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We've detected you are on Internet Explorer. For the best Barrons.com experience, please update to a modern browser. CHROME SAFARI FIREFOX We've detected you are on Internet Explorer. For the best Barrons.com experience, please update to a modern browser.GoogleFirefox Search News & Quotes Barron's TopicsStock PicksLists & RankingsMagazineDataAdvisorPenta Subscribe Now |Sign In Barrons America Has a Retirement Crisis. A Pro Gives Advice on How to Fix It. Next: * * * * Share This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com. https://www.barrons.com/articles/retirement-crisis-thasunda-brown-duckett-51667427998 * Retirement * Level Up AMERICA HAS A RETIREMENT CRISIS. A PRO GIVES ADVICE ON HOW TO FIX IT. * * * * -------------------------------------------------------------------------------- By Reshma Kapadia Updated Nov. 3, 2022 9:36 am ET / Original Nov. 3, 2022 1:30 am ET * Order Reprints * Print Article BARRON'S NEWSLETTERS THE BARRON'S DAILY A morning briefing on what you need to know in the day ahead, including exclusive commentary from Barron's and MarketWatch writers. I would also like to receive updates and special offers from Dow Jones and affiliates. I can unsubscribe at any time. I agree to the Privacy Policy and Cookie Policy. Enter your Email SIGN UP You have been successfully subscribed to The Barron's Daily. Your first delivery will arrive within two days. Continue Reading THASUNDA BROWN DUCKETT, PRESIDENT AND CEO OF TIAA Photograph By Philip Vukelich Text size Your browser does not support the audio tag. Listen to article Length 8 minutes AD Loading advertisement... 00:00 / 08:28 1x This feature is powered by text-to-speech technology. Want to see it on more articles? Give your feedback below or email product@barrons.com. thumb-stroke-mediumthumb-stroke-medium Retirement security and financial literacy are personal issues for Thasunda Brown Duckett, who often talks about how her father, a warehouse worker, missed out on years of retirement benefits. As president and CEO of TIAA, the $1.2 trillion asset manager, Duckett is striving to shore up the retirement security of educators, healthcare workers, and other TIAA clients, and head off a national retirement crisis. Duckett, who joined TIAA about 18 months ago, made her mark running J.P. Morgan’s Chase Consumer Banking division. Along the way, she became one of the most powerful women in finance. Today, she is pushing policy makers to encourage companies to give more Americans access to work-based retirement plans, including products that provide guaranteed income streams to re-create the pensions that supported previous generations. She’s also nudging the financial-services industry to move beyond checking the box in order to narrow gender and racial wealth gaps WHY THE WIDENING WEALTH GAP IS BAD NEWS FOR EVERYONE Stockpickers have always considered long-term trends. It’s time to look at economic inequality. It’s growing, and its economic repercussions could soon hit portfolios. Continue reading . Barron’s interviewed Duckett in New York in late October, as part of our Level Up series of conversations with female leaders. In that and a subsequent conversation, she discussed regulatory issues pertaining to retirement planning, the coming intergenerational wealth transfer, and corporate diversity efforts. An edited version of these conversations follows. Barron’s: People speak of a retirement crisis in the U.S. How bad is the situation for those near retirement, or recently retired? Thasunda Brown Duckett: We are facing a retirement crisis in our country. There is a $4 trillion retirement income gap, which means that 40% of Americans run the risk of running out of money in retirement. BARRON’S LEVEL UP Join influential women executives for discussions about money, management, and investing. Register now. About 30% of Americans are over the age of 55. When you look at inflation—where everyday costs, from gas and energy to food, are high—and your investment portfolio is falling, there’s a real concern. We’ve had an inflation crisis before and had millions of retirees near or in retirement during periods of market volatility. But in 1979, when we last had an inflation crisis, 21% of Americans were 55 years or older, and 67% of Americans had access to a defined-benefit plan, or pension. Today, that number is 23%. You spend a lot of time in Washington, D.C. What are policy makers doing to address this crisis? I am encouraged that this is a bipartisan conversation. There are three areas we’re working hard on in terms of legislation and policy. A third of private-industry workers don’t have exposure to an employer-sponsored retirement plan, [so we are looking for] policy to make it easier for businesses, particularly small businesses, to allow their workers to have that exposure. How to Avoid Outliving Your Money You may also like CloseCreated with sketchtool. Up Next CloseCreated with sketchtool. Your browser does not support HTML5 video. 0:00 ADVERTISEMENT 0:00 PlayCreated with sketchtool. Paused Sound OnCreated with sketchtool. 0:00 / 38:06 ShareCreated with sketchtool.Closed Captions InactiveCreated with sketchtool. How to Avoid Outliving Your MoneyPlay video: How to Avoid Outliving Your Money Thasunda Brown Duckett, Chief Executive Officer of TIAA, tells Barron's how she's shaking up the financial services industry, providing guidance on shoring up retirement security through inflation and market volatility, and offers advice for tackling the wealth gap. We also have a savings gap, with half of Americans having not saved anything toward retirement. We are looking for policy related to auto-enrollment [in retirement plans] and auto-escalation [of contributions] so that people can get started earlier and get the benefit of the compounding of their overall retirement plan. Lastly, we are looking for ways to allow for in-plan guaranteed income. Which of these could come to fruition in the next year or two? “There is a $4 trillion retirement income gap, which means that 40% of Americans run the risk of running out of money in retirement.” — Thasunda Brown Duckett Secure 2.0 [a retirement-security bill that builds on the 2019 retirement legislation] is the most likely proposal to become law in the near future, perhaps even before the end of this year. Getting lifetime-income products more integrated into retirement savings plans is also an area of focus for ongoing improvements. The best way to do this is by embedding these products in plan default investments. The Lifetime Income for Employees Act, which has been introduced in Congress with bipartisan support, would directly address this issue and encourage more employers to offer plan participants products that will provide guaranteed streams of income in retirement. Academics love low-cost annuities for guaranteed income, but they are a hard sell. What does TIAA need to do to change that? We believe that a simple, low-cost annuity should be part of every single retirement-plan default option in the U.S. But education is critical so that people understand the benefits of annuities. The industry needs to work with clients to help them understand risk in a more holistic way. Market risk may be the most visible because it is in our news feeds every day, but there are more abstract but equally important risks to consider, such as longevity, cognitive decline, and sequence of return risks [portfolio losses early in retirement]. Economic risks loom large these days. How worried are you about the economy? [Curbing] inflation is the Federal Reserve’s mandate. Doing so is causing risk. We are heading into a recession. The question is the duration and severity. Consumer spending and a strong labor market have been extremely resilient to the tightening forces from the Fed. It’s crucial that the Fed not go so far in hiking interest rates that it brings about an unnecessary increase in unemployment, which would likely go hand-in-hand with weaker consumer spending. SEE ALL THE 100 MOST INFLUENTIAL WOMEN IN FINANCE We’re starting to see home prices fall, which will affect consumer spending on big-ticket items like appliances and furniture. But a broader-based slowdown that causes people to keep those wallets in their pockets and purses would inevitably lead to a rise in unemployment. Some of that may be necessary to drive down inflation, but neither the markets nor the Fed know exactly how to calibrate policy to make it happen without triggering a deeper slump. What is your favorite alternative indicator to gauge the health of the economy? As we wait for inflation to normalize, we look at things like the Manheim Used Car Auction price index or the Zillow or Apartment List monthly rent indexes. They give us a preview of what’s coming in the consumer-price-inflation data that we know matters a lot to the Fed. But since we want to know where the puck is going, not where it is now, we look at the drivers of inflation rather than inflation itself. What are your financial advisors telling retirement-plan participants about how to prepare for a new macroeconomic regime? No one wants to look at their portfolio statement right now, but we are encouraging them to look and make sure they have a plan—and diversification. Stocks have done most of the heavy lifting over the past decade to provide returns, but the bond part of a 60/40 portfolio is looking more attractive as interest rates have risen rapidly in 2022. We don’t know where rates will peak, but there are opportunities to lock in the most attractive rates we have seen in 15 years with higher-quality government, corporate, and municipal bonds. The growth from a diversified stock portfolio is also important for combating inflation over the long run. We believe that a tilt toward higher-quality companies with strong balance sheets should prove to be more resilient [than other portfolios] and help minimize some of the volatility we expect to face. You have been on the job for almost 18 months. What parts of TIAA’s business are you looking to change in terms of overall mix? Instead of trying to be all things to all people, we want to focus on retirement. With 40% of all Americans running the risk of running out of money, we can do more, which is why we’re spending a lot of time talking about retirement inequality and, in D.C., looking for some good policies. We want to continue to be a leader in lifetime income solutions, and are bringing our guaranteed lifetime income solutions for the first time to the corporate 401(k) market with our recently launched Secure Income Account [or SIA]. To be a leader, we have to improve how we deliver our service and provide clients with an easy, modern experience. We’re thinking about what is required when it comes to agility and speed by having a digital-first mind-set and making it easy for clients to do business with us. We also are an asset manager and asset owner and are committed to doing more around ESG [environmental, social, and governance] issues to make sure we are always protecting against risks so we can deliver good returns. We are on the cusp of one of the great transfers of intergenerational wealth in the next 20 to 25 years to Gen Zers and millennials. How does the industry need to pivot to meet the needs of these generations? This [transfer] is a big deal. It’s not what you make; it’s what you keep. This transfer can happen, but it doesn’t mean that our next generation is going to have a secure retirement just because they get the dollars. It’s about making sure we’re educating our young people so that when they have that wealth, they’re able to make sure they can do good with it. That includes more digital tools, more engagement, talking in human language, and not just resting on the fact we have a long list of services while not looking at the data about whether people are taking advantage of them. And there will be many Americans who aren’t getting that transfer of wealth, so it’s important that we’re also doing better for them. The disparities in intergenerational wealth transfer have contributed to the racial wealth gap, with median white families having $184,000 in wealth compared with $23,000 for Black families. How can executives in your industry and elsewhere do better by Black families? We’re still working through structural and systemic racism in laws and policy. Just because you remove a policy doesn’t mean that everything [improves]. First, it starts with the mind-set: We have to believe that talent is created equally; opportunity is not. If we have the mind-set shift, we ask, what is getting in the way [of progress] inside of our organizations? What is one tangible step companies can take to move beyond checking the box on diversity? We can’t just say X percent of our employees are African-Americans, Latinx, or women. We have to ask: Where are they? Are they in investment banking, in asset management, running a P&L [profit and loss], ascending to the mid- and senior ranks? If not, why not? Lastly, what gets measured [on these fronts] gets done. That should be very easy in the corporate sector and financial services because we measure everything! Thanks, Thasunda. Write to Reshma Kapadia at reshma.kapadia@barrons.com -------------------------------------------------------------------------------- Close AMERICA HAS A RETIREMENT CRISIS. A PRO GIVES ADVICE ON HOW TO FIX IT. 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