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TIAA-CREF CEO on retirement in times of uncertainty

TIAA-CREF CEO Roger Ferguson.

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Kai Ryssdal: As we sit here in late 2010 -- post-Great Recession America -- retirement in this country just doesn't mean what it used to. Older baby boomers have collectively lost $1 trillion from their 401(k)s in the past couple of years. For most of us, the phrase "retirement security" is a non-sequitur.

So a couple of weeks ago Tess Vigeland -- she's the host of our personal finance program Marketplace Money -- and I went to New York to talk to the guy who runs one of the biggest private retirement systems in the country.

Today on Conversations from the Corner Office, Roger Ferguson, the CEO of TIAA-CREF. It was a lovely day in Manhattan, so we went up to the terrace, on the roof to talk.


Ryssdal: As we sit here on this terrace surrounded by the buildings of JPMorgan, Citibank and the rest of the financial sector, where is the culpability for what happened to people's retirement accounts? Is it in these buildings around us? Is it with us?

Roger Ferguson: I subscribe to a general view that nothing this complex happens, because there was one guilty party. The U.S. is not a savings economy. That's one of the things that happened. Secondly, there are some big swings in the way people work that led us to move away from defined benefit plans to 401(k) plans. There was, I think, a lack of good advice and information and education for many people. So anything this complex, Kai, I think has many, many points of failures. Some in the financial services sector, some with individuals, and frankly some that were just fundamental big shifts in the way America works and does business that are no one's fault in particular.

Tess Vigeland: One of the questions that we're getting a lot of these days is, "What should I be doing about the stock market?" People are very skittish; there's a lot of trust issues. What's your advice in terms of trying to figure out how much to be in that risky pool?

Ferguson: I think the reality is that every body has to be in that risky pool to some extent. The stock market over time has had a better return than fixed income. I emphasize over time, because there is quite a bit of volatility in that market for sure. The challenge for them is the amount of exposure depends very much on one's risk appetite.

Vigeland: But determining your risk appetite is really difficult, especially after the last two years.

Ryssdal: It's just a scary proposition.

Ferguson: Absolutely, it's absolutely a scary proposition, one won't deny that. But to say, "I'm never going to be exposed to the stock market again," I think that is an imprudent form of being conservative.

Vigeland: I know that the company has been holding a contest to get folks to give you some ideas to get the national savings rate to 10 percent, I believe it is?

Ferguson: That's correct.

Vigeland: Can you share some of the answers with us that you have so far?

Ferguson: It's called "Raise the Rate." You can find it on the TIAA-CREF website, and indeed, we've had a range of ideas. Most of them have been what I would describe as "micro." So frankly people are saying, "I'm going to give up a cup of coffee every week." I won't mention the brand name, but you can all guess which one.

Ryssdal: They're everywhere and they cost four dollars and yeah.

Ferguson: Exactly right. So that's the kind of thing we are seeing, a number of ideas that are really very much focused in on what I as an individual can do with my own lifestyle to save an extra $5 or $10 a week that then mounts up over time.

Ryssdal: So let's ask the macro question then. You are a trained economist, how do we increase the national savings rate? And you don't get the prize if you win your company's contest, by the way.

Ferguson: No, I do not get the prize. Increasing the national savings rate, I think, has a much bigger challenge if you will. But not to take away from the small ideas, so if every one did some of that, that would certainly help. We also clearly are going to have to change our mindset. We are a society of consumers. So part of this is going to be a big shift towards putting aside more money for savings and just thinking about it more broadly in those terms.

Vigeland: Well then of course, you do have the people who say, "Look, you tell me I'm supposed to save, but then you tell me that if I don't spend my money, then the economy is going to get worse and worse and worse."

Ferguson: Right. Look, we're talking here at a very unusual time. which is the turnaround from this very deep recession -- and so both things are true. In order to keep the economy going, people are going to have to continue to spend appropriately. What we've been talking about though is a longer-term perspective. And so as the economy heals, we are going to have an American economy that is more balanced, away from consumption and more towards savings and investment.

Ryssdal: On that point though, you are a member of the president's economic recovery advisory board. I'm wondering if you would share with us how those meetings are going ,'cause it's tricky.

Ferguson: There's no question it's tricky. We give the president a range of advice. For example, one of the groups that I was on just came out with a report on simplifying, streamlining the tax system. We have some early discussion around an infrastructure bank and that played into one of the president's recent initiatives. The sad truth is there is no easy fix for the current, relatively gradual turnaround. There's not going to be a silver bullet that's suddenly going to get us back to maximum employment in the U.S. for some time to come.

Ryssdal: So this is a little bit off topic, but have you ever called the marketing guys in and said, "Listen, this whole TIAA-CREF thing -- you're killing us in branding and marketing!" I mean, c'mon!

Ferguson: This company has been around for 92 years. We are very importantly thinking about how to make sure people understand what that mouthful of letters stands for. And what it stands for is working with people to get them safely to and through retirement. So that's our brand.

Ryssdal: So yeah, maybe you're thinking about it?

Ferguson: Maybe I'm thinking about reinforcing the brand image, for sure, there's no question to that.

Ryssdal: Roger Ferguson, thanks so much for your time.

Ferguson: Thank you. It's been a pleasure.

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