James W. Russell (Ph.D. sociology, University of Wisconsin-Madison) is an expert and activist in retirement policy. He is the author of nine books, including The Labor Guide to Retirement Plans; Social Insecurity: 401(k)s and the Retirement Crisis; Double Standard: Social Policy in Europe and the United States; and Class and Race Formation in North America. He was co-chairperson of the Connecticut Committee for Equity in Retirement, a rank-and-file advocacy group that initiated a union campaign that won the right of public employees in Connecticut to transfer from their failing 401(k)-type plan to the state’s traditional pension. He has taught at universities in the United States and as a Fulbright professor in Mexico and the Czech Republic. Currently, he is affiliate research scholar in Public Policy at Portland State University in Oregon. He is a member of the National Academy of Social Insurance and an appointed member of the Connecticut Retirement Security Board.
i just read social insecurity. what an eye
opening expose.thanks for this great work.
here is my question; how do we overturn
the 401(k) propaganda campaign, so as to
return to db pensions?
Thanks John. I’m glad you liked it. As far as overturning the 401(k) campaign, we’re up against an industry that has millions to spend on misinformation. But as more people realize that 401(k)s don’t work, I think there will be searches for alternatives. The most promising now, in my opinion, is the beginning campaign to expand–not just defend–Social Security, which after all is a DB plan.
As a federal employee, I’m sure glad that I did not change over to FERS. I stayed with CSRS, and can live with having no match for my TSP contributions…
That’s consistent with what I know about the federal employees retirement program as well as the experiences of federal employees I know.
I’ve just started on your book, Prof Russell, and it makes for very interesting reading. I did check the index, and although I can’t be sure until I finish the book, I noticed that you had not mentioned the retirement system for my own University of Wisconsin, which is part of a public employee pension plan for the entire state. It has been working well for a long time (BTW, I’m in my fourth year of retirement as a professor now) and has earned plaudits from a variety of commentators and officials. There were recent attempts to hijack it for the Wall Street-ers, but those attempts have been fended off, at least for the near future. I’d be curious to find out what you think of the Wisconsin system.
Thank you for your interest in the book.
Despite having all three of my degrees from UW-Madison, I know little about its state pension system. What I do know is that it is well funded. This was mentioned to me when I was interviewed on Wisconsin Public Radio by Joy Cardin.
I’d be curious to know whether Wisconsin has some sort of legislation that obliges it to make regular adequate payments to the public pension system. The cause of poorly funded systems in other states, including my own of Connecticut, is almost always because of skipped or reduced payments to balance the rest of the budget. No retirement system can be solvent in the long run if it is not properly funded.
Thank you for coming to Cleveland, where I was honored to hear you speak at Case Western University.
Having just finished your book, I am impressed with the thoroughness of your research and the sociological perspective you bring to the work. Your willingness to talk honestly about your own situation is helpful since so often, people tend to blame themselves for inadequate savings for retirement.
What do you think about the glorification of work for older people? I have noticed that even some organizations that supposedly advocate for older people are pushing work in retirement as “fulfilling?” I always thought that when we reach our sixties after many years of work, we should be proud to stop working. To imply that we need to keep working (or start our own business) seems insulting. I can find lots to do besides work.
I agree with what you are suggesting–that the promotion of work after retirement is an attempt to make a virtue out of necessity. That is, because so many people will face income shortfalls after retirement, largely due to the failure of 401(k)-type plans, post-retirement paid work is being promoted as a solution. It is no solution. How long are you supposed to work? Into your eighties? nineties? What if you are not well?
On the other hand, I do think that someone should do something in retirement for maintenance of physical and mental health. But it shouldn’t have to be paid work. Having absolutely nothing to do would be, to me, hellish.
(from Chuck Burton). I salute James Russell for his important work in Social Insecurity, exposing the depredations of the corporate financiers, eagerly enabled by our corporate Congress. I do not call it the financial industry, because the latter word suggests something created or at least value added. In this case the only thing added are the profits. He also advocates forcefully to support Social Security and its humanistic reform against the powerful forces that are bent on destroying it. But there is something missing from his analysis and indeed from the entire Progressive critique of the so-called ” one percent”. On both sides of the aisle I only read discussions of growing the economy, creating more high-paying jobs, raising the standard of living, having the next generation doing better than us and so on, with never a caution that this deeply conditioned concept of American life may actually be the problem and not the solution. Russell concentrates on the retention of standard of living for retirees which for me neglects the most important issue which must be quality of life.
In mimicking the meme of unfettered capitalism we fall into a trap, the suggestion that a life built on materialism and consumerism will somehow bring us happiness, when all historical and spiritual evidence suggests otherwise. I have been a lifetime backpack-style traveler in the world’s “developing” nations, and all my experience in diverse societies tells me that the average materially poorer person in countries as disparate as Mexico, Thailand (and all of Southeast Asia), India and Morocco, among others, seems far more contented on a day-to-day basis than the average American, busy, harried, and more resentful for what they don’t have than grateful for what they do. These “innocent” foreigners have what we have lost, a sense of place and personal identity, family and community, even if they lack fancy cars, big houses, all the latest electronic gadgets, and the ability to spend a fortune at a fancy restaurant. Please note that I am not referring here to the desperately poor of the world who live in desperate squalor outside of the world economy and the scope of this discussion. I do not ascribe contentment to them in any way.
The idea of maintaining and increasing a material life-style at its current level is pathological, though our entire national conditioning resists this obvious conclusion. The United States has less than five percent of the world’s populations, but we consume over twenty percent of its energy and resources. The Pentagon alone daily uses more fuel than the entire nation of Sweden. Our lust for material comforts and the divine right to drive a single passenger machine anyplace at any time, has led us into a futile love affair with the imaginary Bitch Goddess of Security, a police state mentality and what is fast approaching a one party military dictatorship.
The biggest elephant in the room is that our insistent desire for more and yet more is destroying the very environment we depend on. I will not belabor this point. In one way or another we all know this, no matter how strong our propensity for denial.
Saddest of all, the bottomless basket of goodies, things, stuff and electronics make us only more unhappy, dividing us one from another inside our own digital cocoons. Our financial worries and insecurities and our unwarranted dependence on Russell’s financial vultures stems from desires that can never be satisfied, and the delusion that contentment and inner peace can ever be derived from possessions. The Stanford Research Institute did a study in the seventies about American lifestyles. It identified one as “voluntary simplicity, ” which is capable of giving us all much more free time, love of nature, and relationship with our families, friends and communities. While resisting the corporate predators, we should aim less for economic gain than for the joys of a more simple and human life.
My other quarrel with conventional wisdom involves the fear of outliving one’s money. The suggested concept of material need encompassed here, along with the hoary old necessity of providing seventy percent of final income, are to my mind mainly part and parcel of our national
culture that denies death. My parents had a long and enjoyable retirement without a high income, but their final years dealing with complications of dementia and Alzheimers disease were unbroken misery for both themselves and their sons. The fact is that we are obsessed with longevity rather than the more important quality of life. Too many of us live far too long for our own happiness or that of our families. This is hardly a natural condition, but something built on the unnatural technology of a for profit medical system run amok. What value is money without health and the ability to enjoy walking, fresh air and warm human relationship, which is definitely not found in our nursing homes and other scrapheaps of our elderly detritus?
Almost all authority and the very pirates whom Russell decries call on us to delay taking our Social Security and spending our savings. As a full-time professional tax preparer for over thirty years and a self-styled lay financial expert, I beg to differ. Generally the financial break even point between taking Social Security at 62 and at 66 comes between our 76th and 77th birthdays. Let us leave aside the fact that millions will never live to achieve this breaking point, and focus on the imaginary advantage of those who do. I ask one simple question. Who gets more enjoyment out of their money, those between 62 and 76 or those who are 77 and older? I am 65 and grateful to enjoy excellent personal health and vitality, along with the promise of longevity due to genetic advantage, but I have no doubt about the answer. Even though I have far more money than when I was younger, my desires only decrease each year, and will continue to do so. If I am so fortunate as to continue enjoying health and physical and mental mobility at 80, the “stuff” that money can buy will be at the bottom of my life concerns. My advice is to enjoy yourself while you can and not agonize over the prospects of being penniless at 90. There are many worse fates in the world.
Thank you for your letter, which I enjoyed reading. I don’t disagree with your point about consumerism. Knowing how to live low is my cushion for retirement. The problem, though, is that there can be people who share our view in this regard but run into in retirement very expensive health problems or have family members who depend on their income who have expensive problems. There’s also the dismal reality that many people simply don’t know how to keep track of money, much less invest it well. As social policy, we need a system that works for the most money unskilled as well as skilled, healthy and frugal. That system is, I believe, Social Security. It doesn’t provide enough now, but it could with expansion–which I believe to be the most efficient and adequate response to the retirement crisis. At the same time, climate change, among many other serious issues, demands that we address surplus unnecessary consumption.
I advocate delaying taking Social Security if you can, that is, you have enough income without it to maintain your standard of living. Better to live on enough now so that there will be enough later than to live on more than enough now at the expense of having enough later. More importantly, the goal should be to have income security whether you live for a few or many years after retirement. I think it is the wrong question to try to figure out when you are going to die so that you can know when to begin taking Social Security benefits in order to maximize lifetime Social Security income.
I agree with Chuck about the quality of life issue. Having watched my elderly parents experience the slow death of very old age, I decided to take my Social Security at 64 and my husband took his at 62. I see people delaying retirement thinking they will have the same energy level in their late sixties that they had in their early sixties. Most of them just don’t have the energy to enjoy life as they age.
I also agree with the professor that most of us don’t have the wherewithal to be financial managers. If I don’t have it now in my sixties, how am I going to have it as I lose more brain cells? We are not machines that function perfectly forever.
Raising Social Security and giving everyone the peace of mind that many people in Western Europe have is the least we can expect.
n my situation, if I take Social Security at age 63, and therefore drawing less from my retirement savings, my break even point is at age 86,assuming the markets cooperate.
Taking less from your investments mitigates the sequence of portfolio bad returns that might occur early in retirement.
Sequence-of-returns risk involves the actual order in which investment returns occur. Typically, negative returns earlier in retirement have a more severe impact on your portfolio than negative returns later in retirement. That’s because your portfolio’s value is reduced by both negative market performance and any withdrawals you take to fund your day-to-day expenses. This means that a smaller amount is left behind to experience any potential future growth.
My general view on when to start taking Social Security is to delay it beyond your full retirement age, if health and income conditions permit, to take advantage of the increased pay out. I think it is the wrong question to try to maximize total SS payout according to how long you are likely to live. What you should want is predictable income security for whether you live short or long.
Sir,
What I don’t understand is that you invested $253,000 or so over 30 years—many of which were fat years in the stock market—and you only end up with $532,000, a return of only three percent. How is that possible? Your publicity says you’re a retirement plan expert. By the way, why no mention of the book with the same title by a former SS commissioner? And what do you think of Vanguard and index funds, which have become very popular with many investors.
I’ve never claimed to be an investment expert, which is different than a retirement plan expert. I invested following a common strategy in TIAA-CREF of 50% in bonds and 50% in equities and those were the results. Skilled investors undoubtedly did better than me, but I don’t think dramatically so. Certainly not enough to obtain better results than if the same amount had been contributed to a defined benefit pension. Regarding Vanguard and index funds, for the reason cited above, I do not have an opinion one way or the other.
Just heard your recent interview on KPFA. Very impressed with what you said – very depressed with our situation. My husband and I are self-employed. We are both aged 72 and still working, not by choice, but to put off using our savings for as long as possible. Is there anything in your book about what people like us should have been doing or can do now?
We have saved as much as we can (including our Social Security payments since age 64) and have invested IRA’s in mutual and bond funds and a small annuity, mostly through Vanguard to avoid paying stockbroker fees. We’ve tried to do this carefully, but realize that we’re not actually very far ahead now and have no way of predicting what we will have when we get too old or too sick to work. We certainly would be screwed if we had to take money out today!
If your book is more about policy for employed people, and since advisors only seem to want to talk about investing in the market, any ideas about where we could go for help?
My general advice for self-employed people is that they pay the Social Security taxes as a good investment that will pay off well when retired. It is unclear from your wording whether you paid the tax or saved the money instead and invested it. If the latter, I would look into what is possible in terms of rolling savings into Social Security and then drawing the highest income possible. It’s a complicated issue. The first stop for information should be a Social Security office—don’t rely on only internet information. If the former, I assume that you have been collecting the maximum distribution since age 70. If you wait longer, you will just lose income.
It would be good if there was a low-cost annuity available for you to turn savings into. Unfortunately the commercial products, including Vanguard’s, are expensive because of a host of reasons that I go into in the book. A future reform that I would like to see would be one in which people such as you could purchase nonprofit annuities from Social Security or state level programs. Unfortunately nonprofit annuities don’t exist for the general public, though they do for members of particular retirement plans.
One last point. In some cases, retirees find that their spending money increases despite their income decreasing. Or at least the former doesn’t decrease as much as the latter. You can try to calculate this by considering that you will no longer be putting money into retirement savings and your taxes will be lower, among other changes.
Dear Mr.Russell:
I am running for a seat on the City of Boston Retirement Board. I am reading Social Insecurity with great interest,
While I am not finished I think your book might rank with Ida M. Tarbell’s History of the Standard Oil Company. Many years ago, I read a greatly neglected book, Dr. Albert Ellis’s critique , Is Objectivism A Religion? I wonder if you know it? Another book of my youth was Eric Hoffer’s The True Believer, which rightest point to when critiquing leftist.
I wonder if you have been invited to share your book with any labor unions? I am on the Executive Board of Service Employee’s International Union, Local 888. Once the current crisis winds down would you like to address us?