The veteran Wall Street Journal reporter discusses her interviews with retirees, the state of the US retirement savings system, and key pain points for retirees and preretirees.
Our guest on the podcast today is Anne Tergesen. Anne is a reporter covering retirement for The Wall Street Journal. Her stories often explore how retirement and preparing for retirement are changing today. She writes frequently on topics related to 401(k) plans and retirement savings, spending, and legislation. She also writes about employee benefits, longevity, and aging. Before joining the Journal, Anne worked for BusinessWeek magazine covering personal finance. Together with colleagues, she recently won a Front Page Award from the News Women’s Club of New York and was a finalist for Gerald Loeb Award. She was awarded a Knight-Bagehot Fellowship at Columbia University’s Graduate School of Journalism and won a Best of Knight-Bagehot Award in 2006. Anne started her career covering local news at The Philadelphia Inquirer.
Background
The Wall Street Journal articles
401(k)s and Retirement
“More Americans Are Treating Their 401(k)s Like Cash Machines,” by Anne Tergesen, wsj.com, March 11, 2024.
“6% of Your Paycheck Is Becoming the New Standard for 401(k) Saving,” by Anne Tergesen, wsj.com, June 28, 2024.
“The 401(k) Investors Convinced That Target-Date Funds Miss the Mark,” by Anne Tergesen and Oyin Adedoyin, wsj.com, Aug. 3, 2024.
“The 401(k) Rollover Mistake That Costs Retirement Savers Billions,” by Anne Tergesen, wsj.com, July 22, 2024.
“Is Your Company’s 401(k) Match Unfair?” by Anne Tergesen, wsj.com, May 25, 2024.
“Retire at 65? It’s More Like 62,” by Anne Tergesen, wsj.com, April 25, 2024.
“David John: Improving the Retirement System,” The Long View podcast, Morningstar.com, Sept. 27, 2022.
Automatic: Changing the Way America Saves, by William Gale, Mark Iwry, and David John
“The Way We Retire Now,” a Wall Street Journal Series by Anne Tergesen and Veronica Dagher.
“Here’s What Retirement Looks Like in America in Six Charts,” by Anne Tergesen, Veronica Dagher, and Rosie Ettenheim, wsj.com, March 31, 2023.
“She’s a Retirement Authority—And Still Made Mistakes. Here’s What She’d Do Differently,” by Anne Tergesen, wsj.com, Oct. 12, 2024.
“Is There Really a Retirement-Savings Crisis?” by Anne Tergesen, wsj.com, April 23, 2017.
Other
Vanguard’s “How America Saves 2024”
“The U-Shape of Happiness Across the Life Course: Expanding the Discussion,” by Nancy Galambos, Harvey Krahn, Matthew Johnson, and Margie Lachman, National Library of Medicine, July 1, 2021.
Employee Benefit Research Institute
“The Retirement Crisis: Perception Vs. Reality,” by PGIM Global Communications, pgim.com, July 9, 2024.
Christine Benz: Hi and welcome to The Long View. I’m Christine Benz, director of personal finance and retirement planning for Morningstar.
Amy Arnott: And I’m Amy Arnott, portfolio strategist with Morningstar.
Benz: Our guest on the podcast today is Anne Tergesen. Anne is a reporter covering retirement for The Wall Street Journal. Her stories often explore how retirement and preparing for retirement are changing today. She writes frequently on topics related to 401(k) plans and retirement savings, spending, and legislation. She also writes about employee benefits, longevity, and aging. Before joining the Journal, Anne worked for BusinessWeek magazine covering personal finance. Together with colleagues, she recently won a Front Page Award from the News Women’s Club of New York and was a finalist for Gerald Loeb Award. She was awarded a Knight-Bagehot Fellowship at Columbia University’s Graduate School of Journalism and won a Best of Knight-Bagehot Award in 2006. Anne started her career covering local news at The Philadelphia Inquirer.
Anne, welcome to The Long View.
Anne Tergesen: Thanks for having me.
Benz: Well, thanks so much for doing it. You and I have talked for a long time and it’s really exciting to have you here. We want to talk a little bit about your background because you were a local news reporter before you began to focus on personal finance and retirement planning. Can you talk about what your initial attraction to journalism was?
Tergesen: Yes, I was thinking about this when I saw the questions that you sent over. I think I’ve actually wanted to be a journalist ever since I was little. I weirdly credit The Mary Tyler Moore show for that. I just love that show.
Benz: Oh, that’s great.
Tergesen: I loved her. I wanted to be like that. I always had a thing about journalism. So it was a thrill when I got to try it out. And I got to try it out in this fantastic newsroom at The Philadelphia Inquirer. It was the suburban newsroom and there were just all sorts of characters in that newsroom, including the guys who covered the cops and then a guy who covered the mafia. And it was just so riveting to be in that room. And I feel that way about every newsroom I’ve been in. It’s just, it’s an exciting environment.
Arnott: So what motivated your switch into personal finance and then to your current focus on retirement planning?
Tergesen: Yes, I did this fellowship program at Columbia University at the business school. And it’s a really great journalism fellowship program. It’s built for midcareer journalists. I certainly felt like more early career than midcareer and was very lucky to have been selected to do that. So they send you to the business school for a year for free and they actually pay you to go. And I kind of knew that if I wanted to stay in New York, which I did, I knew that business journalism would be a good way to go. So that’s why I applied for that program. And then I was really surprised at how fascinating I found the curriculum there and how I just loved accounting. I loved finance. I loved macroeconomics. I did not like microeconomics. And so that was my segue into covering business and economics. And really, I was most fascinated by the nexus between macroeconomic data and the financial markets. So that was sort of a springboard for me to focus on personal finance and investing.
Benz: When you think about your work today on an ongoing basis, what would you say are your major sources of inspiration when deciding what to work on next? Because I assume that you do have a fair amount of leeway when deciding what stories to pursue or when you’re pitching stories. So can you talk about that process?
Tergesen: So I feel like that process has actually changed a bit recently. I still really focus on academic studies and what’s new and interesting out of academia that relates to real-world investing decisions. And behavioral economics, those studies are always great to look to. 401(k) data also—we’re in the era of big data. And I love the fact that a lot of the 401(k) providers, especially Vanguard, has really made a dedicated effort to publishing a huge amount of data. And so that data is available to be mined by reporters like me. So that’s been great. And then, any kind of regulatory changes, legal changes like SECURE 2.0, those are big sources. But I think also just we’re increasingly focused on two other things that are somewhat new here. One is surprisingly what’s going on in the news. So for example, we published this week an article about the financial disclosures of JD Vance and Tim Walz. And what we can learn about them as investors, which may or may not shed any light on them as people, but it kind of does actually.
So, that’s very much in the news. So we’re very focused on, what are the broader news stories and is there a personal finance take on those? The second thing is that we’re always trying these days to bring real people, their voices, and their experiences into what we’re writing. So we can, write a story about, I don’t know, investing for retirement or whatever. But it’s increasingly important for me to interview people and talk to them about how the things I’m writing about affect them in the real world.
Benz: I want to follow up, or we, want to follow up on several of the things that you’ve just referenced, Anne, but you mentioned that Vanguard, How America Saves report, which I always dig into and find so interesting, too. As you think about the latest dispatch, are there any things that jump out at you in terms of headlines from that research?
Tergesen: I think that, as you guys both know, the 401(k) world changes very slowly. So you just see these long-term trends, gaining momentum from one year to the next. And I think that automatic features, the automatic enrollment, the defaults into target-date funds, the automatic escalation—you just see those things really gaining momentum. And I think the increase in savings rates and savings rates just keep climbing and climbing and climbing. And so I think that kind of stood out to me. And the other thing that stood out to me is the flip side of it, which is the leakage. And so, I feel like we have a system, for better or worse, where the leakage is kind of a feature here, as opposed to—and I’m maybe not remembering this right—but I feel like in the UK and in Australia, those systems are a little more airtight—it’s you put the money in and you can’t really get at it. But here, there’s a growing tolerance for allowing people to reach in and take the money when they need it. So it’s interesting. Those are the things that kind of stood out to me.
Benz: You mentioned the growth in auto-enrollment and automatic-investment options. Do you think those defaults have been a success story overall?
Tergesen: I think they have, but I think that I felt like this when my children were really little, like any milestone they reached, like, oh, he’s walking. Or he’s toilet trained, it was like it was two steps forward and one step back a little bit. So I feel like those defaults are, and the automatic stuff is similar for the reason I described, which is the leakage, so you get these higher savings rates, you get more people swept in, you get more people saving, you get all these exciting outcomes. But there is always this ebb and flow. And I think just because a lot more people are being swept in at a lot younger ages, people who have lower salaries and that’s all wonderful. So they have retirement savings, but I think there is a tendency of people when they kind of hit a rough patch financially to say, “Oh, gee, look at that. I’ve got this account sitting there. Can I get to it?” And especially when people change jobs or leave a job, that’s a real opportunity for them to get to it. So I think we do see that two steps ahead, one step back kind of dynamic a little bit.
Arnott: Do you think that flexibility that people have to tap into their 401(k) balances is helpful in the sense that if they didn’t have that kind of safety valve, maybe they wouldn’t participate or wouldn’t contribute as much?
Tergesen: I think that’s probably true. That’s always the argument and you hear that from policymakers and politicians, and you hear that from academics who focus on this that there is that element to it. And I do feel like when you have the automatic situation, especially if you have people who have fairly low salaries—you see this with the state-run programs where the state auto-IRA programs, there’s no employer match. They are sweeping people in. Often these are people who have fairly low-paying jobs. And so it is a little bit of a benefit to them to being able to tap that account when they have a financial emergency. I just remember back when I was in my 20s and, what if I needed a new set of tires or whatever? I had to be pretty disciplined to weather those storms and I do remember, borrowing money from friends. So I think that it’s helpful to people to have that as a pseudo emergency fund at times.
Arnott: Yeah, I remember back in my 20s when I was first starting my career at Morningstar, there was a real trade-off, because obviously I wanted to contribute as much as I could to the 401(k). But, I wasn’t making that much money to start out with. So it was like every percentage increase in my contribution rate, I would definitely feel it and had to think about, what would I do if I have to make a large purchase or something like that.
Tergesen: Yeah, absolutely.
Benz: Anne, I wanted to ask about the system more broadly because you referenced the fact that there is this leakage, people change jobs a lot. I read that the typical worker has like 12 jobs in his or her lifetime and it seems like among younger workers, the job-hopping is alive and well. So, as you step back and think about it, and I know you’re not a policymaker, but does it make sense to have our retirement plans tethered to our employers in the way that they are?
Tergesen: Yeah, that’s a really good question. I feel like, periodically I’ll write stories where I interview people who are sort of experts on our retirement system and say, if you could do anything here, what would you do? And I feel like a lot of times the answer is if we could start over from scratch, then it might make sense to do something that’s more like the Australian system or, I’m not an expert on that, but I think the idea there is that you just have this one account and as you change employers, the money continues to feed into it, but just from a different source. And so it sticks with you throughout. And I believe they have fewer opportunities to take money out and maybe even not any. So, a system like that, I think, it probably makes a lot more sense in an era where we do have this incredible mobility in our labor force system. However, I don’t think we really have the opportunity to go back and redesign it from scratch. I think we have what we have, and I’ve become like increasingly aware of the political factors in this country and how they influence our design of these benefit programs. And I just think that there is this real faith in the private sector in this country.
And so the idea that you could have some kind of centralized, almost like government, not necessarily government-run, but government-backed centralized system where you have one account. I feel like people in this country are very, very skeptical of that. So, unfortunately, I feel like we kind of have what we have, and it does have imperfections, but building off that has proven to be pretty successful for those who have access to retirement plans at work, which is not everybody.
Benz: Thinking about that idea of, the way I’ve heard it described as kind of like a thrift savings plan for the masses and the thrift savings plan is the plan for federal government workers that’s very minimalist, all index funds. I’ve heard that idea floated as a possibility as an alternative to 401(k)s. Like if you work for Microsoft and they field a gold-plated 401(k) by all means you can stick with it, but this other plan would be an alternative if your home team’s plan was crummy. What do you think about that idea? I feel like there’s some enthusiasm among researchers who I talked to for that sort of thing.
Tergesen: Yeah, that’s an interesting idea. And I feel like that’s sort of what Mark Iwry and David John were trying to get at with that national auto-IRA program that they proposed back, I don’t know when, but maybe like 2005 or maybe 20 years ago. And that, I think it has a lot of merit. Obviously we’re seeing a lot of states step up and because we don’t have the, I guess, the political backing to do a national program like that. Some states are adding their own programs to that effect. As you guys both know, California, Oregon, Illinois, and a bunch of others increasing numbers. So that’s interesting and admirable, but it definitely a state-by-state approach leaves this sort of patchwork effect where some people have access and others don’t. So I think there would be a lot of merit to doing something like that if we had the political backing to do it.
Arnott: And, as you alluded to, there are also a lot of workers out there who don’t have a company retirement plan that they can contribute to at all. So have you seen any other innovations that might help this problem?
Tergesen: Yeah, I do think you’ve got the examples in the UK and Australia where it’s like everybody in the pool, they have like mechanisms to make this mandatory. And that’s what happens. And I think in Australia actually, maybe correct me if I’m wrong, but it’s something like 12% savings rate or maybe 15%; it’s high—the combination of the employer and the employee. So, I feel like ultimately something like a national auto-IRA program might be a good idea for us if we really want to ensure that everybody has access. Of course, there’s a lot of people who dispute that everybody needs access. But that’s another whole issue. But it does seem like it’s a benefit to people to save whether they end up using it for retirement or for emergency savings. It seems like there’s a benefit there.
Arnott: Right. I guess if you were, a low- or middle-income person, but you were still able to consistently contribute to a traditional IRA or a Roth IRA, as long as you started early enough and were consistent, you could end up still in a pretty good place.
Tergesen: Yeah, I would think so. And then, I think there’s also the issue of if you’re a lower-income person who is permanently at that lower-income spectrum, then it might be really helpful to have a pot of money for the bumps along the way as well.
Benz: I’ve concluded, though, that payroll deductions are just incredibly powerful as a mechanism, just to the extent that you can remove frictions, make it as painless as possible. It seems like people really respond to that. So I wanted to ask about the defaults that are part of plans. You recently wrote the default savings rates in 401(k)s are going up. Can you talk about why that’s happening and also whether there are any potential negative side effects?
Tergesen: Yeah, I do think that that’s happening in at least in decent part because of auto-escalation programs that, where you get automatically enrolled at say, 3% or 5% of pay. And then every year the plan automatically bumps you up by usually by 1 percentage point. So you just ride that escalator up. And over time, it’s interesting because I think maybe over 10 years ago, I wrote an article about how in plans that did not have automatic enrollment where, plans that left it up to people to enroll themselves and choose their own savings rates, you ended up with higher savings rates than you did with the automatic enrollment where you started at 3%. So that was definitely, there was evidence there that when people were swept in under automatic enrollment, even if left to their own devices, they would have enrolled themselves at a higher savings rate. They just stayed at 3%, which is exactly what automatic enrollment banks on is this inertia that people have to not mess with it. Just to go with where they’re put. So anyway, so it’s interesting, though, now what you see when you look at savings rates in plans with automatic enrollment is that they’re actually higher than in plans that don’t automatically enroll where people choose their own savings rate. So I think that’s a big statement about the power of automatic enrollment over time and combined with automatic escalation to get people to higher savings rate. So that’s all very positive.
I do think that the negatives are, number one for people who are swept in and automatically escalated who literally aren’t paying attention and are very hands off, I think there is some evidence that some of those people take on more debt and often it’s mortgage debt. It’s the sort of positive side of debt. But maybe not always. It could be possible for people to run up higher credit card bills because they’re saving more aggressively in the 401(k) without even realizing it. So that’s one negative. And then, another negative is that, for people who might have chosen a higher savings rate on their own, maybe it causes them to save less than they could have. But, as I said, the evidence seems to be that that’s happening less and less over time.
Arnott: As part of your work at the Journal, you and your colleague Veronica Dagher have collaborated on a series of profiles about real-world retirees with a variety of asset levels, which, and I found those profiles just fascinating to read. How do you find those people and get them to agree to be profiled and open up about their financial situation?
Tergesen: So for the first two that we did, that first one was just this monster hit. It was really a big revelation to us. And I should give my editor Jeremy Olshan a lot of credit because he was the one who identified this as, hey, let’s just try it. Let’s see how it goes. And it was really, really successful. So what we did was we looked for four people who fit into a certain category. The first one was for people who retired on about $2 million. I think the second one was $1 million. And since then we’ve done a lot of different permutations. We look for people who are retiring, living on boats or RVs, living abroad, single women, so all sorts of different categories. And the first two that we did, it was really, really hard to find people because like you said, these stories, people have to be willing to really open up their financial lives to us. How much do you have in retirement accounts? How much do you have in brokerage accounts? How much, income do you have? Social Security, and so on.
So it’s not everybody who wants to do this, but it’s interesting because there are certain people who really do. And I think they fall into two categories. One is that they’re just very open personalities. And I think this is increasingly you can see this on social media, people willing to share. There are certain people who just really are willing to share. And then the second is people who are just really into investing. And this is something they love to think about and they’re happy to talk about their own because this is just where they spend a lot of their mental energy. And so we really had to cast a massive wide net to find people at first and just sending out dozens and dozens of emails to people we knew and professional networks and just any association group that we could think of: the American Association of Individual Investors comes to mind, the NAPFA, the Advisor Network. So we really had to cast a wide net. And then we got smart, and we said, why don’t we embed in our articles some reader feedback form that says, like, would you be willing to be interviewed for future installments?
And we can gather some basic information about people, get them to fill out information about how much money they have, where they live, and so on. Just are they working at all? Are they fully retired? Just the basics. And that has been huge. So at this point, it’s a lot more efficient. We can generate leads on people from that form. Every time we run a new installment of this, we put a new feedback form on. So we just have a lot of people who have raised their hands and they’re willing to do this.
Benz: One of the things I love about this series, Anne, is that you’ve got these great accompanying photos of people in their homes with their dogs, whatever. It’s just lovely to see. Are you able to go on site to interview the people? And if so, what does that in-person aspect add to the reporting process?
Tergesen: I wish we did. I wish we had the budget and the time for that because it would be, first of all, it’d be really, really fun just to meet these people in person. They’re fantastic people usually. And it’s just amazing how interesting everybody is. Again, this is a self-selecting group who’s raising their hands to be interviewed for The Wall Street Journal, but everybody’s got their own story. Especially when you’re talking to people who are in retirement age, whether they’re working part-time or not, they’ve lived a lot of their life, and they have a lot of very interesting things to say. So, totally fun and it would be great, especially recently, I interviewed a woman up in Nantucket and I was like, oh, wouldn’t it be great to go interview her in person? But nope, not happening. So we spend a lot of time with them on the phone, like probably more than they bargain for, but they’re all very willing to keep the conversation going. So I often have like an hour- to two-hour conversation with people. At first, it’ll be more like a half an hour and then it’ll be the hour to two hours. And then we do a lot of follow-up conversations to make sure we got everything right. So at the end of the day, I feel like we’ve spent an afternoon with these people, the equivalent of an afternoon.
Benz: Have the interviews sparked ideas for things that you should be working on? Like, oh, I should follow up and do an article on X beyond this profile that you’re doing of the specific investor. Have you gotten story generation from this?
Tergesen: I feel like not so much. And maybe that’s just because we haven’t…. I feel like what we get is ideas for future installments of this particular format, with the four people who’ve maybe fit into a different… So not as much as you’d think. We did do one on regrets. And that was a little bit sparked by this. And it’s not because these people tend to have regrets. In fact, I find generally they don’t. But just thinking through that aspect that a lot of them bring to the table of looking back on life and kind of thinking about where they’ve benefited and lessons that they’ve learned. So that kind of sparked that thought. But otherwise, I can’t think of any great examples.
Arnott: And you’ve said that one thing that has really jumped out at you from doing the series is just how happy people are in retirement, even when they don’t have a lot of financial assets. Can you talk about any common threads behind what makes people happy or, things that tend to make people more successful at thriving in retirement?
Tergesen: So it’s interesting because… you guys maybe are more aware of this. I was not aware of a lot of the academic literature in the field of psychology, the literature on adult development. So, I feel like we’re very good at understanding that across the early part of the life span, there’s a huge amount of development that occurs. Most obviously the physical growth that occurs, with children, even into the 20s. And then there’s the period of childhood and adolescence. And we’re very good at understanding that developmentally people change over time. But I feel like where I never really understood is that people continue to grow and develop in adulthood. And you go through these different phases of life. And there’s a lot of academic literature that shows that over time people become more positive, more glass half full. Their life satisfaction tends to grow. They tend to focus more on the things that really matter to them, whether it’s the friends and family members that matter to them, the activities and pursuits. They just pare down their life a little bit to the things that they really want to focus on. I very much have seen that with this series, that people are really very positive and they tend to sink their time into things that bring them a tremendous amount of satisfaction. It doesn’t mean that they’re super happy and joyful all the time, but I just feel like there’s a lot of life satisfaction that these people exemplify.
Arnott: That’s great. You’ve probably read some of the academic research on this U-shaped curve of life satisfaction during different phases of life where people tend to be very happy, maybe in their 20s and 30s and then experience a downturn during middle age and then another upturn as they get older. So I guess that would maybe help to explain why so many people do tend to be happy and content during retirement.
Tergesen: Yeah, I absolutely think so. And interestingly for myself, just coming out of that sort of down-trough period where, it’s not unhappiness, but it was like maximum juggling, between work, children, elderly parents, and just feeling like, wow, it’s just, pedal to the metal all the time. And then you can kind of stop and smell the roses a little bit or whatever—that’s sort of a cliché— but I think there’s something to it.
Benz: I’ve heard retirement researchers say that because self-reported happiness among older adults is so high, we don’t have a retirement crisis. Do you think that’s a bridge too far?
Tergesen: That’s really interesting actually, and I guess yes and no. In some ways I feel like this series, we’ve interviewed some very wealthy people, people with $5 million, $2 million, a lot of money. But we’ve also interviewed people who live on Social Security alone and single women, some of whom have significant savings, some of whom have like no savings. And so interestingly, what I see with the people who don’t have a lot of savings is that yes, they have concerns, and they are financially a little bit anxious. But they really have these great ways of making do, which maybe is not their preference or choice. Like one woman, I love talking to her, she was really inspiring. She came home to Ohio where she grew up. She never thought she would come back there and she’s sharing a two-family house with her brother who owns the house.
He’s her landlord. So that’s a bit of a financial safety net for her. Other people who just gave up their houses entirely and they are traveling as nomads or living on boats. There’s an element of risk there, but there’s also an element of making do in a way that brings them joy: traveling. So it’s interesting, this idea that their resourcefulness, and their glass half full, and they’re focusing on what they enjoy, they’re able to kind of cobble together something that works even on a very low budget. So from that perspective, I can see what you’re saying, that maybe the U-shaped curve and the increasing satisfaction and happiness of later years acts against this idea of a financial, of a retirement crisis. But at the same time, some of these people absolutely… There’s one person I won’t say who she was, but I just thought, oh, a reader had said I’d like to donate some money to this person. And I thought, oh, this person isn’t going to want that, this person is very independent. But I contacted the person and said, would you be open? And the person said, absolutely, I need all the resources I can get. So despite the positive attitude and the resourcefulness, the person absolutely felt they needed more money, which is the opposite, which speaks to the retirement crisis idea being real.
Benz: People are working longer. It seems like the border between work and retirement is becoming really porous. And it seems like one thing that people with tight financial resources can perhaps lean back on is working in some fashion. So can you talk about that, whether that’s been a common theme among the people you’ve profiled that they haven’t just like said, I quit and hung it up—that they’ve continued to do a little bit of work or a lot of work into their later years?
Tergesen: So I’ve seen a little bit of that. I feel like what I really haven’t seen is the people who they’re working full time, in whatever field, like financial services or something, and then they say, well, I want to go part time. So I’m just going to downshift in this career job that I have and work fewer hours and give up some money. I really haven’t seen that a lot. But I’ve seen a huge amount of is people shifting gears, for example, and really often it’s volunteer work where I see people focusing. This one woman I spoke to, the woman who I mentioned in Ohio who’s living with her brother, she began volunteering at this LGBTQ community center and she just loved the work. So she’s like 30 hours a week or something there; it’s almost like a full-time situation. So I’ve seen that kind of thing quite a bit. Or another woman I just interviewed is extensively renovating a house in Nantucket and she’s got contractors, but she does a huge amount of the work herself. So I’ve seen a lot of that kind of thing where people really focus on something they love.
Arnott: You’ve also said that you’ve been inspired by how retirees often reinvent themselves in retirement. Do you have any other examples of reinvention later in life?
Tergesen: Yeah, I do have some. There was this couple who I so enjoyed talking to them, Harry and Anne, and they live on a boat, and they sail around the Caribbean. And for them, that was something that Harry had always really been interested in learning to sail and sailing. And so I can’t remember even what their career jobs were, but they left those behind and now they’re sort of full-time sailors. There’s another woman, Deb in New Jersey—I love talking to her too—and she was a consultant and then she became a caregiver to her parents. And then she got laid off, and she just decided to go full time into an entrepreneurial caregiving type of work that she does. So those examples come to mind of people who just were like out with the old, in with the new, something unrelated. Not to say they’re totally unrelated—Deb is still a consultant, but just in a totally new realm, which is caregiving. But I think the more common thing is people building on old interests or even career interests, but in whole new ways. There’s just one doctor I loved, who I spoke to, and he had learned to play the guitar as a teenager and then just had never had time to play. Then he retired and he went back and took guitar lessons.
And now he performs in London on the street when he travels, he’ll do like street performing. So that’s like a sort of a reinvention. But at the same time, as a doctor, he has really doubled down on a lot of medical-related pursuits. Like he volunteers at a clinic in rural New Mexico to help the one and only doctor there get some time off. And he goes to host of medical conventions. So he’s still very involved in his actual career. But he said it’s interesting, he said he loves to read academic studies, medical studies about topics that have nothing to do with his specialty. So it’s almost just like he’s learning anew and encountering new aspects of medicine as opposed to what he was very focused on in his career. So I find like that’s kind of what people do often. Like the guys who were in finance, they may actually do some trading on their own accounts, that kind of thing.
Benz: So those are all really inspiring stories. How about the pain points for people in retirement? You mentioned obviously scarcity of resources is a huge pain point. But are there any other specific aspects of retirement that you found that people struggle with?
Tergesen: Yeah, I think that for people who aren’t yet 65, health insurance is a pain point. Most of the people I’ve spoken to who retire around age 60, they tend to have a lot of resources, they have a lot of savings. So they can kind of afford it. But at the same time, I feel like they’re a little bit shocked by how much it’s costing them to either continue COBRA or to do Obamacare. I think property taxes in high-tax states—yes, sitting in Illinois, me in New York. Our first couple of installments, we started to notice that like a lot of the people we were speaking to as prospects had moved from high-tax states like New York to specifically North Carolina, we’re like, what is it with North Carolina? And then we talked to them about their property taxes. It was like one guy who told me he left New York in 2015, he was paying probably almost $20,000 a year in property taxes. In North Carolina, for a much bigger house on the seacoast he was paying like, I can’t remember, like $3,000-$4,000. So yeah, insurance costs.
Arnott: It’s beautiful in North Carolina, too.
Tergesen: Yeah, yeah. And he loves being out in the water and his lifestyle. His grandchildren were down there, he was having a great time. So I think those are the pain points.
Arnott: One of your recent pieces in the series looked at retirees who are living off of income from rental properties. What were some of the key takeaways from those conversations?
Tergesen: I think some of the key takeaways for me, and I’ve seen this in my own life because my sister and my brother-in-law have a rental property. I feel like it’s a lot of work. There’s this sort of idea that people have that they can just kind of scoop in, buy up a house, and just turn it into rental income. But I think that where it often works best is when you have people who have the skills. My brother-in-law, for example, he’s a contractor. He does a lot of different kinds of work, but he has a lot of contracting skills. He can go in and if there’s a problem, he gets called and, he has to go fix it or find someone who does it. So I think it’s for people who have the expertise. I think it’s a better risk/reward for them. Or, for example, there’s one guy I spoke to who doesn’t really have those skills, but he’s willing to pay. He will pay property managers to do this for them, because I think there’s a lot of time and work that has to go into some of these properties and to refurbishing them sometimes, keeping them competitive in terms of market rents, and getting those calls in the middle of the night, also dealing with tenants who just maybe they don’t pay the rent. Maybe they just up and leave and don’t give you adequate notice. And so I think there’s a lot of risk involved in that as well as the risk that we all know of in the stock market. So I think it just depends on what makes you more comfortable.
Benz: Dialing out to discuss retirement decumulation more generally, you recently wrote about the age at which people are retiring and you were examining data from the Employee Benefits Research Institute. What are some of the key trends there?
Tergesen: I’ve covered that Employee Benefits Research Institute study for years. And the great thing about that study is that I think it has been going on since like 1990 or something. And they ask a lot of the same questions year to year. So you got this directly comparable kind of data points. And over time, I just started noticing like everybody says they want to retire later than they do on average. So to me, that was kind of interesting. And we turned that into an article that really resonated with readers. And I think that data shows like people want to retire at say 65, 66, but they really are retiring more like 63. And often, people speak to these unexpected things that happen, whether it’s layoffs, often it’s health issues, whether it’s their own health or somebody else’s health and they need to provide caregiving. So I think that’s just a very, very persistent, common trend over time. Even over those years since 1990, we have seen the US retirement age go up. But often, I think people are maybe a little over-optimistic about how long they can continue working.
Arnott: So one topic that has come up frequently on this podcast is how difficult it is psychologically for people to switch from saving to spending. Is that something that you’ve encountered in speaking to actual retirees?
Tergesen: Absolutely. I think for big savers, that is a huge thing. And I think some of it, it’s so interesting. I think it’s a habit. I spoke to one guy who retired at 60, and he had a decent amount of savings, approaching $5 million. And he said that it was just that he had just lived for so long, he’d lived very well, but he had lived relatively modestly compared with what his means would have allowed. He had a nice house, but it wasn’t like the big giant house. He had decent cars, but they were, I can’t remember whether they were used cars. He didn’t go in for the big splashy lifestyle. Instead, he saved a lot of money. And he said, when he started his retirement, he spent a huge amount of time running around, comparison shopping, and just looking for the cheapest paper towels. And then a couple months into this, he just thought like, this is ridiculous. He’s like, this is making me miserable. I can’t pinch every penny. I have to have some faith that I’ve saved adequately.
And so, luckily in his case, he really did. Same thing with a guy I spoke to recently who has a real estate portfolio that is worth, approaching $10 million, I think he said. It just was a habit. And he and his friends would sit around and they had conversations like that where they were coaching each other on how to let go a little bit and have more fun. And he’s now starting to travel more, but he said it just took him time to realize that he was going to have enough.
Benz: Another dimension of retirement decumulation is just figuring out how much you can spend. You and I have talked about this. And also just figuring out how to extract cash flows from a portfolio. When you’ve been in savings mode and you’ve been accumulating, it’s kind of a different problem versus the spending in retirement. I’m curious, when you talk to actual retirees, do you hear from them that that is something they struggle with, figuring out safe spending rates as well as how to construct their decumulation portfolios?
Tergesen: Interesting. I feel like some people have a strong preference for income investments. I think just because that kind of does the work for you. So if you’ve got dividend-paying stocks and bonds and so on, they live off the income and Social Security. If they’re lucky enough to have a pension, that’s kind of the way they go. Other people, I think they have financial advisors who do that for them or help them with it. And then other people who are living off Social Security, it’s just that’s just the way it is. It’s a monthly budget. So in a way, nobody’s really coming to mind in terms of speaking to that issue of, how in the world do I approach this? I feel like people have their guided ways, whether it’s income investments or a financial advisor, I feel like they seek some kind of help often.
Arnott: I think you touched on this earlier, but we hear a lot about the notion of a retirement crisis in the United States. What’s your take on that question?
Tergesen: So I had that same question, which was, and I can’t remember when this was, it might have been more than 10 years ago, where I was in this beat covering retirement and I heard constantly about the retirement crisis, the retirement crisis. And you hear a lot about that. You hear about it from academics, but interestingly, you also hear about it from industry. You hear about it from financial-services companies that have a huge interest in having people save more, because that’s where they make their money. So I thought to myself, is this real or is this something that’s kind of being overblown or overhyped? And so I wrote this Q&A with Alicia Munnell, who is an economist at Boston College, and she publishes something NRRI—but I forget what it stands for—but it’s this index of what percentage of the American population isn’t saving enough to be able to support their current lifestyle. And the numbers bounce around, but it’s often like about half is the estimate. So she believes, there is a retirement crisis. If only half of the public, when she looks at the underlying numbers, she can see, based on government data, that only half of the public can support their current level of consumption in retirement on their savings.
So that to her is a retirement crisis. And then on the other end, I had Andy Biggs, who’s a more conservative voice, he’s an economist too. I think he’s at the American Enterprise Institute, not positive about that, but they both very generously gave their time to me. And we did this on email. So I would ask them each a question, and they would answer on emails. We cobbled together a Q&A about whether or not we have a financial crisis, and they’re both looking at the data that’s out there, and they’re both coming to different conclusions. So, it was interesting.
Arnott: That’s interesting.
Tergesen: Yeah, it really was. And I feel like it’s often worth maybe understanding that… Andy isn’t arguing that nobody is in crisis. There’s absolutely people out there who are in crisis. But he’s saying that it’s not nearly as pervasive as what people like Alicia, who her yardstick of crisis is, can you support your current level of consumption? Well, often people in retirement do cut back their spending. So I found it interesting. And I thought, well, maybe there’s a midpoint that is more accurate. Or maybe it just depends on your perspective.
Arnott: And David Blanchett, our former colleague at Morningstar, I think has taken the position that talking about a retirement crisis just isn’t a helpful way to frame the issue. Maybe there are problems that we can address, but it drifts into fear mongering at points. And I think just it’s such an emotionally fraught topic for a lot of people that I think if you can dial down the panic level, it seems like that might be helpful.
Tergesen: I think it’s an interesting point. It’s so smart. And I also do feel like when people are far away from retirement, it’s just such an abstraction. You just can’t even imagine it. And you also can’t ever imagine having enough money. When you do the math in your head, and you think, OK, this is what I need to save, whatever, $1 million, or just something that sounds impossible. And one of the really interesting conversations I’ve had with one of my colleagues here, Laura Saunders, who covers tax, is that, as you hit, say, 50, 55, or whatever, the compounding—assuming the market goes up—starts to just really work for you in a very powerful way. And so I think it was one of David Blanchett’s coauthors on some research. It was Michael Kitces, I think, who pointed this out to me, that at age 50—assuming the market goes up by whatever, 7%, I can’t remember the number—over time, age 50, you’re only going to have about half of what you’re going to end up with at age 65. Don’t hold me to that exact number. But even at age 50, you might look at what you have and say, I’m never going to get to where I need to go. But assuming the market goes up and there’s that powerful compounding effect, you will, or your odds of coming close to that are decent. So I just think that you have these numbers in your head, like I need to save $1 million, I need to save $1.5 million, whatever the number is, and it just sounds impossible. And so people get very fearful.
Benz: Anne, I’m curious in your time on this beat, how has your perspective on your own retirement changed?
Tergesen: I think that I still don’t really think very concretely about my own retirement, which maybe is kind of a mistake. I feel like I’m finally at a point where my kids, my youngest is in college now, and I’ve been taking care of my parents, but unfortunately, my dad died this year. So the upside of being in a different phase of life is that I actually, I think we’ll have time to think a little bit more concretely about retirement for myself and what that might look like. And I also feel like one thing that has occurred to me on this beat is I remember when I was like 40 or something, and I was covering retirement, and I would talk to people who were in or near retirement and be like, how did you ever figure it out? How did you ever? And one thing that I didn’t understand at that point is that your perspective just changes over time. Again, getting back to that adult development idea—I had this idea that you become an adult, and your development just freezes in time, and you have the same perspective as a 40-year-old, as you do as a 50-year-old, and a 60-year-old, which is not true. I feel like as you get older, you become a lot more mindful of like, A) what matters to me, what things do bring me joy, where do I enjoy spending my time, who do I enjoy being with? And you also become a lot more conscious of this idea of legacy. And I saw this with one of my grandfathers. He was very, very like, generative— that’s a weird word—but he was interested in giving back, he spent a lot of time with his grandchildren, he spent a lot of time on like, community-focused events.
And so, I just feel like over time, some of these things take care of themselves. And I’m a real planner. So I’m inclined to be a little bit panicked about the fact that like, I haven’t planned. I don’t know what I want to do, I never know what I want to do, which is part of the reason why I’m a journalist, because you don’t have to know what you want to do, you can kind of hop from topic to topic and interesting person to interesting person. And so I am a little bit worried about my lack of concrete planning, but I think I also just have to have faith that over time, these things take care of themselves and your perspective changes and your attention just naturally shifts over time.
Arnott: Yeah, and if you’re fortunate enough to have a long life, retirement, you could have 20 or 30 years in retirement. So within those couple of decades, you might go through many different phases and interests. And, maybe you spend the first couple years after retirement, just playing golf and having fun and then once you get that out of your system, maybe you need a little bit more structure after the first few years. But it seems like you don’t really have to have everything figured out the day you retire.
Tergesen: Right, which is part of the great thing about retirement, I think, because for so long, I’ve been doing the, wake up, just shoot out of bed, get the kids ready, take everybody to school. It’s this crazy, overly structured life. I was talking to some friends recently about how much fun it is just to wake up and kind of poke around, have some coffee, just drift around. Do a little of this, do a little of that, yes, eventually get ready for work. So, I don’t know, I just think there’s a real pent-up desire on my part to just be a little bit more free-form.
Benz: Well, Anne, we’ve loved spending time with you today. Thank you so much for taking time out of your busy schedule to be with us. We’ve really loved this conversation.
Tergesen: Oh, thank you. It’s been really fun to talk to you guys.
Arnott: Thanks, Anne. This has been great.
Benz: Thank you for joining us on The Long View. If you could, please take a moment to subscribe to and rate the podcast on Apple, Spotify, or wherever you get your podcasts.
You can follow me on social media @Christine_Benz on X or at Christine Benz on LinkedIn.
Arnott: And at Amy Arnott on LinkedIn.
Benz: George Castady is our engineer for the podcast and Kari Greczek produces the show notes each week.
Finally, we’d love to get your feedback. If you have a comment or a guest idea, please email us at TheLongView@Morningstar.com . Until next time, thanks for joining us.
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