Reset Retirement Podcast

Ep 2: Can I Live on Social Security Alone?

July 23, 2019

We' are often told that our retirement system is a three-legged stool made up of Social Security, savings from employer-sponsored retirement plans, and private savings. But this model no longer matches today’s reality where 60% of workers don’t have a retirement plan at work.

Reset Retirement, a new podcast from our Retirement Equity Lab, tells the real stories of retirement. This is not the same, old retirement advice that is hard to follow in today's job market and makes us feel worse about our own saving. Rather, we hear from real people - millennials, mid-career professionals, and retirees - about how life has affected their retirement savings, how they cope, and what we can do to demand a system that works for real people. Listen above or wherever you find your podcasts. 


In episode two, we explore what happens when we are left with just one leg of the stool thanks to life events like job loss, divorce and sickness that can easily wipe out private savings or 401k accounts. We ask, can you really live on Social Security alone?

We are first joined by David, a veteran journalist and playwright, to discuss the realities of living on Social Security after a lifetime of working in a gig economy. Next, our expert roundtable featuring host Teresa Ghilarducci and guest economists Anthony Webb and Rick McGahey convenes to clear up misconceptions about our Social Security system: who it serves, how it’s funded, and where it can be strengthened. Finally, we close by shining a spotlight on upcoming Congressional hearings that will look at how to expand the Social Security system, the first in 50 years.

Expert Roundtable Guests

Teresa Ghilarducci, Host, SCEPA Director, and Economics Professor

Teresa Ghilarducci is the Director of the Schwartz Center for Economic Policy Analysis (SCEPA) at The New School. She joined The New School after 25 years as a professor of economics at the University of Notre Dame and 10 years as director of the Higgins Labor Research Center at the university. Her latest book, co-authored with the Blackstone Group’s Tony James, argues our financialized pension system destabilizes the macro economy and fails to provide equitable, adequate and efficiently delivered retirement income. It outlines a bold policy vision to create Guaranteed Retirement Accounts (GRAs) for all American workers. Her research areas concern automatic stabilizers, financialization, and labor market dynamics. Ghilarducci holds a Ph.D from the University of California Berkeley.


Rick McGaheyRick McGahey

Rick McGahey is a nationally recognized expert on urban and regional economic development, program evaluation, retirement policy, and workforce development. At the Ford Foundation, McGahey was the Director of Impact Assessment, developing and implementing assessments to help the Foundation achieve greater impact, and also was a Program Officer focusing on economic and workforce development emphasizing equity and community development for economic, social, and environmental goals. During President Clinton’s second term, he served as Assistant Secretary for Policy, and later for Pension and Welfare Benefits, at the U.S. Department of Labor under Secretary Alexis Herman. He has a Ph.D. in economics from the New School for Social Research and has taught at The New School, New York University, John Jay College, and the George Washington University.


Anthony Webb, SCEPA Economist

Tony Webb is the Research Director at SCEPA's Retirement Equity Lab. He is a widely recognized expert in retirement planning and policy. Prior to joining SCEPA, Dr. Webb was a senior research economist at Boston College’s Center for Retirement Research, and a senior research analyst at the International Longevity Center. He completed his PhD in economics from the University of California, San Diego. His research interests include the impact of pension type on the retirement age, the financing of long-term care, and the management of the process of asset decumulation.



Full Episode Transcript

Teresa: The messages we get about retirement these days are “be afraid” and “it’s all your fault.” We’re told that if, like most people, we don’t have enough saved for retirement, it’s because of what we did, not the system.

But is that the truth? The Reset Retirement Podcast asks, what does retirement really look like for Americans?

By hearing from people who have both struggled and succeeded in saving, we can learn where the real problems lie within our retirement system. We can stamp out retirement-saving shame, and we can discuss real solutions.

I’m your host, Teresa Ghilarducci, a labor economist and professor at the New School for Social Research. In our first episode, we dive right into people’s retirement fears. We ask our guests and our expert roundtable, “Can I live on Social Security alone?”


Teresa: We are often told that our retirement system is a three-legged stool, made up of Social Security, savings from employee-sponsored retirement plans, and private savings. But this model no longer matches the reality where 60% of workers don’t even have a retirement plan from work. They can’t get coverage on the job. Coupled with life events like job loss, divorce and sickness that can easily wipe out private savings or your 401k, that leaves just one leg of the stool: Social Security. But can you really live on Social Security alone?

David, thanks a lot for joining us. Can you tell me your name your age and what your work is now and what you used to do?

David: My name is David Holmberg and I don’t like to admit it, but I'm 80 as of last June. And I was a journalist for like 40 years here in New York and elsewhere. But other than my Social Security in the last few years, I've gotten into the theaters. I've had three plays produced off off Broadway. I only made money on one of them so I'm basically still surviving on Social Security essentially.

Teresa: I’m gonna’ ask you a little bit about your life course because American workers are supposed to have a pension on top of Social Security.

David: Right. 

Teresa: What happened to you?

David: Well whatever is, the long view of it is that I was an itinerant journalist who never worked for more than five years in one place. So I don't have a pension. And then I basically left newspapers when I was 60, and I then freelanced for The Times and for other outlets. And then I taught for several years as an adjunct. 10 years after I left newspapers and a full-time job, I got divorced, and that was the beginning of my slide into Social Security dependency. As of then, we'd sold the house and I lived off the house profit for five years. So I've been stuck in the Social Security thing as of about since I was 65 roughly. I'm sorry, since I was 70.

Teresa: Well, when you got a divorced at 70, you had to sell your house, dividing that asset. Did you also have to give up some of the savings that you had?

David: No, I had some savings, but sort of minimally. We had a little bit of stocks, but we didn't have much. I think it was the kind of situation where if we hadn't got divorced at that age, I think we probably would have sold our house within another year or so and we would've made a lot of money on that. So if continued to be married, we would’ve been fine. It wouldn't be any problem. But as it was, I didn't have much. We had minimal savings, and so the house was mostly my main source of income for the next five years.

Teresa: So tell me what it's like to live on Social Security. Are you renting now?

David: Yeah, I rent. I don't know how detailed a story you want, but mine is probably a fairly unique story. When my wife and I lived in Montclair, New Jersey, we had a very nice cleaning lady who was with us for like 12 years. And when I got divorced, essentially the story is that my cleaning lady became my landlady. She is a millionaire landowner in Montclair, New Jersey. I guess there’s no harm in sharing, when I had to leave and was running out of my house money, I couldn't even afford the apartment I was in. She offered a studio in one of one of her buildings for $600. So that's literally how I survived at that point. I'm from Minneapolis originally. I was ready to go back to Minneapolis. I mean, she's a nice lady but she lives in Bloomfield, so I had to move from Montclair to Bloomfield

I guess you might say, the struggle - particularly if you’re living in New York or New Jersey - is to maintain a middle- to upper-middle class life.

Teresa: That’s downwardly mobile.

David: That is downwardly mobile.I still have this combination of gratitude and resentment because I'm in the position I'm in. But what the hell? There’s nothing you can do. She's actually said at one point recently, due my age she says I don't want you dying here. She actually said that. So in other words, she doesn't want to keep me paying this minimal rent for the rest of my life, however long that might be. That’s the point we’ve reached in our relationship.

Teresa: Well let me just go back to this. So here you on Social Security, and you’re a renter, and you're at the mercy of your landlord in terms of raising rent.

David: Correct.

Teresa: And if you go from $600 to $700, that's a one-sixth increase. Social Security doesn't go up that much.

David: Exactly. It doesn't. It actually went up. She pushed it up to $700 about a year ago.

Teresa: What about your medical expenses and your food expenses?

David: I just have medical, basic Medicare. So far, it's been OK and I'm a little bit apprehensive about when I get something serious and it's going to kill me. But I just sort of pretend that's not gonna happen.

Teresa: And how do you handle food?

David: I have a Spartan diet in my little studio apartment.

Teresa: How much do you get in Social Security?

David: As of this month, it's $1,890 - just under $2,000.

Teresa: And do you pay for Medicare Part A or Part B out of that?

David: Yeah, I think it's Part B that comes out of that. Social Security is one thing to deal with, but the larger thing is to be able to make some money in addition to Social Security. I have literally never retired. I left the newspaper business, but that does not constitute retirement. I've literally been scrambling for 20 years, writing for magazines and newspapers and the academic world, and now the theater. I've literally been scrambling for 20 years. I just have not retired. I've retired from a full-time job, that’s the only way to put it. But the stress of Social Security is simply a matter of getting through every month without desperately asking my ex-wife for money, which I started to do only recently.

Teresa: Oh, that’s sounds stressful.

David: I can't get through the month without it. I'm down $200-$300 at the end of the month. that's how bad it is.

Teresa: David what would you say to people who say that Social Security is enough to live on?

David: I’d say they’re essentially wrong. In terms of a middle-class person in the Northeast. I’d say it's extremely difficult, if not impossible.



Teresa: It seems clear from our story today that it's not possible to live on Social Security alone. This makes sense because Social Security was never intended to be seniors’ only source of income in retirement, though two thirds of seniors depend upon Social Security for the majority of their income. Why are people still really dependent upon Social Security income? I would like to invite our guests to introduce themselves.

Tony: Tony Webb, it's nice to be here. I'm a Ph.D economist. I've spent 20 years researching pensions the the the US pension system.

Rick: I'm Rick McGahey, I’m also an economist. At the U.S. Department of Labor, I was the Assistant Secretary in charge of regulating private pensions, and I also served as the Executive Director of the Congressional Joint Economic Committee. I'm glad to be here.

This is a great subject. Social Security is a vital program for the elderly. It's a great American success story. But I think it's a surprise to many listeners that so many people live only on Social Security and don't have a private retirement plan. Is Social Security enough for them to get by, to give them financial security?

Teresa: Most of the people who live only on Social Security are women. And it's not enough. They might be a little bit out of official poverty, but they actually live in de facto poverty. They face the fear of increasing medical costs. They face the fear of not being able to engage with the rest of society - going out, providing a birthday present. Loneliness is a big problem when you're poor.

Rick: A lot of people don't have private savings either. I would guess that it's people who live only on Social Security are less likely to have private savings as well.

Tony: Yeah. One third of retirees are dependent on Social Security for 90% or more of their income. And over 60% are depending on the program for more than half of their income.

Rick: Doesn't Social Security get adjusted for inflation?

Tony: Yes it does. The problem is that Medicare premiums get taken out of the check before it goes in the mail, and Medicare premiums are increasing faster than inflation. That means that in some years. retirees may have no dollar increase in their Social Security check.

Rick: And do we know, are medical expenses a larger share of expenses for retirees than they are for the population as a whole?

Teresa: Yeah, there are. There are a lot of us arguing that retirees should get an even bigger cost of living increase than they do. It's great that Social Security indexes it for some inflation, but the elderly face much higher rates of inflation.

Rick: So back when I was in graduate school, we were taught about a three-legged stool for retirement. You would have Social Security, you would have a private pension plan, and you would have savings - your own personal savings. Is that still the way we should be thinking about retirement in the future?

Tony: So that’s a very nice and unfortunately very unrealistic metaphor. If we look at the third leg of the private savings, very few households have any significant savings outside of their 401k plan. If we look at the 401k plans, many households have nothing at all. The average balance of households approaching retirement is a mere $150,000, which is enough to give an income of $500 a month.

Teresa: You're right Tony. It's a dumb metaphor. And if there's anything we can do today, it is to ban that from people's vocabulary. Our system is not a three-legged stool. If you're lucky, it's a pyramid with Social Security on the bottom and the middle is an employer plan. On the very tippy top is some private assets, including your home. But the fact is that the middle layer is just crumbling, and most people only have Social Security to rest their retirement futures on. So, down with the fantasy of a three legged stool.

Tony: And I would also say down with the fantasy of using the house.

Rick: Sorry, using the house, what do you mean?

Tony: Well, one way of using your house in retirement is to downsize. The problem is that the average retiree owns a house worth about $160,000. There's not an awful lot of downsizing that you can actually do, even if people wanted to. And as most people indicate a strong preference for aging in place

Teresa: If I can just say, reverse mortgages aren't a good deal either. And not everybody approaching retirement even has a house, there are a lot of renters. So it's a fantasy of banks that want to sell reverse mortgages.

Rick: But what if I'm a retiree now. I'm 60- 61 years old. I don't have personal savings, maybe I don't have a pension plan at work. What should I do? Should I be taking my Social Security right away, as soon as I can get it?

Teresa: What I tell people is to do whatever you can to delay collecting Social Security.

Rick: To delay collecting it and not to collect it right away?

Teresa: No, not to collect it. Even if you can wait a month, a half of a year, if you can move in with people, if you could take a part-time job… do everything you can to delay collecting Social Security.

Rick: Why should I delay, I need that money?

Teresa: It’s because you're probably going to live a lot longer than you think you are. Also, delaying collecting Social Security means that you have the best deal on the planet. From 67 to 70, you get an 8% increase in your benefit per year from 62 to 66—which is a normal retirement age for most people coming on line. It’s about 6%.

Rick: So I can get 6% to 8% just by waiting. That's a lot more than I can get on CD at the bank.

Teresa: You can't get that risk free rate anywhere on the planet. It's the best deal around.

Rick: Social Security is a vital program for the elderly. It's a great American success story, but many young people are told it won't be there for them in the future - that the program risks insolvency and that it's running out of money. Is it true?

Teresa: Social Security is not running out of money. It's funded from the contributions of current workers, and current workers are contributing. Now young people always worry about Social Security. They're told to be worried by financial advisers. But in fact, the system will be there for generations upon generations. We do have a problem though. The money that we're projected to take in will not pay the full benefits of the money that is expected to be paid out. And by 2034, if we don't do anything—anything at all—to bring in more revenues, then we'll have to cut promised benefits by 25%. So young people should be very secure that the system will be there, but all of us should make sure that we get more money, more revenue into the system

Rick: You said people were trying to scare people about this. Why would they do that?

Tony: I think it's largely ideological. That it goes back to attempts to privatize Social Social Security in the early 2000s. We know where that went in the market crash of 2002. If you think that it's unstable, it weakens the political support for it. I really think it's as simple as that.

Rick: Some people say that Social Security takes too much of the federal budget, that the elderly as a group are getting too much of our gross national product and are, in effect, harming children and other needy groups. Is that true? Are the elderly taking funds away from children's needs?

Teresa: First of all, Social Security only costs about 5% of GDP, where the rest of the rich countries, they provide like 11 percent of their GDP.

Rick: More than double?

Teresa: —more than double. And even by 2065 or so, we'll only have to charge about 6% of GDP because we're a rich country and a rather young country. But the idea that somehow spending more on retirees or old people takes away from young people, from my point of view is just wrong. Countries that spend a lot on the old also spend a lot on their young. So there's really no tradeoff in any real political system.

Tony: We all start off young and we all end up old and all of us have an interest in seeing that the elderly are properly taken care of.

Rick: And is Social Security only a program for the elderly?

Teresa: That's the other thing, a lot of children in our country - over 1.7 million today - are lifted out of poverty because of Social Security benefits.

Rick: It's clear from what you've said that a healthy Social Security system is essential for financial security now but also in the future. And that both the current retirees and young people who are working have a shared interest in strengthening the system going forward. So what are the threats to Social Security and what can listeners do to help strengthen it?

Tony: So the greatest threat is the exhaustion of the Trust Fund. This isn't an eminently solvable problem. It needs modest increases in taxes. The problem is less expensive if we fix it now than if we wait until the 2030s. And of course, politics being what it is, the can is being kicked down the road.

Rick: I was going to use a different metaphor - that if your roof has a small leak, fix it now. If you wait till the roof falls in, then it's gonna cost you a lot more. Is that a fair comparison?

Tony: Yes, it's very fair, yeah.

Teresa: The biggest threat to Social Security—just to emphasize what Tony says—is ideological and not acting. Economically, we can now increase payroll tax just a little bit or we can raise the earnings cap.

Rick: We know Social Security is vital for a secure retirement. But Teresa, you've designed and you advocate for a Guaranteed Retirement Account that would work with Social Security to provide secure retirement for all Americans. So why would your Guaranteed Retirement Account help? Why don't we just expand and strengthen Social Security?

Teresa: Social Security is a great system, and it has to be expanded as a pay-as-you-go system to help people be lifted out of poverty. But for middle-class people and for people even more than that - it will never be enough. What we are trying to do is give everybody a pre-funded account that sits on top of Social Security.

Rick: What should people be doing in their social and political lives? What should the young and old people be doing when thinking about Social Security?

Teresa: What we know from our research is that the retirement solutions do not lie with an individual or household by household. That we need a government solution. And that everyone - no matter what age - should support policies that strengthen Social Security and Medicare.

Teresa: That's all the time we have to talk today. Thank you Rick and Tony for joining our expert roundtable. And thank you David for sharing your story about living on Social Security.



Teresa: And now it's time for a final segment. This is where we feature the bright spots of retirement the stories that are giving us hope for retirement reform. The bright spot today in retirement is the attention paid to Social Security and especially in expanding Social Security. We heard from David that he's having a hard time living just on Social Security, but without Social Security he would have almost nothing.

Representative Bill Larsen has introduced a comprehensive bill to expand Social Security. He will be holding hearings in the new Congress very soon. This is the first time that we've had congressional hearings focused on expanding the system in 50 years.

One of the bright spots about the hearings is that we can debunk some of the myths that we just talked about. We'll hear about the many millions of people who are still poor after receiving Social Security. Social Security has not been updated and that's what Representative Larsen's bill will consider. So part of expanding Social Security is to prevent poverty in old age.

And finally we're catching up to the reality that the elderly need more money in retirement and that Social Security is one of the best vehicles - the most efficient vehicles - in the entire landscape of retirement income that works.



Teresa: Thank you so much for listening to Episode 2 of Reset Retirement.

You can find us on Apple Podcasts or Spotify or wherever you find your podcasts.

This podcast was brought to you by the Retirement Equity Lab at The New School.

This episode was produced by Bridget Fisher and Anna Low-Beer and edited by David Fuchs.

We hope you’ll subscribe and join us for our next episode where we ask: do we get shamed by the system?