|Deirdre Fernandes, Globe Staff|
Former Fed economist
As an official in the
Now approaching 72, Munnell remains unapologetically blunt and this time her target is the US retirement system. “The idea that people can retire at 62 and walk around holding hands on the beach, it’s not realistic,’’ she said.
Munnell, director of Boston College’s
The book, to be released
If nothing is done, the book warns, “millions of retirees will find that they are too old to return to work and have little in savings — and no one to turn to for help.’’
Munnell, who has run BC’s retirement research for 15 years, has studied pensions and
Demographic and economic changes weakened the old supports. Birth rates have declined, meaning there are fewer new workers to pay the costs of
Companies also have abandoned traditional pensions, which offered workers income for life, based on earnings and years of service. In 1983, nearly two of three workers with retirement plans enjoyed a traditional pension; in 2013, less than one in four depended solely on such pensions, according to the
Meanwhile, the percentage of workers relying only on 401(k) plans during that period multiplied six times, to 71 percent from 12 percent. The typical household approaching retirement, however, had saved only
“People are not going to have enough money when they stop working,’’ Munnell said in an interview in her
Ellis approached Munnell about a year ago about writing the book after seeing people make investment mistakes that threatened their chances for secure retirements. But Ellis said he didn’t know enough about
“One name that obviously comes up is hers,’’ said Ellis, adding that Federal Reserve Chair
Munnell, who earned her doctorate in economics from
But she wasn’t afraid to point out inconvenient truths and stand her ground. She was the lead author of a study that found systemic racial discrimination in mortgage lending among the region’s banks, which led to federal and state investigations into dozens of banks.
But it hurt her chances to become president of the Boston Fed when
Munnell, who had left
“Falling short’’ is Munnell’s 23d book. The slim volume, under 130 pages, excluding footnotes, attempts to give families basic information about the challenges of retiring. Among the first steps they can take to improve the chances for comfortable retirement is plan to work longer, raising the issue with employers and updating skills.
By delaying retirement until 70 from 62, individuals can increase
“People need to understand that one of the most potent levers is staying in the workforce,’’ she said.
One of the book’s more controversial recommendations is to use reverse mortgages, which allow seniors to take equity from their homes to pay for retirement. When they die or leave the home, the property goes to lenders.
Critics argue that these complex products target desperate seniors, who quickly burn through equity to cover long-term care costs and end up losing their homes because they can’t pay taxes and other expenses.
For example, the costs of retirement are so high that reverse mortgages don’t always make a significant difference, he said. The number of middle-income retirees who will avoid running short of money increases by just 6 to 8 percentage points by tapping home equity, according to the institute.
So it may not be worth it for many seniors to take this risk, leaving them without a house to pass to their children, VanDerhei said.
But many retirees have few other sources of money and regulators have improved oversight of these products, said Munnell, who has advocated for reverse mortgages for several years (In 2012, she invested in and joined the board of Longbridge Financial, a
Munnell has been writing about
Workers are increasingly on their own and denying that — and failing to take steps such as working a few more years — will only lead to serious problems in the future.
“I’m less of a bomb-thrower the older I get,’’ she said. “But if I see something I don’t agree with, I still speak out.’’
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