Retirement may be a long way off for the University students who attended Tuesday’s Ford Policy Talk, but the president of one of the nation’s largest nonprofit financial institutions told them they should start planning now.
Roger Ferguson, president and CEO of TIAA-CREF, discussed financial literacy and economics during a discussion with University students and faculty.
TIAA is one of the largest nonprofit financial institutions in the nation and one of the retirement policy providers for the University.
Ferguson, the former vice chairman of the Board of Governors of the U.S. Federal Reserve, previously served on President Barack Obama’s Council on Jobs and Competitiveness and worked on a long-term study for the National Academy of Science on the effects of the aging population in the United States.
During the talk, Ferguson said he sees Americans’ lack of fiscal knowledge as one of the most pressing issues facing the U.S. economy.
Thirty percent of Americans, when tested on their financial literacy, fell into the category of financially illiterate, Ferguson said.
“The state of financial literacy is abysmal,” he said. “The problem is that most parents are not very comfortable with finances, and therefore their kids are not comfortable. Adults in general aren’t comfortable, teachers are uncomfortable … So I think that there's this general lack of financial awareness that permeates our society.”
The solution, he said, lies in education, citing work he’s doing with 15 graduate schools to try to identify techniques which can be used to educate millennials on finances.
In particular, Ferguson said more education is required on saving for retirement. As the president of a retirement savings organization, he said he frequently interacts with individuals who are not thinking about it and are not saving enough — or even not saving at all.
“I think that the biggest problem can be just not thinking about it,” Ferguson said. “It's been long said that people spend more time planning for vacation than their retirement.”
Ferguson listed three ways for businesses and organizations to maximize their employee’s retirement savings plans and encourage them to save. The first was to automatically enroll employees in a retirement savings plan so that instead of forgetting to sign up, they would have to unenroll if they did not want to participate.
His next suggestion was to implement automatic escalation, so that when an employee earns more money, a greater amount of earnings is also taken off their paycheck into their retirement plan. Finally, Ferguson said he wants companies to give their employees a chance to think about how the funds from the retirement plan will have to last them.
Though he acknowledged college students probably aren’t thinking about saving for retirement, he told the crowd they should be.
“For those of you who have loans, probably the first thing to do would be to resurface that debt and pay it off,” Ferguson said. “Plan to do both and sequence them properly.”
Ferguson, introduced at the talk as the top Black economist of his generation, also touched on diversity in the field of economics itself, saying he’d like to see more of it.
He said a combination of an intimidating intellectual environment, the types of research done within the field, and the math-based work might create an unappealing atmosphere for many students, but that students of all backgrounds should consider the profession.
“There are very few African American economists in my generation,” he said. “I think the real problem with the profession is that it is simply not diverse enough — be that race (or) gender. There’s something about the profession that is off-putting for lots of people.”