Facts Versus Factoids

“What if the entire retirement-crisis narrative playing out in opinion polls, the government, and the media was a massive case of confirmation bias?”

That’s the provocative position of an intriguing new white paper titled “America’s ‘Retirement Crisis’: The Emperor Has No Clothes” by Andrew Biggs.[i]? Readers of my work will note that with frightening regularity there are any number of assertions, “studies” and surveys all painting a dismal picture of the state of the nation’s retirement—each and every one embraced and promoted with attention-grabbing headlines without so much as a question as to the veracity of the underlying data, the logic of the conclusions drawn, or the motivations of the proponents that have drawn them.

Consequently, I was delighted to come across this paper that provides a detailed, thoughtful, and data-driven analysis that focuses on a number of points that have been made (and uncritically trumpeted by the media) by none other than Teresa Ghilarducci[ii]—points that Biggs’ analysis concludes are “either trivial or inaccurate.” More specifically, he comments that these “points that are true do not necessarily lead to the conclusion that Americans have undersaved for retirement, while other points that could potentially lead to such conclusions are not factually accurate.”

Here are the 10 claims asserted by Ghilarducci/Cook in an Op-Ed (calling for folks to “urgently get over our retirement crisis denial” along with a pitch for the ironically named “Retirement Savings for Americans Act”)—and Biggs’ data-driven responses.

Claim 1: The Poorest Portion of Americans Do Not Have Sufficient Savings

It’s not so much that the statement is inaccurate—but Biggs argues that “their problem was not that they failed to save enough for retirement; it was that they were poor throughout their lives.” While noting that he has long argued for increasing Social Security benefits for the lowest-income retirees, he explains that “these households’ unusual predicament says nothing about their own retirement savings, much less about the US retirement system as a whole.”

Claim 2: 10% of Seniors Live in Poverty

This claim Biggs acknowledges is accurate “if we exclude the income seniors receive from retirement accounts such as individual retirement accounts (IRAs) and 401(k)s.” Biggs doesn’t accuse Ghilarducci (and Christopher Cook) of deliberately glossing over this significant point, though he does point out that this “shortcoming” in poverty measures for seniors “has been well-known by retirement experts for over a decade.”?

Well-known, and well-documented, as it turns out, and Biggs provides a half-dozen written acknowledgements of that shortcoming over the years. Among those, he cites a 2012 report by Social Security Administration researchers that pointed to that Census Bureau data as “greatly” unreported distributions from DC plans and IRAs, “posing an increasing problem for measuring retirement income in the future.”

Perhaps more significantly, Biggs cites information from a new dataset put together by the Census Bureau that finds not only that “The true median income of households age 65 and over increased from $43,700 in the CPS to $55,610 in the more accurate NEWS dataset, while the incidence of poverty fell from 9.75 percent to 6.42 percent.” In other words, even by those measures, seniors’ risk of poverty fell by more than one-third over a 28-year period “in which seemingly everyone came to believe the US retirement system was doomed,” Biggs writes—oh, and the annual income of the median households age 65 and older increased by 32% over that same period.

Claim 3: Retirees Are Subject to Exorbitant Long-Term Care Costs???

Ghilarducci (and Cook) claim that the average American turning 65 today will incur $120,900 in future long-term services and paid care—an assertion Biggs characterizes as a “hall-of-fame level of misdirection”—and he’s kind in applying that label.

Biggs explains that the $120,900 figure cited by Ghilarducci is the total cost of long-term care, not the cost borne by seniors—EVEN THOUGH the source Ghilarducci relies on “makes clear that $120,900 is the sum of costs covered by Medicaid, other public programs, private insurance, and, finally, out-of-pocket expenditures.” Instead, Biggs notes that the true average out-of-pocket cost to seniors beginning retirement at age 65 is $24,029—and that’s NOT per year, but over their entire retirement.

Claim 4: Middle-Income Retirees Are at High Risk of Downward Mobility

Biggs notes a couple of issues with this assertion; that it’s meaningless (it’s widely accepted that individuals can maintain that lifestyle in retirement on less than 100% of pre-retirement income, hence the common targets) and—“it’s almost surely false.”

To that point, Biggs challenges Ghilarducci’s claim that 40% of seniors will see their incomes drop below 200% of the poverty line—pointing to a 2017 Census Bureau study that tracked household income five years before and after retirement—and ultimately concluding that (only) about 4.1% of near-retirees with incomes above 200% of the poverty line would meet Ghilarducci’s definition of “downwardly mobile, less than one-tenth the number she projects,” according to Biggs.

Claim 5: Seniors Cannot Afford Emergencies?

“Roughly half of Americans (49.4%) aged 55–64 say they could not afford an emergency of more than $2,000.”

Once again, a statement that is factually accurate is being misapplied to retirees. Biggs notes that while only 23% of respondents aged 18–24 could handle a $2,000 emergency bill, and just 47% of respondents aged 45–54 felt capable, more than two-thirds (68%) of 75-and-over households stated they could do so. “The fact that not every retiree can cover every financial emergency using cash says nothing negative about the US retirement system, since seniors are far better able to weather financial emergencies than are younger adults,” Biggs notes.

Claims 6 through 10 can be found here.

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[i] Biggs, a senior fellow at the American Enterprise Institute, was previously the principal deputy commissioner of the Social Security Administration (SSA), where he oversaw SSA’s policy research efforts.

[ii] Most recently in an Op-Ed published in The Hill with Christopher D. Cook, a senior writer for?The Schwartz Center for Economic Policy Analysis?(SCEPA). Teresa Ghilarducci is, of course, a professor of economics at The New School for Social Research and author of “Work, Retire, Repeat.”