TIAA-CREF’s CEO Calls Retirement Security a Pressing National Need

New York, July 29, 2010

In a speech yesterday to the National Bureau of Economic Research, TIAA-CREF chief executive Roger W. Ferguson, Jr. called for a “comprehensive and sustainable system that provides genuine retirement security” for all workers.

Mr. Ferguson, in the Feldstein Lecture to the Bureau’s summer meeting in Cambridge, Massachusetts, said that such a system “would have to be affordable for employers and give employees a measure of security through guaranteed income that will last a lifetime.”

In his prepared remarks, Mr. Ferguson traced a decades-long shift in responsibility for funding retirement from employers to individuals – a shift that has resulted in workers who “now devote the bulk of their attention to their quarterly account balances with little thought as to how their accumulated savings will translate into a steady stream of income when they retire.”

“Retirement risk burdens – funding, investment, longevity, and mortality – fall disproportionately, often entirely, upon workers who are not equipped to manage such risks,” he noted.

To address this imbalance, Mr. Ferguson outlined three elements that should be featured in a system that provides genuine financial security in retirement:

  • Sufficient funding to ensure enough savings – Workers who want to maintain a standard of living close to what they enjoy at the end of their working years should aim to replace at least 70 percent of their final salary in retirement. This means that individuals should save at least 10-15 percent of their gross annual income, a figure that represents the combined contributions of employers and employees.
  • Appropriate diversification and asset allocation – 15 to 20 fund options gives savers the ability to diversify their investments appropriately. More choices could be confusing and actually lead people to choose less-diversified investments. This confusion underscores the need for reliable, objective advice.
  • Guaranteed lifetime income – Guaranteed lifetime income, in the form of annuities, makes it possible to re-introduce the element of security that has been missing from most private sector retirement plans for the past three decades.

Mr. Ferguson observed that the defined contribution model commonly used in higher education includes, to one degree or another, the above three features. Eighty percent of higher education employees describe themselves as “somewhat confident” or “very confident” that they will have enough money to live comfortably in retirement, compared with just 54 percent of all U.S. workers, according to the TIAA-CREF Institute.

Mr. Ferguson also addressed behavioral aspects of the retirement challenge. “Economists, plan designers, and policymakers have looked for ways to use inertia to keep people on the right track, anticipating that they will not muster the motivation to deviate from it,” he noted.

“We’re all familiar with the classic line from the movie Field of Dreams: ‘If you build it they will come.’ These efforts might be characterized by a slightly more aggressive mantra: ‘If you build it and put them in it, they won’t leave,’” Mr. Ferguson added.

Read the Full text of the Feldstein Lecture.

TIAA-CREF ( is a national financial services organization with $410 billion in combined assets under management (as of 6/30/10) and provides retirement services to the nonprofit and government fields.

Chad Peterson, Director, Corporate Media Relations, 704 988-6811; Cell: 917 715-9083

Guaranteed income for life is based on the claims-paying ability of the insurance company issuing the annuity.

Diversification is a technique to help reduce risk. There is no absolute guarantee that diversification will protect against a loss of income.

TIAA-CREF Individual & Institutional Services, LLC and Teachers Personal Investors Services, Inc., members FINRA, distribute securities products.

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