>> announcer: this is "nightly business with tyler mathisen a more than 10,000 people retire every day. tens of millions already there. and generations to come. but things are changing. >> 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. >> 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. >> if i were to retire right now, i would be a homeless person. >> announcer: tonight, "nightly business r examines america's retirement crisis and options fo

and it is one of the biggest financial challenges of our time, saving for retirement. >> and tonight we are hoping to shed some light on this issue which certainly ns of americans. >> welcome to this special edition of "nightly business i'm sue herera. >> i'm bill griffeth in tonight for tyler mathisen. >> 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 i >> reporter: about ten years ago, galen murphy realized he never saved for retirement. now he's 49 and still not saving. >> nnot. i was hoping to in this next year. >> reporter: 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. >> the biggest ones are going to be rent, student loans, health care, car payment. >> reporter: living the american dream for too many people is 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 40% of the private workforce has access to an employer-sponsored retirement plan. even those who are saving still aren't saving enough. one problem? pensions became a thing of the past. in 1983, almost 90% of the workforce had pensions. by 2016, that number had dropped 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? >> i think it's much bigger than one can imagine. >> reporter: he's a washington, d.c.-based financial adviser. >> 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. >> reporter: johnson says putting a higher priority on saving for retirement needs to start at home and continue in school. but that's not happening. >> look, it's social media and facebook. 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 retirement. >> reporter: 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. >> that for me is the biggest issue. >> reporter: tim renzata studied 13 million students, finding less than 17% of high school studen retirquir 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 could impact their lives? >> we need this sort of education to thrive in the future. >> reporter: now approaching 50, galen murphy knows he would 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. for "nightly business repor so what are some possible solutions to our lack of savings? our steve liesman did some digging for us.

>> reporter: people don't always 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 thalor'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 savings. >> economics is based on the 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." >> reporter: his idea was to enroll people automatically in savings plans. they would have to opt out if they didn't want to save. this would help americans use 401(k)s and roth iras.

and they would automatically increase their savings as their salaries rise. would you agree to increase it 2% a year until you get up to some reasonable level? >> that works wonders. >> reporter: but the growth spurt since thalor introduced behavioral economics has stalled. and the actual dollar amounts of savings remain low. 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 is difficult to plan. senator jeff flake and congressman david bratt 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. >> 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. >> repor provis w excluded from the latest tax bill, that backs up thalor's idea that people don't always do the right thing when it comes to money. ea fixes like saving more or enacting the right legislation in congress eludes us. i'm steve liesman. >> jack van der hei is our guest. thanks for being here, jack. there are some parameters that you've identified foth >> well, we've been studying national retirement income inadequacy now for many years. we built a model in 2003. every ye wie rerun it to see

what percentage of people who retire will have sufficient retireme income. the number is perhaps strikingly low in many cases. it's overall about 57%. 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 ret plans. and unfortunately those that don't. the probability of having adequate retirement income is over 50% higher for those people who are working for employers who have those particular types of retirement plans. >> 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%, and the trick is waiting that long, right? >> 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% 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. it's very important to not claim too early. >> let's bring in another expert here, jack, stay right there. joining us right now is john leitner, director at the university of michigan's retirement research center. john, you don't think we're in a crisis yet.

why? >> well, i should say i'm glad to be here. >> welcome. >> thank you. 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 t 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. >> 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. >> absolutely. and unfortunately, many people just look at some kind of target replacement rate that if they think they can have 70 to 80% of what they had pre-retirement, they're going to be fine. the problem is of course that's using averages. if you end up living longer than the average life expectancy, 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 id >> 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 age? >> 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. >> all right. but we do have some time to do

that. i certainly hope so. jack van der hei, john leitner, thank you both f >> thank you. still ahead, your questions on ret. >> reporter: have you been saving money for your retirement? >> i have. probably not nearly as much as i should. my husband and i always hope that maybe we'll win the to the l i hope to open up another savings account and every paycheck, transferring over, yo you know, two weeks or so. but -- yeah, like i said, you know, at the moment i think my priorities i guess aren't there and i'm not thinking that ahead into the game. but i could defini.

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. 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% 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% of your pay, then 5%, then 10%, 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 pai 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% tax on the money you withdraw before reaching age 59 1/2. however, there are a few medical exceptions that apply. go to irs.gov for details. that's the last resort. take the o so that you don't have to drain your retirement savings and you can retire well. we do welcome the famed financial expert, the host of her money podcast, welcome, we're glad to see you. we'll get to our questions from our viewers. what about the issue we have to worry about, medical expenses? that's a crisis as well. >> 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. 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 lon jest insurance in order to protect ourselves. >> and nobody wants to think about being sick, that's the other issue. >> no. >> understandably so. but no one wants to think that you're going to be the one that needs that long term care insurance. >> 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. >> when should you be thinking

about long term care insurance? it's cheaper the younger you are and the healthier you are. >> 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. people who have less will often spend th mayor monr money and qualify for medicaid. >> good advice. we asked for questions, you 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% per year in that 401(k). he's assuming that the house will be paid for and the calculation is for a couple. t he say basically all those financial tools are assuming too much. do you agree with that? and what do you make of his question? >> 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. 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 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% of their money. the other portion to make up that 72%, and what we're not doing here, the reason that thos la column are so much lower, is we don't have to replace the money we're saving. that's already done. 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 40, three times. and by the time you retire, ten times. these stats i pulled from fidelity investments. and the problem is that people aren't getting close. and that means that wherever you are now, you have to downshift in order to make at least some more savings possible. >> okay. i'm optimistic now. >> aren't you? >> but it's good advice. >> 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 thalor was very, very known for his nudge concept. you nudge yourself up. start saving 2% and then just do a little bit more every six

months. >> we have some other questions here. we actuall went out to the street and asked people for your questions. here is one of them right now. >> what would be the most effective way to save money without breaking the bank, basically, to be able to buy food, pay rent. how do you save with those very limited budgets? >> it's what my wife and i used to call poverty mode, back in the day. >> exactly. thers some do it yourself ways. you can automate a contribution of $25, move the money from your checking to savings account, put it on automatic pilot. >> and then deal with it in your budget. >> yes. 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 it moves the money for you.

and i know millenials in new york who are earning in the $40,000 range who are saving thousands of dollars a year this way. they charge $2.99 a month for this, i want to be clear, there is a small fee. if you're going to save thousands, i'll pay the $2.99. >> you brought up millenials living in new york. that's another factor, where you are going to live in retirement. 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. >> yes. interestingly, agewave did a batch of research with merrill lynch in the past six months looking at people 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. >> we've got to go. the best advice is, do the best

you can. >> absolutely. a little bit, just start with a little. >> and don't get overwhelmed because that's what we're here for. thanks, jean. >> great to see you, and thanks for that important advice. we're going to continue. jean was a terrific guest. and thank you to everybody who sent in the questions. coming up, bill? >> why the new retirement . >> reporter: do you think you could be saving more money? if so, how would you save more money? >> uh, 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. >> they don't supply a 401(k) like they used to, or if you contribute, they don't match like they used to. it's difficult to try to save especially if you have kids and they go off to college and everything is getting more expensive. i kind of worry about that sometimes. >> 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 retire. >> i may bring in the camera close right here. >> reporter: veteran assistant 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 rogeland. he used to own a logis company. 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. >> a lot of them cashed out their iras ready. a lot of them are working because they have to pay the rent. social security is just not making it. >> reporter: the employment benefit research institute found 42% 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. >> i get bored. >> reporter: 77-year-old walt

krakowiki retired at 60 from a career at food management. now he picks up odd jobs acting, he even did a scene with cameron diaz where she washed his cadillac. >> didn' wash my car for two months after that. >> reporter: the fact is we're living longer, healthier, more active lives. that's why this senior center is a hive of activity. at least half of americans expect to live to at least age 85. more of us are retiring earlier than expected but we're not sitting around. people like sherry. >> 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? >> reporter: she ran 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. >> i plan to do this as long as i can. i love it. >> reporter: retiring is a lot less retiring than it used to be. for "nightly business repor" jane wells, palm sprin and we thank you so much for watching our special edition of "nightly busines i' sue herera. >> i'm bill griffeth. have hope. have a great eveni.

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