Nightly Business Report – November 23, 2017

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue

More than 10,000 people retire every day, tens of millions already there,
and generations to come. But things are changing.

UNIDENTIFIED MALE: I think retirement is almost like a wishful thinking
thing these days.

ANNOUNCER: Saving for retirement is becoming more of a challenge, from
shrinking options.

UNIDENTIFIED MALE: I have a pension but I don`t know if it`s going to be
there in a few years from now.

ANNOUNCER: To rising health costs. Americans` increasing struggle to put
away money for their golden years.

UNIDENTIFIED MALE: If I were to retire right now, I would be a homeless

ANNOUNCER: Tonight, NIGHTLY BUSINESS REPORT examines America`s retirement
crisis and options for funding your future.


financial challenges of our time, saving for retirement.

to shed some light on this issue which certainly affects millions of

HERERA: So, welcome you to this special edition of NIGHTLY BUSINESS
REPORT. I`m Sue Herera.

GRIFFETH: And I`m Bill Griffeth, in tonight for Tyler Mathisen.

HERERA: Well, the numbers, they`re pretty staggering. The vast majority
of Americans have under $1,000 in savings. And by some estimates, half of
all Americans have nothing put away at all for retirement.

And this runs across pretty much all ages. Sharon Epperson delves into the


ago, Galen Murphy realized he never saved for retirement. Now, he`s 49 and
he`s still not saving.

was hoping to in this next year.

EPPERSON: Murphy earns about $42,000 a year working as a store manager at
Portland`s House of Vintage.

The company has two stores, five full-time employees, and no retirement
plan. Murphy says he makes enough to pay his bills, barely.

MURPHY: The biggest ones are going to be rent, student loans, health care,
car payment.

EPPERSON: Living the American dream — for too many people, it`s more like
a nightmare. And Galen Murphy is hardly alone. He plans to keep working
as long as he can. But still wonders which bills will get paid and which
ones won`t.

There`s no money left for savings. Only about 40 percent of the private
workforce has access to an employer-sponsored retirement plan. And even
those who are saving still aren`t saving enough.

One problem? Pensions became a thing of the past. In 1983, almost 90
percent of the workforce had pensions. By 2016, that number had dropped to
27 percent.

Today, 94 million Americans have retirement accounts, yet a recent Vanguard
study says the median 401(k) for someone aged 35 to 44 held less than
$24,000 in 2016. For 45 to 54-year-olds, $43,000. And for someone 65 and
older, the median balance was less than $61,000.

How big a problem is this?

bigger than one can imagine.

EPPERSON: Ivory Johnson is a Washington, D.C.-based financial adviser.

JOHNSON: The ones who don`t plan, the majority, if you look at the number
of retirement accounts that have less than $50,000, as a percentage of
people over 50, it is staggering.

EPPERSON: Johnson says putting a higher priority on saving for retirement
needs to start at home and continue in school. But that`s not happening.

JOHNSON: Look, it`s social media and Facebook (NASDAQ:FB). What are
people posting? They`re posting, I went on vacation. This is where I went
to eat. This is where I sent my child to college.

What`s celebrated is not I have a plan and I`m setting myself up for

EPPERSON: Student debt is one of the culprits. Galen Murphy at 49 is
paying about $365 a month on $62,000 of debt. That`s accrued since he was
in graduate school more than ten years ago.

TIM RANZETTA, NEXT GEN PERSONAL FINANCE: That for me is the biggest issue.

EPPERSON: Tim Ranzetta`s Next Gen Finance studied 13 million students
across 11,000 high schools, finding less than 17 percent are required to
take a personal finance course to graduate. So, he says, how can they be
expected to understand how tens of thousands of dollars of debt might
impact their lives?

RANZETTA: We believe all students need this sort of education in order to
thrive in the future.

EPPERSON: Now approaching 50, Galen Murphy knows he`d have to give up a
lot in order to improve his quality of life in the future. It`s a cost
that only seems to keep going up.



GRIFFETH: So what are some possible solutions to our lack of savings?

Our Steve Liesman did some digging for us.


do the right thing with their money. In fact, sometimes, they`re downright
dumb. That was a major finding of University of Chicago professor Richard
Thaler`s work that helped him win the Nobel Prize in economics this year
and among other things has had a profound effect on America`s retirement

assumption that everybody is super rational, has no self-control problems,
never has a hangover, saves exactly the right amount for retirement, and
then invests it perfectly. The rest of the world is nothing like that.
We`re more like Homer Simpson than we are like Spock from “Star Trek.”

LIESMAN: Instead of giving people the choice to enroll in retirement
savings plan, Thaler`s idea was to enroll them automatically. They would
have to opt out if they didn`t want to save. This help increase the number
of Americans using defined contribution plans like 401(k)s and Roth IRAs.
More Americans also decided to automatically increase those savings as
their salaries rise.

THALER: You say to people, look, you`re only saving 3 percent now. Would
you agree to increase it 2 percent a year until you get up to some
reasonable level? That works wonders.

LIESMAN: But the growth spurt since Thaler introduced behavioral economics
to savings has stalled. And the actual dollar amounts of savings remain

A third of all Americans, for example, have no savings at all.
Policymakers struggle with how to prompt low income Americans to save more
and how to adapt to an economy where more workers are self-employed and
earn irregular income from the gig economy. For them, savings is always
voluntary and difficult to plan.

Senator Jeff Flake and Congressman David Brat introduced a bill to create
universal savings account, a super charged Roth IRA with no penalty for
early withdrawal. Those penalties are the reason many low income Americans
don`t use them at all.

CHRIS EDWARDS, CATO INSTITUTE: Both Canada and the United Kingdom enacted
accounts that are universal savings accounts within the last decade or so,
and they`ve proved to be hugely popular with about half of the public in
both countries using them.

LIESMAN: Even while both lawmakers are Republicans, the provision was
excluded from the latest tax bill. And that backs up Thaler`s original
idea of people, they`d be lawmakers or regular Americans, don`t always do
the right thing when it comes to money. Sometimes, easy fixes like saving
more or enacting the right savings plan in Congress eludes us.



HERERA: So, let`s bring in our first expert. Jack Vanderhei is research
director at the Employee Benefit Research Institute.

Welcome. Nice to have you here, Jack.

Thank you. It`s a pleasure.

HERERA: You say that this is a dire situation for certainly people who
have not saved enough. But there are some parameters that you`ve
identified for us. Tell us about those.

VANDERHEI: Well, we`ve been studying national retirement income inadequacy
now for many years. We built a model in 2003. Every year, we rerun it to
see basically for those people who have not yet retired what percentage of
them will have sufficient retirement income.

The number is perhaps strikingly low in many cases. It`s overall about 57
percent. But the thing that you have to keep in mind is that we`re really
telling a tale of two different populations.

We have those people who are fortunate enough to work for employers who
have employer-sponsored retirement plans. And unfortunately those that
don`t. The probability of having adequate retirement income is over 50
percent higher for those people who are working for employers who have
those particular types of retirement plans.

GRIFFETH: I have to say, I learned something. Social Security, if you
wait until you`re 70 to begin drawing rather than waiting when you`re first
eligible, your benefits go up by 76 percent? And the trick is waiting that
long, right?

VANDERHEI: Right. And what obviously is happening there is, you`re taking
the same types of benefits that you`ve accrued through Social Security, and
having them paid out to you during a smaller period of time, so that 8
percent increase for each year of deferral is going to amount to a
significant increase overall in those benefits.

If possible, it`s always nice to delay those claiming of the retirement
benefits, especially if you`re continuing to work, because if you start
taking those benefits before what`s called your full retirement age, for
somebody in my age group that would be age 66, if you`re continuing to earn
more than a particular amount of money, you in essence sacrifice one dollar
for every two dollars you`ve earned. So, it`s very important to not claim
too early.

GRIFFETH: Let`s bring in another expert here, Jack, stay right there.

Joining us right now is John Laitner. He is director at the University of
Michigan`s Retirement Research Center.

And actually, John, you don`t think we`re in a crisis yet. Why?

CENTER: Well, I should say I`m glad to be here.

GRIFFETH: Welcome.

LAITNER: Thank you.

The — I would say in the aggregate numbers I deal with, and I tend to look
at older people, maybe in the 50-plus age group, that while things are far
from perfect, I don`t perceive us to be in a crisis yet. And I hope one
can be avoided. And I say that, crisis yet, because the basic retirement
instrument for most people is Social Security.

Now, Social Security right now has a trust fund of about $3 trillion. But
the predictions are that in 16 years, that trust fund will be depleted and
benefits would be cut substantially.

So, when I`m optimistic, I`m optimistic that we have some time to correct
that and bring the Social Security system back into full solvency.


HERERA: Jack, let me turn to you, though. One of the factors that you
think most people, whether they have a defined pension plan from a past
employer or a 401(k) or whatever it is, many of them are not factoring in
how long they will live and long term care costs, which can be catastrophic
if you don`t factor that into your planning.

VANDERHEI: Well, absolutely. And unfortunately, many people just look at
some kind of target replacement rate that if they think they can have 70
percent to 80 percent of what they had pre-retirement, they`re going to be

The problem is, of course, that`s using averages. If you end up living
longer than the average life expectancy, perhaps 17 years for male, 20
years for female at age 65, or even more importantly, you have catastrophic
long term care expenses, a one or two- or three-year stay in a nursing home
or assisted living facility, easily can take the finances which otherwise
would have been sufficient to get you through retirement and deplete those
very, very rapidly.

GRIFFETH: John, since you`re not worried yet about Social Security, when
do we start worrying, and will there be enough, you know, what about the
Gen-Xers who will likely not have something waiting for them at retirement

LAITNER: As I say, we — the predictions are that the crunch hits Social
Security in 16 years, 2034. So, there is time yet to put in a fix. Now,
we had some experience with that in the 1980s. We made some adjustments,
and things have lasted until now.

So I`m very hopeful that there will be a bipartisan commission or whatever
to make some adjustments again.

GRIFFETH: All right.

LAITNER: But we do have some time to do that.

GRIFFETH: All right. I certainly hope so.

Jack Vanderhei with the Employee Benefit Research Institute, John Laitner
with the University of Michigan`s Retirement Research Center — thank you
both for joining us tonight.

VANDERHEI: Thank you.

LAITNER: Thank you.

HERERA: Still ahead, your questions on retirement answered by noted
financial expert Jean Chatzky.


REPORTER: Have you been saving money for your retirement?

UNIDENTIFIED FEMALE: I have, probably not nearly as much as I should. My
husband and I always hope that maybe we`ll win the lotto.

UNIDENTIFIED MALE: I definitely could be saving more. I`d probably say
opening up like another savings account and just every paycheck,
transferring over, you know, a certain amount every, you know, two weeks or
so. But — yes, like I said, you know, at the moment I — my priorities I
guess aren`t there and I`m not thinking that ahead into the game. But I
could definitely do a better job, yes.



EPPERSON: An unexpected event like an accident or illness can become a
financial disaster if you`re not prepared. If this happens, the last thing
you want to do is tap your retirement account to pay for medical bills.

Protect your retirement savings from unexpected expenses by planning ahead
and taking these three important steps. Get disability insurance. You
insure your car and your house. So, why not your income?

This kind of insurance will provide steady payments if you become unable to
work. Most disability policies that you get through your employer usually
cover 40 to 60 percent of your salary.

Bulk up your emergency savings. Put away enough money to cover at least
six months` worth of living expenses in a rainy day fund. Start small.
Build it up one month at a time, stashing away 1 percent of your pay, then
5 percent, then 10 percent, until you reach your goal.

Create an estate plan. These legal documents determine who will make key
financial and health care decisions on your behalf. You need a health care
power of attorney to handle your emergency and ongoing medical care. Also
designate a durable power of attorney to make financial decisions,
including making sure your bills are paid.

If you have no other option than to take money from your retirement
accounts to pay for medical expenses, watch out for tax penalties.
Normally, you`ll be hit with a 10 percent tax on the money you withdraw
before reaching age 59 1/2. However, there are a few medical exceptions
that apply. Go to for details.

But that`s the last resort. Take the other steps first so that you don`t
have to drain your retirement savings and you can retire well.


GRIFFETH: All right. We do welcome Jean Chatzky, of course, the famed
financial expert, the host of her money podcast.

And, first of all, welcome.


GRIFFETH: We`re glad you`re here.

HERERA: Great to see you.

GRIFFETH: We`re going to get a lot of questions from our viewers.

What about the issue now we have to worry about in retirement of medical
expenses? I mean, that`s a crisis as well, right?

CHATZKY: It is, because of the issues that you were talking about in the
earlier pieces. As Sharon noted, we`ve got rising longevity, and that
means that people have to plan for these very late in life health care
expenditures. If you look at where people`s money goes, we know that
people are spending the most when they`re about my age, when you`ve got
kids in college. But from there, it tails off a little bit during early
years of retirement. And then it`s in those last years where those health
care costs kick in and we need to think about things like insurance,
whether it`s long term care insurance or longevity insurance in order to
protect ourselves.

HERERA: And nobody wants to think about being sick, that`s the other


HERERA: There`s a lot of denial — I mean, understandably so. But no one
wants to think that you`re going to be the one that needs that long term
care insurance.

CHATZKY: Or the will or the power of attorney. And the statistic that
gets me always is the one that says that half of adults in this country
don`t even have a simple will. And there are a lot of parents in that
number, which I just think is unconscionable.

GRIFFETH: When should you be thinking about long term care insurance?
It`s cheaper the younger you are and the healthier you are, right?

CHATZKY: But if you buy it too young, then you`re going to end up paying
the premiums for too many years. So the sweet spot to buy it is around 50,
55 years old.

It`s not right for everybody. It`s very expensive. If you can`t afford to
maintain the premiums, it`s just money down the drain.

So, if you`ve got assets of between $1 million and $4 million in liquid
assets, not including your house, that`s where it makes the most sense,
because for people who have got more money than that, they can often self-
insure. For people who have less will often spend through their money and
qualify for Medicaid.

HERERA: Good advice.

All right. Well, we`ve got asked for questions, because we asked for the
questions, you mailed them to us, e-mailed us. It was terrific, thank you.

Here`s basically one question we got a lot of. Our first question comes
from Victor. And here`s what he e-mailed in.

Please use a typical scenario of retiring at 65 with about $100,000 saved
in a 401(k), annual income of $80,000 but no pension, include Social
Security, current age of 50, saving about 10 percent per year in that
401(k). He`s assuming that the house will be paid for and the calculation
is for a couple. The calculators out, they assume too much of a pretax
income to be maintained.

He is saying basically, everything, all those financial tools —


HERERA: — are assuming too much. One, do you agree with that? And what
do you make of his question?

CHATZKY: I agree to some extent. I mean, we are seeing retirees, when we
look at their real spending during these years, as being pretty resilient
and pretty able to go with the flow. So, if they have years where their
money in the market is down a bit, they`re just spending less, they`re
taking one less vacation. If they have years where their portfolios are
doing especially well, they`re taking a little bit more out. They`re
spending a little bit more.

That scenario that he laid out, and if I could ask the control room to go
to the second graphic that I sent you, that would be really, really helpful
— takes a look at how much money Social Security is actually going to
replace for you. And so, what we see here is that for somebody who earns
about $100,000, Social Security is only going to replace 27 percent of
their money.

The other portion to make up that 72 percent, and what we`re not doing
here, the reason that those replacement rates in the last column are so
much lower, is we don`t have to replace the money we`re saving. That`s
already done.


CHATZKY: So if we can go to the first graph, you`ll see that in order to
meet these numbers, we actually have to come up with substantially more
money than people are saving now. By age 30, you want to have one times
your income put away, by 43 times, by 56 times, by 68 times, and by the
time you retire, 10 times.

These stats I pulled from Fidelity Investments, but Aon (NYSE:AON) Hewitt
has similar benchmarks.

And the problem is that people aren`t getting close. And that means that
wherever you are now, you got to downshift in order to make at least some
more savings possible.

GRIFFETH: OK. I`m optimistic now.

HERERA: Aren`t you?


HERERA: But it`s good advice.

GRIFFETH: But these are the hard numbers we need to hear, right?

CHATZKY: They are. I was telling Sue before, I put these numbers on
Twitter last week. People went nuts. I mean, I got thousands of comments
along the lines of, ha, ha, ha, ha, because if you haven`t been doing it,
it`s daunting.

But if you can start, and Richard Thaler was very, very known for his nudge
concept. You nudge yourself up. Start saving 2 percent and then just do a
little bit more every six months.

GRIFFETH: All right. We have some other questions here. We actually went
out to the street and asked people for your questions. Here is one of them
right now.


UNIDENTIFIED MALE: What would be the most effective way to save money
without breaking the bank, basically, to be able to buy food, pay rent?
Yes. How do you save with a very limited budget?


GRIFFETH: It`s what my wife and I used to call poverty mode, back in the
day, right?

CHATZKY: Exactly. And there are some do it yourself ways. You can
automate a contribution of $25, just move the money from your checking into
your savings account, every time your pay check lands, you put it on
automatic pilot. You try to forget about it and you just let it ride.

GRIFFETH: And then deal with it in your budget.

CHATZKY: Yes. But there`s also an app that I love called Digit. It does
this for you. You give it access to what`s happening in your accounts.
But it has a crafty algorithm where it figures out how much you can afford
to save and then it moves the money for you.

And I know millennials in New York who are earning in the $40,000 range who
are saving thousands of dollars a year this way. Now, they charge $2.99 a
month for this, I want to be clear, there is a small fee. But if you`re
going to save thousands, I`ll pay the $2.99.

HERERA: You know, you brought up millennials living in New York. That`s
another factor, is it not, where you are going to live in retirement?


HERERA: It is really expensive on the West Coast and on the East Coast.
But there are other parts of the country that you should really consider.

CHATZKY: Yes. Interestingly, Age Wave did a batch of research with
Merrill Lynch just in the past six months, looking at people who are
entering retirement. Among the ways they found people stretching their
dollars was just saying, hey, I own this very expensive house that I don`t
need to live in anymore, I`m going to sell it, I`m going to go to Peoria or
someplace else, buy something comfortable, affordable, and then take that
actual equity and live off it.

GRIFFETH: We`ve got to go. But the best advice is, do the best you can,

CHATZKY: Absolutely. A little bit, just start with a little.

HERERA: And don`t get overwhelmed —


HERERA: — because that`s what we`re here for. Thanks, Jean.

GRIFFETH: Jean Chatzky, great to see you, and thanks for that important

HERERA: We`re going to continue. Jean was a terrific guest. And thank
you to everybody who sent in the questions, right?

Coming up, Bill?

GRIFFETH: That`s right. Why the new retirement is not retiring.


REPORTER: Do you think you could be saving more money? If so, how would
you save more money?

UNIDENTIFIED FEMALE: I don`t think so. Too much things that you have to
pay. The amount of money that you can save, it`s not that much.

UNIDENTIFIED FEMALE: They don`t supply a 401(k) like they used to, or if
you contribute to your own 401(k), they don`t match like they used to. So,
it`s kind of like difficult to try to save especially if you have kids and
they go off to college and everything is getting more expensive. So, yes,
I kind of worry about that sometimes.


HERERA: She`s not alone. A growing number of Americans are not retiring
in the traditional sense, anyway. No golf, no lounging by the pool.

As Jane Wells reports, the new retirement is not retiring.


JASON ROBERTS, ASSISTANT DIRECTOR: I may bring in the camera close right

director Jason Roberts is giving a class to aspiring background actors at
Burbank`s legendary Central Casting. One of his students is 67-year-old
Abe Rogland.

ABE ROGLAND, SEEKING HIS SECOND ACT: It`s fascinating to be on set.

WELLS: Rogland used to own a logistics company but that went south in the
recession. Now, he`s pursuing his love of acting full-time, partly because
he needs the money and says he`s not the only one on the set who does.

ROGLAND: A lot of them is cash out, they are resurrecting. A lot of them
are working now because they have to pay the rent. Social Security is just
not making it.

WELLS: The Employment Benefit Research Institute found that forty-two
percent of people working for pay after retirement need the money to get
by, but at the same time, almost all of them also do it for fun.


WELLS: Seventy-seven-year-old Walt Krakowiecki retired at age 60 from a
career in food services management at Universal (NYSE:UVV) Studios. Now,
he picks up odd jobs at the background actor, not for money but to keep
busy. He even did a scene with Cameron Diaz for “Bad Teacher” where she
washed his Cadillac.

KRAKOWIECKI: Yes, she washed my car. I didn`t wash my car for about two
months after that.

WELLS: The fact is, we`re living longer, healthier and more active lives.

That`s why the Mizell Senior Center here in Palm Springs is a hive of
activity. The EBRI Survey says at least half of Americans expect to live
to at least age 85, and more of us are retiring earlier than expected, but
we`re not sitting around.
People like Sherry Goodloe.

SHERRY GOODLOE, RETIRED AT 62: I had breast cancer six years ago, and I
looked at between 62 and 65, and I thought, do I really want to stay there
another few years or do I want to start really living?

WELLS: Goodloe run the numbers, realized that with a little downsizing,
she had enough retirement to, quote, start living. Now, through a Website
called Trusted House Sitters, she house sits and pet sits around the world
for free.

GOODLOE: I plan to do this as long as I can. I love it.

WELLS: Retiring is a lot less retiring than it used to be.

For NIGHTLY BUSINESS REPORT, Jane Wells, Palm Springs.


HERERA: And we thank you so much for watching our special edition of

GRIFFETH: I`m Bill Griffeth. Have hope. Have a great evening as well.
We`ll see you tomorrow.


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