to him, it was never an option to not act. if there is a lesson that we take out of this tragedy, all we have to do is look at him. we must run into the building together. we must act. >> "washington journal" continues. host: this is joshua gotbaum.

he should -- he serves as an economical studies scholar. he is here to talk about the issues facing millenials when it comes to retiremen guest: the truth is, mostly because everyone worries about retirement, but we have been , some of us think over focusing, on the baby boomers on the verge of retirement and focusing on their worries and whether they are prepared, and not paying attention to the fact that everyone else also is nervous. everyone else is nervous that when they retire social security will not be there. everyone else is nervous that they will not have enough money saved. what is happening is it is a good thing that we are beginning to realize that there are about to be more millenials than baby boomers, and we are not talking to them or thinking about them. that is the reason for paying

attention. in thehere is a line report that i want to read you saying "millenials will have several advantages such as more education and longer working lives, and more flexible worker rain bins -- work arrangements." let us start with the disadvantages. what are they? guest: the millennial generation educated, but their education costs more. they have greater student loans. and, that is a separate challenge. turns out that when you enter the labor force at a time when the economy is lower, it affects -- u.s. eventually -- you eventually start lower and it takes a long time to catch up. although it is true that millenials are better educated, morethey have access to

forms of savings and et cetera, they also have, on average, a less encouraging income path. and inve more debts, addition, although we do not think of this as an issue only for millenials, the challenges of social security and paying for social security will affect them much more than to baby boomers. together, and what that says is millenials have to do things differently. that is true for everyone. it is true for millenials, gen xers. the fact is the world has been changing, and we need to catch up. , bute are living longer health-care costs more. that means that, if you live longer, you have to think about working longer, you have to

think about saving more, in thetion, it looks like stock market returns in the future are very likely not as great as the ones from the past. and so, that means that the dollars you set aside today are actually -- you cannot count on them as earning as much as the dollars that their parents or their employers set aside. the last change that really matters is that we have moved from a society in which the dominant form of retirement was a pension, in which you and i did not worry about our retirement, the employer did. the employer had to make sure that there was enough money set aside and that you had a paycheck for life. now we are in a world in which most of us, although there are still 70 million people who have have ton, most of us

decide how much to set aside, most of us how to decide how to invest money and aside when we when we- and decide retire will we buy a paycheck for life, or are we going to run the risk of playing the market? us,: are guest to talk to retirement security in millenials. this is the age of 3 -- the age range of 22 to 20 -- 23 to 30 at 202-748-8000. the rest of you, 202-748-8001. mind -- what is the what is the mindset for millenials? do not wantpeople to deal with it. that is the biggest problem of all. the biggest problem is i am uncomfortable, i am not sure

i have ao, and so, if savings plan at work i may or may not sign up. i probably will not think carefully about how much i set aside. i probably will not think very carefully about how that money is invested. we needof this is that to do more things as individuals. there is lots we can do as a nation, but as individuals you need to do four things. one, it is to actually set things aside. if your employer offers a retirement plan, going it. if they do not match for a year, join it immediately anyway. step one is set aside something automatically. do not count on remembering to write a check, have something

deducted from every paycheck. .2, and this gets to the piece -- number two, and this gets to the piece i did, if you are in the millennial range, set aside at least 10%. if your employer contributes 5%, you contribute 5%. if your employer contributes 3%, you contribute 7% at least. if your employer contributes nothing, set aside at least 10%. it does not mean you cannot have emergencies, but set aside 10%. ,hird, unless you are an expert and most of us are not, do not gamble by spending your retirement money trying to pick stocks. it, of us are not good at and retirement programs that enable you to pick stocks are also more expensive. in the end, most of us who try and play the market in

retirement end up less well-off than people who leave it to the professionals. get tot one is when you retirement. this is the hardest one. use at least some of your money to buy a paycheck for life. do not just move it into an individual retirement account and hope that you will -- that your money will last. host: are you talking an annuity? guest: some kind of annuity, some kind of lifetime chain -- paycheck. bought a paycheck for life, and annuity that begins if i get to 85. 65, it not start at starts if i get to 85. the only reason for that is to be sure that i do not run out of money when i cannot work. that is the hardest one for -- that is the hardest one to do.

for millenials right now, steps one through three are the ones that matter. set something aside, make sure it is at least 10%, and do not try and play the market unless you are an expert. host: you set it at the beginning, and there is a story in "the new york times" that there are millenials with college debt. they are saying i have to pay all these things first, how can i do that and at the same time put something aside for the future? guest: two things are the case. one is nobody pretends that millenials have it easy. waitint is that if you until you are 35, or 45, or 55, then go, oh yeah i need to say something for retirement, you will guaranteedly not have enough. the real trick and hard part is

to set aside something, even while you are paying down your student loans, automatically. ideally, 10%. 10%, doannot afford less, but do something every paycheck and do it now. there is a whole separate other debate, which is beginning to percolate up about what we do about student loans. it is clear that student loans are a problem that this generation has that previous generations did not have. education got more expensive. students were allowed to borrow more money. unfortunately,e, the congress and its sometimes less than infinite wisdom said that although major corporations can restructure their debts through bankruptcy process, student loans are special. we will not let you get out of student loans through the

bankruptcy process. that has clearly got to be reconsidered. host: we have some calls lined up. let us go to ohio from cynthia. you are on. caller: hello. comment thening to when i first started working i hour.king $4.35 an was 61orked up until i disability,put on because i could no longer work. be ableyou supposed to to save enough money with the economy the way it is? host: we will let our guest respond. , there is no one

who pretends that everything is hunky-dory. the economy has been, although it it has been getting better for the last 10 years, it is getting better from a disastrous level. my point is that even if you are dollars or six dollars an hour, et cetera that there needs to be a way, as you are going along, the advice to millenials and folks who are 20, 20 5, 30, 35, et cetera, set something aside. did notll be folks who thattuff aside, and, in case, it is going to be harder. in that case, you will have to less, living on social security. there are a few things that you

can do. your disability ends and ui thinking about going on social purity, and -- social ifurity, it usually ends up you spend down whatever savings you have or can get andy for -- defer -- and defer social security you are better off. if you delay starting social security, you can wait as late as 70, and it turns out the government for reasons that are arcane will give you a guaranteed inflation adjusted 8% per -- return if you wait. you can use your savings and weight. for the millenials, the main issue is set something aside automatically. surveyolks did a thinking about savings.

amongst let niels and baby boomer -- millenials and baby boomers, and they asked how much they were planning to contribute, most of them said 6% or less, does that surprise you? guest: not at all, that is why i wrote the piece for "market we are noth is that experts. and of us are not experts, most of us do not know how much to set aside. 6%,our employer matches then people set aside 6%. if your employer only matches 3%, a lot of people say i will put in 3%. that is a mistake. what you should do is say, if my employer puts in 3%, i need to get to 10%, so i should set aside 7%. i am not at all surprised that

the average prices at 6%, which is one of the reasons that i wrote the article. we have not provided any guidance. host: those who start working for a company, should it automatically be an opt in, or should they get the option themselves? guest: the way i think about it, it should be automatic. you should be automatically enrolled in a retirement savings account unless you specifically choose to opt out, because what we discover is that, if, when i start a new job and they give me a stack of papers, and i have to figure out do i want to sign up for the retirement plan, how much do i want to set aside, how do i want money to be invested, do you know something, that one gets moved back. most of us think the better approach is, even if the

employer does not contribute a dime, the employer can automatically enroll you in something that has an automatic contribution level if you do not specify. an automatic investment if you do not specify. that is the best way to go. that,f you have doubt then you can decide how much do i set aside. the employer will probably not say we will set aside 10%, so you have got to go in. the first step is, automatically enroll folks, automatically get them contributing something, and, ideally, automatically increasing the amount of the contribution until you get to a 10% level, or more. host: if you fall into the ages of 23 to 28 -- 38, 202-748-8000 all others, 202-748-8001.

john, you are on. caller: as far as social security goes, i think they ought to raise the earnings limit based on congressman's pay which is around 170 something thousand which would shore up social security and relieve a lot of people. i feel bad for the people that think that social security will not be there. it will be there. it is an insurance program. if you live you get it, if you die you do not need it. that is my thought and i had better leave it at that. thank you. goodbye. ourt: social security is most basic social insurance program. we pay into it, and then we expect it to be there, and respect it to provide income for life. unfortunately, we have gotten to the folks -- where

-- folks in the capital have our docking the issue on -- ducking the issue on social security. we have one party that has said and as want lower taxes a result we want to cut benefits for social security, but we do not want to admit to do that, so they do not say that and do that. we have another party who would like to increase social security or maintain it, and does not want to say and that will necessarily involve raising taxes. as a result you have a stalemate, you have had a stalemate in washington, d.c. for decades. my view of this is, and i do not want to be political about this, we have an election coming up.

one thing i hope that folks will do is say to whatever candidate whether it is for congress, president, or whatever, what are you going to do to make sure that social security is there? and, what is it going to take? if they tell you that we will get together and have hearts, flowers, and figure out a magical solution, they are stuck -- ducking. host: this is paula up next. caller: i am an individual who works for the world government and human resources, and a small agency. guest how he your felt about the federal retirement program, and you are 100% correct. i am in the older group.

i have been working for 30 years, and i have seen the systems change, and have seen where young people come into the federal government are not offered the same level of retirement as we were coming in. even when the system changed from civil service to the new system, it -- newer is ever evolving and putting aside is definitely a necessity. i just wanted to get your thoughts on how you felt about that program that does allow you to invest in your own retirement, and have a lot left, and those kinds of things. guest: i should start by saying disclosure, since i have spent 20% of my year in the adderall government, i am in that -- in the adderall government, i am in

i am-- federal government, in that system two. the federal system is still -- still very good. the federal system has a pension component, and a savings component. that is something which most people outside the federal government would love to get. federalue that the system has changed over the decades, and i was fresh out of school in the last century, there was a very generous pension and a much smaller individual account program. over the years, the balance has shifted. you still have both pieces in the federal system. that for a lot of people is just not true. for a lot of people outside the government, the only retirement they get is if they set it aside

themselves, and do it themselves. isview on the federal system thank your lucky stars. host: our guest, aside from his working at broking institution, of thethe -- 40 -- part federal -- guest: when a company goes payingt, and they stop their debts and workers, they also stop paying their pension. if that pension is underfunded, the pension benefit guarantee corporation steps in and pays the benefits. for example, if a bank ever goes belly up, you have the federal deposit insurance corporation. trouble,ions get into you have the pension benefit guarantee corporation.

it has been around for over 40 years and is staffed by some of the best, was dedicated civil servants i have ever seen. they are great. i say that even when they are not watching. so, it is something to protect pensions. what it does not do is it does not protect individual accounts if you do not put any money in them and it does not protect individual accounts from market failures or losses. the 40 million people in america, the private sector folks who have private sector pensions have some protection. the rest of us have to deal with our retirement on our own, and has to make sure that social security is there. host: does the corporation have enough money in it to cover all the pensions that it is responsible for? guest: at the moment, no.

one of the nice things about that system is that pension plans play premiums -- pay provide resources to pay benefits. for most of the pension plans that are insured, those premiums will work out. pensions, alass of very important class called multi employer pension plans where the premiums and benefit levels were set too low, and as a result, those plans get in trouble and it does not have the money to pay adequate benefits. there is some evidence that even though the congress of the united states has trouble agreeing on anything, they are trying to find a way to make sure that those pensions are protected.

these are, for example, pensions , truck drivers, construction workers, et cetera. pensions, andost the 90's they were adequately funded because in the 90's the stock market did well. in the last 15 years, they were not well-funded, because the actuaries who said here is much you need to put in, in the 90's i guess low, so -- they guest low. guessed low. in this century they have guessed hi. begress seems to actually trying to work on a bipartisan basis to actually solve this people so that 7 million do not move their pension. host: this is tim from michigan. hello. caller: i think that social

security should be bolstered and improved to -- because that's what it was for. you keep saying that we should put more money into something that is already set up and it would be easier to solve as far as putting money in a bank, that would be a good idea. get with it. the republicans took over $1 trillion away from social roots -- social security for a tax bill. what is wrong with you people? guest: let me unpack that a little bit. that, as a nation, and my colleague says that pretty eloquently in a book he just did. , in the beginning of the 1980's, we started deciding

that cutting taxes was more important than paying our bills. that is clearly a problem. one of the things that he says is we have got to pay attention and start saying and recognizing that somebody is going to pay our bills and the question is is it going to be the millenials or the people who follow them? one of the things we need to do is stop pretending that federal deficits are someone else's problem. why i amthe reason optimistic about social security is because even the people who -- who say theve way you should solve social security is by cutting benefits do not have the nerve in most cases to say it. that is why i think, if people ask their elected officials how are you going to solve and make sure that my social security is

there, and make sure that my medicare is there, and demand an answer, then, the folks in that beautiful building up on the to find a wayble to do that. i have my preferences about it, i do not want this to be a political broadcast. there are plenty of ways to do this if people say to their elected officials i want my social security to be there. i do not want to be worrying about it, and my personal view is, the way that we should make sure that it is there is to pay for it. this is a bit of an aside, but i worked for president bill clinton, in one of the things he did was say that -- one of the things he did was to balance the federal budget and what did he do with the surplus, we will make sure that social security

is there. so, it can be done. now, the next president decided that tax cuts were more important than saving social security. guess what? you're getting closer to the time that social security will need more money, and i think we should, as citizens, say to elected officials we put you here to solve problems, not to kick the can down the road. host: one more call from eric, washington, d.c.. caller: good morning. i wanted to ask your guessed a question based on an earlier loanst saying how student , unlike other debt, cannot be restructured. i remember reading something about student loans being sold on wall street as security.

and, it being used as credit ratings to attract investors. that is the reason why student loans cannot be forgiven, because of the credit ratings and to reinsure investors of their guaranteed payments of these debts. i was wondering if your guessed could comment on that. this is not my area of expertise. i have a colleague named adam who has spent lots of time studying this. that myan tell you is former brethren, because i worked in the finance industry, have worked hard to find ways to process loans. one of the things that they did was they said to members of congress, you know if people

cannot discharge their loans in bankruptcy, it will be easier for us package them. unfortunately, the congress heard that. bes is a mistake which can -- in my view it is a mistake. this is something that can be changed. whenay to change it is somebody comes and asks for your vote, you can say in addition to what are you doing to make sure social security is there, and say what about the millions of people who have student loans that cannot afford them? major corporations can discharge the loans, the president of the united states use the bankruptcy process to walk away from hundreds of aliens of dollars in loans. but, student loans are different. should they be? host: joshua gotbaum.

if you want to see more of his work go to brookings.edu.

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