of 401(k)s is the flexibility. I
mean, within the program that your company offers you, you have your choice of
various, you know, stock and bond and annuity options that you can consider.

Prof. GHILARDUCCI: Right. Right.

GROSS: And it's nice. You have a choice. There's flexibility. What do you
perceive as the downside of that choice?

Prof. GHILARDUCCI: Right. Yeah. Well, you know, we have choices of what
color toilet paper to buy, too. Right? So choice is attractive, but choice
in financial situations can actually be worse off than very few choices. Let
me give you an example. Most people have learned that you should diversify
your assets, and the most sophisticated of us realize that we have to--and
this is very sophisticated--to diversify between stocks and bonds. I mean, I
think 15 percent, the last figure show of people understand the difference
between a stock and a bond. But almost all of us realize we have to
diversify. And most people do not put all of their 401(k) money into one
asset. So the employer chooses for you all these, you know, flavors of all
these different funds. And you are to decide where do you put your money. So
if you're given 25 choices of funds, people often will distribute their money
among 10 or 15.

Now, I've been talking about retirement for a long time, and often do it with
radio or with TV. Just recently, I was asked by the anchor and by the
cameraman to come back to their offices and to look at their 401(k)s. And I
found out that their TV studio owner offered about six international small cap
equity funds. And this cameraman and this anchor said, `Look, I'm
diversified.' And what I found out was all of their money was in stock. Much
of their money was in international small cap, a very refined and risky asset.
And they really had no idea that what they thought was prudent and diversified
was actually a very, very risky portfolio.

GROSS: So if you're not really informed about the stock market--and how many
of us are not really informed about the stock market.

Prof. GHILARDUCCI: Yeah.

GROSS: Then it's hard to make intelligence choices about where to put the
retirement money in your retirement account.

Prof. GHILARDUCCI: Yeah. You know, and I used to think it was just hard,
and I thought that financial education on the part of, you know, people like
me who were independent or, you know, good, trained people in the HR
departments, you know, would fix it. But it's clear that financial education
is something that good employees who are supposed to, I don't know, build
buildings or teach English classes or run radio programs really shouldn't be
spending all their time doing. And we found out the people who spent the most
time and said that they were the most well informed were actually making the
worst choices. And that's counterintuitive.

But let me tell you why. People who spent a lot of time looking at the stock
market and researching funds tended to chase the market. So when the fund was
doing really well, they could move their money towards that fund. And when it
was doing poorly, they would move it out. So people were actually buying high
and selling low. And they were paying turnover fees while they were doing
that. And at the end of 10, 15 years, their accounts were actually much lower
than people who got good advice, got lucky and just stuck with whatever
portfolio allocation they got. So that--and the research committee has really
stunned us, that the people who thought they knew the most and acted on that
knowledge did worse.

GROSS: My guest is Teresa Ghilarducci, author of the new book, "When I'm 64."
We'll talk more about 401(k)s and other retirement plans after a break. This
is FRESH AIR.

(Announcements)

GROSS: My guest is Teresa Ghilarducci, author of the new book, "When I'm 64:
The Plot Against Pensions and the Plan To Save Them." When we left off, we
were talking about some of the problems with 401(k)s.

OK, so with your typical 401(k) retirement plan, your money is invested in the
stock market, and your stocks may rise or fall. And then it's a kind of
roulette game, isn't it, about whether you're going to retire when the stock
market's at an all-time high or now when it's been just doing so poorly for
about a year. So how much of a problem do you think that poses for the future
of retirement?

Prof. GHILARDUCCI: Yeah, you know, because individuals have selected their
own funds and have managed their own investments, they probably made worse
choices than professionals would. And they can't avoid paying the retail
fees. They had to pay because they were making those decisions on individual
basis. Like built into the 401(k)s are these high fees. In contrast, pension
funds are funded, of course, by employees and employees, but professional
trustees invest that money. They pay much lower fees, and they are doing it
every day. While we're teaching our English classes or running our radio
programs, they are following the market and not as tempted to follow their
emotions than individuals are. So there's a big advantage of having
professionals invest the money for you over you doing it. So on this
microlevel, 401(k)s have that disadvantage.

But on a macro level, it's almost even worse, because when people are getting
older and they're reaching retirement age at a time when the economy's going
poorly, they find that their 401(k) plans, like right now, are really what
people have called "201(k)" plans. You know, that they are half the value,
you know, or much less value than they thought they were. So then you make a
decision to work a little bit longer. But that's right at the time your
employer is doing worse and is about ready to lay you off. So you're laid
off, and many other people are laid off, you have fewer retirement assets, you
don't spend as much money, and the economy suffers more unemployment and less
buying power. Social Security and traditional pensions don't have any of that
problem because the benefit does not depend upon where you are in the economic
cycle. Social Security and regular pensions are stabilizers and 401(k) type
plans are actually destabilizers. So they make recessions worse, as well.

GROSS: Now, the fees that you have to pay for your 401(k)s.

Prof. GHILARDUCCI: Yeah.

GROSS: Why don't you explain what those fees are and what to look out for in
your own portfolio.

Prof. GHILARDUCCI: Yeah. Yeah. I really wish I could say, `All right
everybody, those of you who are lucky enough to have a 401(k), go to your
booklets, go to your human resource director and ask how much fees do you
pay.' I wish I could say that, but we don't have any laws in the books that
say that employers or these companies have to provide those numbers in any way
that anybody can understand them. Now, George Miller in the House of
Representatives had hearings over the past six months to try to make companies
reveal the fees that participants had to pay, but he finally had to abandon
that quest because basically Wall Street firms did not want those fees
revealed. And over the eight years in the Bush administration, the kinds of
initiatives we had in the '90s to make those 401(k) fees just revealed was
just stymied and just ended.

So I really can't give any advice to 401(k) participants except this one:
Find the index fund in your 401(k) plan. And it's not going to have bells or
whistles drawn around it, so you have to read carefully, and probably your HR
director won't even know which one it is. But it probably has the word index
or S&P stock fund or bond index fund. They're often called a passive fund.
And what these options do is just invest in the whole market, and if the
market goes up, you know, a computer basically selects the stocks. If the
market all goes up, your asset goes up; if it goes down, it goes down. But
you pay hardly any fees for that passive or just indexed part. If you don't
do that and you invest in all these actively managed funds with all these
fancy, attractive names, you are probably over time going to erode 20 to 25
percent of your...

GROSS: That much?

Prof. GHILARDUCCI: Yes. It adds up.

GROSS: How does it eat away that much?

Prof. GHILARDUCCI: Because instead of paying 1/2 a percent, you know, fee on
your account, you're paying four times that amount or three times that amount.
And just as the magic of compound interest, you know, grows, you know, a
dollar saved, the magic of compound fees can erode a dollar saved. It's
really stunning. And any professional knows that, but they won't tell you
because it doesn't serve their interests.

GROSS: So in other words, you're paying those fees on a daily basis as
opposed to like when you withdraw the money or once a year?

Prof. GHILARDUCCI: Exactly. It's on a daily basis. And the reason why you
might be surprised about that is because these fees were really implemented
and these practices were implemented in the '90s where the tide was up, the
stock market was getting, in some of those years, double-digit returns. So a
3 percent fee on double-digit returns was really not seen, nor if it was seen,
wasn't minded, you know, because you just made so much money. And so we got
these practices of not really looking at these fees when the stock market was
up. But as John Kenneth Galbraith always says, when the tide, you know,
recedes, then a lot of the garbage, you know, is still on the shore. I mean,
when the tide recedes and you only are getting 1 or 2 percent return, these
decrements, these high fees, really can erode your assets.

GROSS: Teresa Ghilarducci will be back in the second half of the show. She's
the author of the new book "When I'm 64: The Plot Against Pensions and the
Plan To Save Them." She's a professor of economic policy analysis at the New
School for Social Research. I'm Terry Gross, and this is FRESH AIR.

(Announcements)

GROSS: This is FRESH AIR. I'm Terry Gross.

Let's get back to our interview with Teresa Ghilarducci, author of the new
book "When I'm 64: The Plot Against Pensions and the Plan To Save Them." She
says only about half the American work force even has a pension and the
majority of Americans who do have 401(k) plans, plans that are optional,
voluntary and depend on the worker making smart choices. When we left off we
were discussing some of the choices employees have to make about their
401(k)s.

You know, another choice that people who have 401(k)s usually have is whether
they want to take their money in the form of annuity...

Prof. GHILARDUCCI: Yeah.

GROSS: ...or in the form of a lump sum payment. Would you describe the
difference?

Prof. GHILARDUCCI: Yes. The lump sum payment is by far the choice that
people take, and that is the attractive option of getting all of your money in
a big lump so that when you retire you withdraw from your account the 50, 60,
$70,000, or if you have been diligent and you're a high income earner you
might have 100 or $200,000. And a lot of people will tell you to do that
because they, the trusted bankers and investment officers, can help you manage
that money and get even higher returns, or you can use that lump sum to move
to Florida or to buy that car or to take that trip that you always wanted to.
It's, you know, it's very human to want a lot of money up front.

An annuity is the option to buy a contract with, usually an insurance company
or some other financial institution, that will give you money, the same amount
of money for the rest of your life. That's the simplest form. There are all
sorts of variants of annuities, meaning that you could take a little less
money now and then over time that will grow to protect you against inflation,
or you have an annuity for 20 years and then you have whatever's left over. I
mean, there's lots of variations. But the basic differences couldn't be more
stark.

West Virginia teachers used to have a pension system, and then they moved to a
401(k) system for about 10 years. All of a sudden the union officials and the
State Teachers Board began to see the way these older teachers were living
under this defined contribution plan. And what they found, to their horror,
was what they called the red truck syndrome, which is, instead of teachers
living on a modest amount of money for the rest of their life, they found that
teachers were cashing out their 401(k) type plan, buying that red truck that
they've always dreamed of and running out of money before they died. And then
they went back to a regular system.

GROSS: You know, the problem with the annuity is if you don't have a lot of
money in your retirement account, it means you're going to get like, what, a
few thousand dollars every year for the rest of your life?

Prof. GHILARDUCCI: Yeah.

GROSS: I mean, how much help is that going to be in maintaining a decent
standard of living?

Prof. GHILARDUCCI: Yeah. Right.

GROSS: It's better than not having it, but it's...

Prof. GHILARDUCCI: Right.

GROSS: ...not going to cover the rent on your house or the mortgage on your
home or...

Prof. GHILARDUCCI: Right.

GROSS: ...food for you. I mean, you know, it's going to be small.

Prof. GHILARDUCCI: It's not a pension. Right. The problem with annuities
are twofold. One is that, for them to be meaningful you have to have a lot of
money to buy an annuity, and people are not accumulating enough in their
401(k) because basically they've taken it out when they've had periods of
unemployment or they just transitioned from jobs. That's one problem with
annuities. The second problem with annuities is that we have to go out into
the annuity market and go out and buy one of those things. Well, insurance
companies aren't dumb. They know that people who want annuities probably are
people who know something about themselves that the insurance company doesn't
know, which is that they have reason to believe that they're going to live a
long time, that they're healthier, that they've taken care of themselves. And
insurance companies protect themselves against, you know, your long life by
giving you a pretty bad deal on your annuity. So even if we had enough money
to buy a decent annuity, when we go out into the market we're penalized
because we go out there as individuals.

The only annuity market that makes sense is one in which big groups, you know,
buy it so that the insurance companies know that there are people who will
live a long time and people who will not live a long time in that group. And
the best way to do it is just to mandate that everybody has an annuity. So
it's not just the long livers and healthy people that take the annuity. And
that's what traditional pensions do. Everybody has an annuity, and that's
what Social Security does. And that's what most European countries do, and
developing countries that are adopting a pension system. It's really only our
system that have people go out there on their own to find their own annuity
and basically to find their own health care system.

GROSS: Since most people who are lucky enough to have a retirement account at
this point have a 401(k) type plan as opposed to a pension, how did that shift
come in to being?

Prof. GHILARDUCCI: Yeah. It's really an interesting story. In 1978 a few
corporations asked the Treasury Department if they could put aside money, tax
free, for their executives in a retirement account so that their executives
could get a tax break. And the Treasury Department, not wanting to give tax
breaks to anybody because that's what they do, they try to get tax revenue,
didn't want to say no. But they also didn't quite say yes. They said, `You
can do it if you make that available to all of your workers regardless of
their income level.' And so some of those corporations walked away from it.
But some corporations said, `OK, we'll offer it to everybody, most low income
people won't take it, but our executives will and we'll get the result we
wanted.'

But for many years--that started about 1982--these 401(k)s were just
supplements. They were just saving supplements that you could borrow from and
take money from if you needed to. And somewhere in the late '80s some
companies noticed that only their higher income people were participating and
that the workers were no longer unionized or were threatening to unionize or
their unions were weaker. So they experimented with taking away the defined
benefit plan and replacing it with these 401(k) plans as a prominent plan. So
these 401(k) plans kind of sneaked under the radar as just supplemental plans,
and as workers lost their bargaining power they became the predominant savings
plan. But they were never really meant to function as retirement plans.

GROSS: My guest is Teresa Ghilarducci, author of the new book "When I'm 64."
We'll talk more about retirements plans after a break. This is FRESH AIR.

(Announcements)

GROSS: My guest is Teresa Ghilarducci and she's the author of the new book
"When I'm 64: The Plot Against Pensions and the Plan To Save Them." She spent
25 years as a professor at the University of Notre Dame, a professor of
economics. And she's now chair of economic policy analysis at the New School
for Social Research.

Since you're disillusioned with 401(k)s and with the way pension plans are run
now, you've come up with an alternative that you propose in your book, and I'd
like you to give us an overview of what you describe as a guaranteed
retirement account.

Prof. GHILARDUCCI: Lots of studies show that a guaranteed retirement annuity
is worth more to people. It adds to the happiness of a retiree. What people
want in retirement is not to get rich, but what they want is a steady, modest
amount of money to supplement their Social Security. It's also based on the
idea that it's only the government--because it is an entity that lasts longer
than any Wall Street firm or any company--it's only a government that can
guarantee a return on your income. The Swedes, the Germans, the Italians, now
the Dutch, and it looks like now the British are adopting changes in their
retirement plans based on that same concept. Only the government can
guarantee return.

So here's the plan. The plan is that everybody will save 5 percent of their
income, every time they get a paycheck, into their retirement account. So
basically everybody will have a 401(k)-type account. Their name will be on it
and they can watch their assets grow in that account. But the way it differs
from a 401(k) plan is that the government will contribute every year $600, you
know, in today's dollars. It will go up, you know, with inflation. So the
government will help you save, and it will be administered by the same agency
that administers the pension plan for federal government employees, including
members of Congress and the president and other agency employees. It will be
run by professional investors, and they'll get, you know, the low
institutional fees. The funds will be managed by Wall Street firms. But
again, it won't be these retail brokers who spend a lot of money on
advertising. They'll be these professionals. So workers' savings will go
into the economy. That means that our savings rates will go from, you know,
negative amounts now or zero to what they were in the 1980s and before that.

GROSS: In your plan, is it mandatory for the employer to contribute to the
retirement fund?

Prof. GHILARDUCCI: You know, it can be--yes, in one version of the plan the
worker contributes 2 1/2 percent and the employer contributes 2 1/2 percent.
And the workers' contributions are really subsidized by this $600 subsidy from
the government. So for low income workers they won't see any decrease in
their take-home pay.

As an economist I think that when the employer contributes they really just
pass that indirectly on to the worker. But that could be debatable. So in
my--the first version of the plan, the employer and the employee split that 5
percent contribution. But the government also has a role, too. It's a more
direct role than we have now. They pay the $600 for everybody.

The beauty of the plan, too, is that it corrects a big problem in our system
now that we haven't even talked about yet. And that is, right now the
government subsidizes our retirement system in a way that's very wasteful and
very expensive. I described before that people get a tax break when they save
in their 401(k)s, that that income and those earnings aren't subject to income
tax. And if you have a high income tax--in a high income tax bracket, you are
bound to save more and you get more subsidy from the government because that's
not taxed. So right now we have people in households with over a million
dollars getting what's equivalent to a $7,000 tax break because they're
pouring the maximum money into their 401(k). And we have people who are
making under $50,000 getting a couple of hundred dollars in a tax break if
they contribute at all. And most people under $50,000 don't have a 401(k),
and if they do they don't contribute. So we have this like upside-down tax
subsidy for these 401(k)s.

And from a policy point of view what this money adds up to, these taxes not
collect, they're called tax expenditures, add up to $135 billion equivalent
every year and we get people just getting these breaks from the government who
would have saved anyway.

GROSS: So wealthy people can play the tax breaks in the current 401(k) system
in a way people who are middle class or less can't.

Prof. GHILARDUCCI: Yeah. Right.

GROSS: There's a lot more savings and tax breaks for the wealthy than anyone
else, and you'd like your plan to even that out.

Prof. GHILARDUCCI: Yeah. What it does is just take that $135 billion and
redistribute it, and everybody gets $600.

GROSS: So let's get real for a second.

Prof. GHILARDUCCI: Mm-hmm. Mm-hmm.

GROSS: Your plan proposes that the government basically take on Americans'
retirement funds, manage it, contribute to it. This just happens to coincide
with a time when the Bush administration and many other Republicans would
really like to privatize Social Security and make Social Security head in the
exact opposite direction that you propose retirements head in. So I think the
odds of your plan being accepted in today's climate is hovering around no.

Prof. GHILARDUCCI: Yeah. Yeah. Yeah. Yeah.

GROSS: Yeah.

Prof. GHILARDUCCI: You know if we had this conversation in 2005 when
President Bush had an all out, you know, plan to privatize Social Security and
there was lots of smart people and a lot of powerful people behind that plan,
you would be more right than you are now. Right now is a time of great
political change. It's also a time where we've had 30 years of experience
with a kind of a privatized individual account. And so I think my chances of
my plan are actually better than zero, but it does step on a couple of toes.

Let me argue why my plan actually has a better chance than Americans might
think. When Americans and other people are asked, what should the government
do about retirement crisis or what should government do about the health care
crisis, most Americans will say that we should not raise the retirement age,
We should not cut benefits, but `the government should make it easy and even
force me to save more for my retirement.' It's like people want people to take
away snack food when they want to lose weight, when they want to do something
virtuous. It's the same thing here, that they want to be forced to save. I
mean, that's not a great option, but it's better than all the other options.

We also are looking forward to new leadership in either the White House and in
Congress, where that leadership are faced with polls that say that the
government should do something about securing retirement because of recession
and the stock market decline has made the 401(k) promise, you know, less
attractive than it ever was.

GROSS: I'm sure you've been following what the candidates have to say about
retirement plans...

Prof. GHILARDUCCI: Mm-hmm.

GROSS: ...to the extent that they've been addressing it. What do you hear
the presidential candidates saying about retirement? And do you think they're
directly addressing the issues that Americans want to hear addressed?

Prof. GHILARDUCCI: Hm. Yeah. Hm. Yeah, well we have two candidates now.
One is John McCain, who has said almost nothing about retirement insecurity
during his campaign, although in the past he's been in favor of privatizing
Social Security. And the reason he doesn't say it now is because it's a
non-starter. That was one of the biggest defeats in the Bush administration
was that exploration. He just got nowhere with that idea.

Senator Obama has been talking only a little bit more about retirement
insecurity. Obama has been saying that he thinks that there should be a
change to 401(k) plans, and it's actually quite a narrow change. And it's a
little bit complicated. I'll make it quick. Obama wants people who have
401(k)s to be automatically enrolled in those 401(k)s with the idea that
people's personalities and character will take over and they won't bother to
pull out of the 401(k)s. And that's supposed to take care of the problem that
a lot of people don't start participating in 401(k)s in the first place and
then they get behind and they don't accumulate enough. But that is such a
narrow view of the problem with 401(k)s. It does not address the fact that 50
percent of people don't have any kind of retirement plan at all and don't have
a 401(k), and it doesn't fix the problem that the tax incentives are upside
down, that the highest income people are getting the most tax breaks from the
government and the lowest income people who need the help the most don't get
anything from the tax system.

GROSS: When retirement funds, you know, when pension plans got started unions
were really behind it. And unions had a lot of power, a lot of collective
bargaining power. And unions have become so weakened in the past few decades.

Prof. GHILARDUCCI: Yeah.

GROSS: How do you think that's changing progress on the retirement front?

Prof. GHILARDUCCI: Yeah. I think it's one of the biggest factors about why
we were able to move from traditional pensions to 401(k)s. I mean, once
workers lost their bargaining power and their voice, and executives and
managers got a stronger voice and more power, that coincided with the shift
towards Congress approving of and giving a lot of permissive regulation to
401(k)s. So you're right, Terry, if workers don't have a voice in retirement
policy, either through their unions or through their participation in the
political system, we aren't going to get change that gives a modest amount of
income and secure income to workers. And we're going to go back to where we
were in the '20s and the '30s, when really only the rich could retire.

And one of the most hard-fought gains of workers, whether they were union or
not, workers in the post World War II period, has been the ability to retire
and expect retirement because right now we have the happy situation that
working class, middle class and upper income people can expect some period of
time before they die of time to themselves, you know, free time, retirement
time. And that's one of the successes of our retirement system is that we
have low income workers being able to retire a little bit earlier than people
who had delayed entering the work force because they went to graduate school,
and had jobs that didn't break down their bodies. They're retiring, you know,
in their early 60s and white collar workers are retiring in their late 60s.
And what that does, because there's this differential in mortality, is really
even out the amount of time spent in retirement. So it's actually kind of a
hidden equality in our system, but we have actually reached in the United
States today kind of equal retirement time stretched across the population.

And that is an equality, is a distribution of something really important to
people that I don't want to see eroded. Time before you die is actually quite
precious. There's no other place to get more time, you know, when you're
older. And to have everybody look forward to that time in their life is
something that I really believe in; I'm passionate about it. And one of the
reasons why I am pushing what you might think is a radical proposal, but it
does make sense. It's based on sound experience and a sound interpretation of
where our facts bring us to, you know, the conclusions are based on these
facts.

GROSS: Well, you've certainly given us a whole lot to think about and I want
to thank you a lot for talking with us.

Prof. GHILARDUCCI: You're welcome.

GROSS: Teresa Ghilarducci is the author of the new book "When I'm 64: The
Plot Against Pensions and the Plan To Save Them." She's a professor of
Economic Policy Analysis at the New School for Social Research.

You can download podcasts of our interviews on our Web site, freshair.npr.org.

If you missed the first season of "Mad Men," the AMC series set in 1960 at an
advertising agency, you can now watch it on DVD. Coming up, our TV critic
David Bianculli has a review. This is FRESH AIR.

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

Review: David Bianculli on the first season of "Mad Men" on DVD
TERRY GROSS, host:

"Mad Men," the American Movie Classic's TV series about the men and women at a
Madison Avenue ad agency in 1960, got rave reviews when it premiered on TV
last July. A year later it's finally out on DVD. TV critic David Bianculli
has this review.

Mr. DAVID BIANCULLI: "Mad Men," starring Jon Hamm as a talented ad exec
named Don Draper, is another of those cable drama series that's found a home
and an audience because of the trail blazed by HBO's "The Sopranos." But the
lineage of "Mad Men" is more direct than most. Its creator is Matthew Weiner,
who wrote for "The Sopranos" and displays the same talent here for capturing
small details and unpredictable characters.

"Mad Men" is quite a departure for American Movie Classics, which also turned
heads with the recent Robert Duvall Western miniseries "Broken Trail." AMC has
dabbled in series production before, but not for about a decade. And those
shows--"Remember When," about the golden age of radio, and "On the Lot," about
the golden age of Hollywood--were low rent comedy dramas. "Mad Men" is a
class act all the way. It's the best TV series to probe and dramatize the new
frontier of the early 1960s since "Called To Glory," a wonderful ABC drama
from the mid '80s. And "Mad Men" has more on its mind than just reveling in
the differences between now and then. It's also serving up a complicated
mystery or two, and some first rate plot twists and shockers and so many
intriguing characters and situations the show quickly becomes addictive.
Watching them on DVD at your own pace is a great way to burn through them.

On the ad front Don Draper and his colleagues deal with everything from
cigarette advertising and those pesky new studies linking smoking to lung
cancer to the 1960 presidential campaign. On the home front, Don and most of
the other executives have unhappy wives. And at work the relationships
between men and women are, to say the least, markedly different.

Here's Jon Hamm as Don briefing his brand new secretary Peggy, played by
Elisabeth Moss, when one of Don's colleagues barges into his office. He's
Pete, a brash young man played by Vincent Kartheiser, whose abrasive
outspokenness makes him seem almost like a white collar Archie Bunker.

(Soundbite from "Mad Men")

Mr. VINCENT KARTHEISER (As Pete Campbell): You look like a hundred bucks.
Ready to go sweet talk some retail Jews?

Mr. JON HAMM (As Don Draper): You are tough to take first thing in the
morning, Pete.

Mr. KARTHEISER (As Pete Campbell): I've never had any complaints. Speaking
of which, who's you're little friend here?

Mr. HAMM (As Don Draper): She's the new girl.

Mr. KARTHEISER (As Pete Campbell): You always get the new girl. Management
gets all the perks.

Where are you from, honey?

Ms. ELISABETH MOSS (As Peggy Olson): Miss Deaver's Secretarial School.

Mr. KARTHEISER (As Pete Campbell): Top notch. But I meant, where are you
from? Are you Amish or something?

Ms. MOSS (As Peggy Olson): No, I'm from Brooklyn.

Mr. KARTHEISER (As Pete Campbell): Well, you're in the city now. It
wouldn't be a sin for us to see your legs. If you pull your waist in a little
bit you might look like a woman.

Ms. MOSS (As Peggy Olson): Is that all, Mr. Draper?

Mr. KARTHEISER (As Pete Campbell): Hey, I'm not done here. I'm working my
way up.

Mr. HAMM (As Don Draper): That'll be all. Peggy, right?

Ms. MOSS (As Peggy Olson): Yes. Oh, and it's time for your 11:00 meeting.

Mr. HAMM (As Don Draper): Oh, and sorry about Mr. Campbell here. He left
his manners back at the fraternity house.

(End of soundbite)

Mr. BIANCULLI: There are many things to savor about "Mad Men." The
performances are wonderful. I especially love Christina Hendricks' Joan, the
sexy office mother hen, and John Slattery from "Desperate Housewives" as Don's
boss, Roger Sterling. The production design is fabulous.

If you're old enough, you'll smile with recognition at the clunky IBM
Selectric typewriters, the pointy can openers and the incessant smoking. If
you're not old enough for "Mad Men" to qualify as nostalgia, you'll just smile
period. Was America ever this chauvinist and shallow, and, for some people at
least, this enjoyable? Yes. But "Mad Men" doesn't forget or ignore the
hidden costs and the often ugly underbelly. And that makes the whole series
even better. In a summer when TV is offering so little, the DVD release of
"Mad Men" offers so much and goes down as smoothly as that third martini at
lunch. Ah, those were the days.

GROSS: David Bianculli is TV critic for Broadcasting & Cable magazine and
tvworthwatching.com. "Mad Men" returns for a second season on AMC July 27th.

(Credits)

GROSS: I'm Terry Gross.
Transcripts are created on a rush deadline, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of Fresh Air interviews and reviews are the audio recordings of each segment.

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