Retirement: When and How?

Special Guests: Jason Fichtner, Bob Bixby

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On the latest Facing the Future, I was joined by Jason Fichtner, senior lecturer and an associate director of the Master of International Economics and Finance program at Johns Hopkins University, and Concord Coalition Executive Director, Bob Bixby. We discussed Social Security, retirement planning, fiscal and economic policy, monetary policy, long-term fiscal responsibility and the Congressional Budget Office’s monthly budget review.


[Note: Portions of this week’s Facing the Future can be seen in the video clip posted below.]

Fichtner shared some of the differences between generations in how they view work, how many employers they have throughout their work lives and how it impacts their retirement savings. Past generations largely worked for one company their entire lives and received a pension, but current generations change jobs frequently.

“That changes, in some ways, what that means for retirement security,” Fichtner said. “A lot of employers used to have a defined benefit pension plan, and now we’ve shifted the risk onto individuals with defined contribution plans, which move as you move your job, and sometimes portability is there and sometimes it’s not.”

He went on to share other differences between Millennials and earlier generations, like delayed home ownership and approaching retirement with more debt. As a result, Fichtner believes it is time to rethink how we plan for retirement, when it takes place and even how Social Security operates. He added that the nature of the conversation surrounding retirement security needs to change as well.

“Social Security is the best inflation protected annuity out there; it gives you security, lifetime income and it’s adjusted for inflation,” Fichtner said. “We have to figure out how to make sure Social Security is there for everybody because it does face financial challenges potentially coming up within the next decade.”

As for changing the conversation, encouraging portability and reducing leakage (siphoning off portions of retirement savings when individuals change jobs or savings accounts), he said there needs to be more nuance, which is something desperately lacking in Washington.

“It’s very tempting when you start changing jobs, especially when you’re younger, to take that money saved in a defined contribution plan and just cash it out … as opposed to rolling it over,” Fichtner said. “On the policy side, we could do more things to make automatic rollovers more easy … and also education materials to talk about the opportunity costs of what it means if you take out that money.”

It is a difficult task in the face of individuals’ current needs – debt, children, housing, health care and more.

“I usually tend not to give financial advice, but I will say, make sure you take care of your retirement before you take care of your kid’s,” he said. “That does not mean you should avoid planning for their college savings, but make sure you are secure before you start thinking about their security.”

Read more of Fichtner’s take on retirement and Social Security by clicking here.


Additional topics in our conversation included long-term fiscal policy and Modern Monetary Theory.

On MMT, Fichtner had a word of caution. One of the primary tenant’s of the theory is that for a nation like the U.S. that issues debt in its own currency and is the world’s reserve currency, that nation can print money up to a certain point without creating more inflation.

“In some sense, that’s kind of true … right now it’s going on with monetary policy,” he said. “As the economy grows and it needs more money, as long as you keep growing the money to fit the economy and not too much, you don’t create inflation.”

But on the idea of can you just keep printing money, the answer is “no.”

“What we’re seeing now with COVID is because of the rapid nature with which people lost their jobs, lost their income, there was this gap between what people could afford to pay and what the economy basically was assuming could be paid for,” he said. “That could get filled in now with government spending … and it did prop up the economy, but the problem is if you keep going forward, now you’re going to have people who aren’t productively adding to the economy and just giving them dollars and that’s going to bid up inflation.”

Fichtner added that there is no such thing as a free lunch, and at some point we will have to pay for our lunch.

“The question is when … when is that tipping point,” he said. “The federal reserve has been buying up a lot of assets … at some point they can’t do anymore of that, and we’re going to have a reckoning.”

As with retirement planning and security, there are opportunity costs related to the nation’s debt and deficits. Read more of Fichtner’s take on fiscal policy and MMT by clicking here.

Bixby discussed the Congressional Budget Office’s monthly budget review for August.

“Through the first 11 months of the fiscal year, with one month left to go, CBO reports that the federal government has run a budget deficit of $3 trillion, which is about three times more than was projected at the beginning of the year,” Bixby said. “Almost all of it is COVID-19 spending.”

He added that the deficit is projected to come back down, but the nation will experience historically high deficits for the next couple of years before they plateau back to around where they were projected to be, which were already high levels at roughly $1 trillion each year.

“It’s like a deficit fever for the next year or two, but the patient wasn’t very healthy going in,” Bixby added.

Hear more on Facing the Future. I host the program each week on WKXL, (N.H.), and it is also available via podcast. Join me and my guests as we discuss issues relating to national fiscal policy with budget experts, industry leaders and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, Pandora, iTunes, Google Play Music or with an RSS feed. Follow Facing the Future on Facebook and watch videos from past episodes on The Concord Coalition YouTube channel.

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