Apr 1, 2014|
Garland talks about the coming collapse of the American retirement system with Christian Weller of the Center for American Progress and Daniel D'Amico of Loyola University.
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Automatically Generated Transcript (may not be 100% accurate)
Well -- so we're thinking about a special CBS news reporter Michael Holland America or retirement. Well there's roughly half. Of all -- for them Jews have no money set aside for charm not a thing. And to act. Only 18%. Of workers in the United States did their very competent. Of having -- up money to live comfortable. During the retirement years. -- understand this we have book expert with the Christian -- senior fellow with the Center for American Progress. Also professor at University of Massachusetts and Boston professor thank you so much for the time. Is this the the media with a little bit of hyperbole. -- Is this really -- -- -- an 18% jobless. Convinced we can live comfortably and. Note that the reality. We've known for many years we sort of -- the retirement issue some of -- -- into the background during the Great Recession because the housing crisis because -- I employment but. It took back in the that was has been back in in news for about a year and half or talking about here is is that. We have he retirement system that consists of Social Security. Which is a comfort to be six on in March and then we have pensions than a traditional and com. Pension -- elect income. They've been declining in more more people have been trying have been forced to play in full retirement -- -- -- distort yourself system. Well we call 401K he's an individual retirement accounts for 57 and -- -- there's all numbers -- out there. I'm a bit you know retirement savings account that the government gives money to two people to -- The tax incentives the problem is that too often people do not have access to these retirement savings accounts. Less than 50% private sector workers participate -- Through an employer in their retirement plan either pension war -- keep him. And over on in about 35 to 40% of people went on and become -- retirement. Have nothing other than social security and Social Security was never mean to be. All of retirement people were always meant to have something other retirement. Another -- security to live in retirement and that situation hasn't changed Uga has gotten a little worse during the crisis. But we're now paying attention to it on from poppy perspective -- in total from an economic perspective because what has changed -- The numbers have changed in terms of the people moving into retirement because now the people start to retire so we have the wave of people moving into retirement. Relying very heavily of -- security more than -- -- we're supposed to. In all it really happen is if they're lucky -- -- -- -- and you can't picture we can limit it but you can -- -- -- needed -- -- Too much with it on it and living it in and out or not enough. -- -- human record shouldn't. One basic point over and over and over. Over the last reported thirty years. That -- for a risk when it comes to investment. Been transferred from employers to employees is that correct. That's correct I mean. Just to -- is sort of the sense we always have to look for one hour to 40% the numbers now at large in the were historically particularly. 35 to 45% of people. Record your retirement. Would nothing but the victory but the two thirds of people who had something typically at a pension from their employer on and attention. Is. A little pot involved. Proposition two bullets that the beatable simply I'll -- -- it employer. Paid for the sometimes it would have to contribute to -- -- working here. In the end but upon the profession -- -- which means little in the room. But -- content into retirement in depicting most people accountable -- and check that that that they could never run out of money is that. And those pension plans instantly this stint on manufacturing industries among the airlines to some degree. Did their very popular among law offices of doctors offices because he can give lawyers and doctors and an expert on. But by and large the typical retirement -- it is in there and -- individual retirement account. And that is what do it yourself that you have to decide the one public stage we need to invest the money. How to withdraw the money went to with a lot of money ultimately the problem is spelled definitely with what -- -- -- -- -- you're -- a. And -- and that's too complex for most people than. That is complex from economists is that. The end it's -- -- -- from -- planet. By and large most of what the other crops. And in the requiring people to do comprehensive. In in that -- That's verdict yet neither is the world financial planning. -- in -- -- we end up with. Because there's so in the season the after the there's two things that people make mistakes being beaten him. Sort of in the wrong in particular too much with what equipment company like that let them money. Imagine somebody in the 1990. Putting all the money in cash and not to get into the stock market. What people have been stuck in the market crashed in 2007. But it would be about to retire. -- -- -- -- -- accept an appointment to destroy a lot of money. People investing in the Dominican that the things that happened if -- That you have about 1%. You know on -- that. Witnesses who say that about 30% by the time to -- That money they -- different service companies to continue investing. Them. I've -- in Canberra. -- destroyed a lot of well in the other party. Because of the complexity a lot of people don't. People are sold at Atlanta but the decision. Re doing to find out how that it -- -- equipment forum. Beautiful and keep it right people today -- the money tonight in what kind. Today it is important to have the money it's fifty different investment options on the equipment. 500 did that popped -- my quietly. There's just overwhelming I'd rather not do anything because -- -- -- -- -- -- and that's part of the the complexity. Prohibit state. And it'd have been I would submit not just the complexity. Give you. Microscopic. Example. And an acquaintance of mine oh lord I mean in order author by the minimum Michael Lewis. Just came out with a book talking about the stock market is rigged he did brief for sixty minutes and basically what he's -- was. A small group of people. Via the the wires that. -- knock copper wire and optical one optic wires. Or Roland had had hundreds of millions of dollars they have access to and other people don't. And they can see what's gonna be traded before it happens. In turn around make money on. And and the little guy. Doesn't have much richer and so they're few people in the stock market today and now we find out. There's a good chance it may be rigged them elected 401 -- and try to figure out what to do is there any answer to all of this. Well they're there or answers to this and policy makers are looking at that the first step is. Two. Very attractive the issue -- did that. If you -- could be beating your standard are things you can take advantage of that you cannot do as an individual investor. But that doesn't sitting in the market rate it's -- public. The rich people make a little bit more money and which people. But for the first sort of the average 401K investors. There's basically if you decide that ticket -- sure that if you decide to participate in Europe where I should important at a particular match. Document sent to different take. That picture that. There's two things. One is. Hi Rick you yourself and make the wrong decisions on in in -- from pop perspective in the private market or trying to -- that are. There's a new wave of products that seem to be working relatively well as local model portfolios. Wore light and fun and basically. It takes awaited decision from individual -- -- to elect I -- -- 60% of all the money in stocks and 40% and on and that they get older. The percent of -- get smaller so from the one time treatment market music to 50% and one amendment 60% to 30% and don't support. That automatic in -- call expect one or. Or model portfolio now entered there's some shenanigans with -- on but generally and to work well because people no longer have to worry about. The risk -- didn't know it. But the -- sort of get out of whack or -- On the other party is than that is the problem with many funds including life cycle and model portfolio funds. On or -- -- -- yet it's 2% in the past so that every year you pay -- takes 22 and a half percent. Of the New York total money away for just managing the all are on the charge substantially in the chart only zero point one person. You get to keep a lot more money in. Policy makers in Beijing and everybody's wanting to really. That the market much competitive over time but policy makers are trying to educate people. Night you're just more disclosure on your forward these statements can open these days than it was in the past of how much money actually eat. On in. So the move reducing and reducing costs will ultimately allow people -- To to keep more money. But that doesn't address the problem of the more effective person private sector workers were never we're not participating in every time and right now. -- him. There are a number of proposals. -- sort of get people to participate more. I think the critical voices within like unless we require people to participate in some formal action unless we require employers. To sort of get people into retirement account in some formal action. Will never move the needle and -- former fashionable to say like explicit what people mean by. The basic proposal that the that the minimal proposals a lot of people considered news. That every employer. Doesn't offer retirement plan. Have to offer you payroll deduction into an individual retirement account. What that would mean if you sign up start work in the first day. You basically get a warm peace unless -- check box. -- you don't want to participate. Your employer will take part of your paycheck and send it to an individual retirement account that you open -- So indeed the idea if you make it easy for people to start -- com. The that's one thing and there's a number of proposals to reduce costs but. He is sort of like requiring employers to at least help make it easier for people to participate. I'm an old employer to do is just happened of parks and payroll deduction I'll. But it's not important money complete money to -- the -- of the -- proposal -- people consider. Dude do you have a number of those getting -- retire -- Al into retirement we talking about. Millions tens of millions. Talking millions. Need to do to number it's typically about 35% of people who were into retirement -- -- Social Security. The the understate the problem a lot of people have very very little -- some money in their count but -- -- 50101000. Dollars that. So we consider them than those without anything at all. We're talking. -- On demand roughly half of people who don't have much in terms of -- you'd generally talks. Right now about 50% of people 55% of people depending on how Celtic numbers. Who if he retired at age 676667. Which is sort of the normal retirement age for Social Security. Can no longer on maintained a standard of living in. Did you have a deal with the numbers are. Honestly I don't. -- Q this is it different. Quite like 20% of the population is it's totally -- sixty million people our. In that age groups 65 and older. So unknown. -- Yeah half of that thirty million people. -- no longer mean understandable in some form or fashion which means they've -- but -- we know what that means is people. And wanted -- to opt for your life they tried. Harder to find another job sort of to meet in -- Unemployment rate among people 65 and older is very I relatives in -- The cut back on consumption. Com and that doesn't mean like you will not -- like Florida three times here and like play for the perks would that money that means I'm gonna cut my -- and half. From my heart disease or been an uptick in your group for -- have revealed. Those kind of things that the U -- in in there are people were sort of tried to paint him. -- pictured and I think long we don't really feel like millions of senior lining up to think well that misses the point the person. Who means whole season -- in can't go to doctors select and that the two pink to begin it was gonna cut back on things that. The need to cut back and typically the cut back on McCain and how it's going to the doctor the medication. And the reason kept asking for numbers. Can we sustain those kind of numbers of people does he. Cutting back in the pills cutting back on the food but they survived. That on me. The degree and a major. It is the major problem in two and number one -- sort of let -- think about this issue a lot of these people. Work most of these people work -- life state -- paid into Social Security -- that the right things in the they just. Happen to not work for employer who offer retirement plan ordered BP had these beat me the wrong decisions BP to -- and there was too much risk -- in -- count. The door unlock your unwise. In him now beer have to cut back on food and housing and in health care so that's one. The other -- it's that that sort of about these things I think that the society we want to arm but the other pieces fall from economy that. Population is growing very quickly in hand that over 65 fueled. In we expect them he hit it well big if -- Theoretically if they hit a lot of money during the working years and we expect them to spend a lot of money in their retirement -- it depends if the money during the working years back and spend it in retirement which means. Two things we've consumption going down economy which we economy's gonna grow a little bit more slowly. Which means fewer jobs for others for young people and announcing it. They're gonna come knocking on the doors of government particularly state and local governments where a lot of these social services for the elderly house. And they're gonna. For help not because that's really liked that they want because he's seen a lot of options on in debt means. Forty -- and government services that could mean more spending. Crowding out other spending public education infrastructure or could be higher tax -- but he. He did this CBO report though looked. Shows graph that talks about the industrialized. Nations and how bay. Rank sports retirement security. In the talked when we were ranked in nineteen right above the Czech Republic. Other things other countries or doing that we can adopt to to improve -- use it to mention. Or what most other countries other the United Kingdom and Japan and upbeat generally have much richer Social Security systems problem. So. -- the question but -- -- which is Social Security system you'd have to pay higher taxes. And that's generally in don't know. In the United States then there are some ways. Where where does some bipartisan agreement to bring in little more money to source security that you can't. Bring US system. To the level of pure and free for him and within the constraints. Which means you have to look at what works well retirement savings world. -- And there's two countries we can learn from one at the United Kingdom and -- basically how not to do what commanders Australia and -- example of how to do. Basically what it in Indian comes down to in order to sort of have a system that actually works on top of Social Security. The lesson from the United Kingdom and from Australia particular say. You need to really make this universal. Ultimately mean indeed that people. Have access to retirement -- at work. -- we don't mean that we keep it up to be clear that we need to see whether. It's voluntary. In I think they're the media opinion and the voluntary approach is -- gaining traction across the political. Artists you require people to contribute -- moments like the typical person contribute to 401K contribute 3%. In Australia and numbers are completely between eleven and 15% pure. So people went to contribute contribute to a little again. It's a government may indeed in Australia. On Indian oil from high heavy regulations in order to keep the cost the -- down. So if you wanna move -- house something like this works in Australia it is heavy government and the waves have beat. Government regulations so it -- to make that system work. Professor we're running out of time always played pro woods learned so open really appreciative. And thank you. Proposed Euro Christian Weller professor University of Massachusetts in Boston what would come back we'll talk to us. Professor at laurel what do you think -- 60187. Concerned about retirement argue. Planning for a dollar appeared younger were you middle age in. Got something you work at all and that can hold drool over are reputed to terminate George looking into an empty pocket pocketbook. Or if you're okay hug and it was call 2601. -- tablet. Ovary its exit so when it under its exit zero it's. We're I think it above the special report to you used whose call on all of America. Talking about retirement dangers all America's retirement system is breaking down. Not everybody agrees with -- that -- a -- some experts. Reject the premise that Americans actually pays for retirement prices -- or. University of Wisconsin Madison economist. They argued the family shoes should consume more when children -- at home but reduce consumption. When the kids leave -- announced given those lower spending new user in that twilight years. In the U professors have economist. Economic professors. University of Wisconsin. A most people are saving enough but this entire report. Disputes that. The expert and I just at all and -- of that professor university shipments should choose its. Said the orders brawl and it's a big problem only 18%. Of -- workers. Say they're very confident of having an opponent live comfortably. And when I asked him for answers he gave a number of them mostly what. Foreign countries are doing which we probably won't until everything from raising. Taxes to. Taken a whole lot more out of your paycheck and think reportedly England and Australia. Are one of the things should be pointed out entrants. And this mortgage interest. In the coming hour we're gonna do her show about some in the legislature. Because of absolutely opening DiMicco apparel and wanna go back to his strong prison term for users. And pushers and for users I think. They -- more an area prison term to felt a -- of two years. And and we're gonna hear them -- the reasons for. Abdul and put those that agree wouldn't. But there is no doubt that we or the in cars reaching capital. Of the world here in Louisiana. Consequently according to the theory institute is back in 2012. Active and a year ago or a year ago. Total cost of Louisiana prison 698. Million dollars. And what that means. Is there's an additional cost to taxpayers in that. Because of the cost of revenue in those prisons. We have underfunded pension contributions. According to the battery and -- 2002010. The say contributed. 87 point 2% of the annual amount required. To fully fund pension benefits and -- States can need to -- remaining. Five point four million plus interest. To provide. For employees' pension benefits from my point is. Once I believe god expert saying well. You know one of the things is increased pension funds and pension fund but on the other side and we're -- still doing things that take away from pension. It'll complicated to. Let's go to Jack in haven't -- I appreciate ago. This is something that well her years ago and I heard in your -- government. Saint when the sort of -- to money is collected from the employer employee. This -- in sticker. That not going -- so -- for. It's my understanding that the reason it would look on the -- and the warm emotional here while the evacuation. Order right. Quote you could all have a gifted but he would -- but -- Investigate. That want to read more that maybe we're -- And there's so pure game. Retirement money in the company and that's made billions of people. -- so for all the experts and I have on -- said people still there's still plenty money. To give Social Security talks those dirty people lives it's totally funded to wonder what is toward the two point seven. Bob they say what they basically have in the pot is IOUs. Because yes it did go into. Owner of it's called the general fund -- congress did take that money to his spindle and other things. But it did talks of security experts -- out in the -- a big problem wouldn't pundit. Somewhere or another and in the meantime we -- we are able upon those. Let -- take a break curable come back and talk about what we've been thinking about. CBS news special report. Asylum Americans about retirement. And CBS play roughly half. Of all -- well. But it half of 310 million -- into -- -- you have no money set aside or retire not one cent. Which is that true and -- -- -- can be done about it come out. As usual not totally convinced we can believe that's we've got CBOs -- his spirit for a report Ireland miracle on retirement. They report roughly half of all Jewish families have normally set aside for retirement. Sent. Only 18% the US workers say they're very compliment of having you know wanted to live comfortably. During their retirement years for the CBO report makes it look like this is they hire. Situation did that get rid X -- -- says baby boomers. More and more retire but go to your pursuit of Wisconsin Madison per a couple of economists. The -- not true. Basic family's shoes to consume more when children home when they leave. They consume laughs and there report they have saved enough and that are able to make don't. So will go to other experts try to get a handle on this proposal Daniel -- real and turn to our economic said Loyola university. Professor welcome back to the show. Which board -- this should we believe or we are in dire straits are -- Like many things he answers yes and now. I think that the focus on the 50%. Issue is is very overblown. Mostly because they think you would have to take out. A lot. People don't necessarily intend to retire. So for example in a modern economy there's a lot war. Avenues of work that our physically impossible to do as you age. So. If you look at. Older he comes right so when people are in their fifties and sixties -- burning. Hi there at their highest earners in the economy. That is why I think Social Security such it's problematic institution its ads is because that it blanket application. It ends up being -- distribution. From the port to the well he -- So I think what. That the part that is concerning. Is that it's very difficult to get young people to start changing. Early in their careers. Largely because today's economy there aren't as many jobs with full benefit packages. As well as the fact that many young people coming out of college are riddled with this kind of debt. So I I think. The sort of extremity that the recent uptick in the stretch and he's he's a big fat it of water shall fiscal issues in the in the United States. So. Do younger -- understand. On only one side it's not used tire on the retirements -- we're here because older people. Can continue to work on the other side and -- -- number of young people coming out of college going into college with big debt that come out they can't go bankrupt all net debt. Can't find -- job because they're old people still have good jobs. Isn't there some problem either weren't. Well again. I tend to think that Social Security would design. You react to like behavioral problem it was believed that it's rare individuals own device. They would -- enough to be prepared for their retirement. Get some extent this has been incredibly flawed. Margin because he doesn't effectively accomplish. Because the government spends the money in the current account. So Social Security is it really succeeding in that and what is in Italy is discouraging part -- -- it's -- if you would be you can roll why. The government sort of social program where you are ready to finish work it into your life that your urgent. Urgently concerned with your retirement. So in addition -- that for young people. You've got it's hard work that hard to find a job and buyer and you've got. Very confusing. Tax programs that are so there's little young people. To try to -- retirement. Packages. But on the other hand I'm not terribly concerned with that because. Every generation tend to get easier and better you know I just they're skeptical that. The rhetoric crying. It's securities. Beginning proposals. Really apply at all. When -- went to street about the peak of the Great Depression. The New -- That he. He bite your old demographic was the most war demographic in the United States so retarded so sturdy design programs that help people like. And we quote themselves on some sort of reasonable income streams so that they wouldn't be lately we've elderly sort of hold it sin -- -- population. Close to what you were in the American economy today -- -- not execute our demographic is again the wealthiest demographic. -- in the economy its highest earners. Okay -- got about a minute. I'm a little confused that are or are you saying that. Basically and I'm oversimplifying. The elderly would go along and the young dog that long ago had problems now -- find solutions. That the summit. I mean I'll just think that that static vision of like. What -- you were were higher mean it's sort of -- they'd -- People's lifestyle in and economic. Productions and and the jobs debate fine. Are very very papers in today's society. I mean a lot of people work more knowledge -- service economy that. He -- it's not the case that they're going to need someone to take care then because of a lifetime of back breaking labor. Now or -- demographics again I think the system's problem. Because it does discourage their statements right. So we need to we need to focus retirement. Strategies for the people who needed and we need to sort of let the people who don't need to figure something else -- But the certificate doesn't Dudek that's the one -- it's also. Professor always a pleasure appreciated that time you good day. -- -- well bigoted celebrity immoral 53 yeah. Pilgrim next week contingent of the think tag owned a bit of with -- --