[narrator] In 2019, a social media craze swept the internet:
the age challenge.
People shared photos of their faces decades older,
using the aptly titled FaceApp.
Even celebrities hopped on the bandwagon.
People were seeing their future in focus for the first time,
and they were…
[laughing] My God!
-[narrator] …a little freaked out. -[all groaning]
[laughing] Oh, my God!
Bro, I look insane!
[narrator] Younger people generally don't like to confront the fact
that one day, they'll be old.
The pictures were like meeting a stranger,
and that disconnect?
Researchers have actually measured it.
In one study, people were put in a brain scanner
and asked to think about four things:
themselves today,
a stranger today,
that stranger 10 years in the future,
and themselves 10 years in the future.
Their brains lit up when they thought about their present-day selves,
a lot less so when they thought about the stranger.
And our brains didn't care much for our future selves, either.
I'm Hal Hershfield, I'm a professor at UCLA's Anderson School of Management.
[narrator] He was the lead researcher on that study.
Psychologically, people don't identify with who they'll be in the distant future.
That future person seems like a-- like a stranger to them, almost.
[narrator] And so Hal started researching something he never thought he would,
retirement savings.
I'd sort of said, "That sounds incredibly boring."
But then that sort of led me to start digging in and thinking about, you know,
what are the things that stop people from making the decisions
over the long run that could really help them?
[narrator] If you look at the numbers around the world,
we haven't made the types of decisions that look out for our future selves.
In most wealthy countries,
the average 65-year-old has saved enough to keep their current quality of life
until their early 70s,
but they're expected to live until their mid-80s or longer.
That translates to trillions of dollars in missing savings.
And by the time Millennials retire, it's expected to be a lot bigger.
In the US, over $100 trillion bigger.
Most people will not be able to maintain their standard of living into retirement.
Many people will sink from a middle-class life
to a near-poverty experience into retirement.
I feel pretty horrible, to be honest with you.
[speaking Spanish] I haven't had the chance
to save for my retirement.
It's really tough to be sure whether what I'm doing right now is enough or not.
I'm very frightened.
We really have a crisis on our hands.
[narrator] Experts suggest that to retire comfortably,
a middle-class American should save at least $1,000,000.
If that sounds wildly out of reach,
you're not alone.
In the US, a quarter of the workforce doesn't have any retirement savings.
We might dream that in our golden years,
we can kick back and relax,
but what's the reality?
Can we even afford to retire at all?
[man] Thanks to the advancements of medical science,
men and women in the autumn of life enjoy better health
and can expect to live longer.
Ninety-two percent of Americans are not meeting their retirement savings target.
We have to work to do more to ensure
that every older American has
the resources and the support they need to thrive.
[woman] Price of food's gone up, price of where you live's gone up.
Where are you gonna get the money to live on?
[film reel clicking]
[narrator] In 1933, America was in the grips of the Great Depression.
Almost a quarter of workers didn't have a job,
and half of the country's seniors were living in poverty.
Like never before, the country's miseries spilled out onto the streets.
That's what Dr. Francis Townsend saw one morning
as he looked out his window in Long Beach, California.
And the view moved him to draft a radical proposal,
a plan to eradicate old age poverty.
Well, Earl, now that you've thought it over and studied my figures,
what do you think?
We'll call it the… the Townsend Plan, what do you say?
Fine.
[narrator] Townsend thought every American over 60
should have a guaranteed income from the government of $200 a month,
which would be around $4,000 today.
Townsend went on the road, spreading the good word
that everyone had the right to retire.
You see, back then, for many people the retirement system was…
You worked 'til you died.
[narrator] Some lucky people had pensions,
but that depended on your job.
The idea of a pension is pretty simple.
In exchange for your loyalty and service,
your employer would support you financially
from the day you retire until the day you die.
First, they were offered to the military,
and later in a variety of other Industries.
If you think of our modern-day retirement system as a stool,
pensions were the first leg.
But since most people didn't have access to them,
Townsend's plan took off.
Within two years, 7,000 Townsend Clubs had popped up across the nation,
with 1.5 million members.
It was a whole movement,
and it pushed the president to sign into law
the most sweeping social reform in American history.
This social security measure
gives at least some protection to millions of our citizens.
[narrator] Basically everyone who makes a paycheck now pays into Social Security.
You're literally paying it forward,
and when you go to retire,
you can expect the current workforce to do the same for you.
This is the second pillar of the retirement system.
And at the time, it redefined the role of government,
as a safety net for its citizens.
But it definitely wasn't Townsend's plan.
Everyone wasn't going to get 4K a month.
The Social Security system replaces on average
about 40% of your pre-retirement earnings.
[narrator] If you make the average salary, which is around 4,000 a month,
you can expect Social Security to pay you something like 1,500 a month.
Social Security is only going to get you so far in retirement.
[narrator] Even paying out that much
takes up almost a quarter of the federal budget.
There's no way around it.
Retirement is expensive.
Which is why there's a third support,
your own personal savings.
This three-legged stool once seated many retirees comfortably,
and a new industry emerged to cater to this new group of people:
retirement communities designed to look like a resort.
The first one, Sun City,
boasted a Riviera-sized swimming pool,
social activities,
a cheer team.
Retirement as an idea had only really existed for a few decades
when it got a new brand as a second childhood,
a time of leisure.
This is a vision of retirement many of us grew up with,
even if most people could never afford it.
And then a discovery in 1980 started to shake this system up.
Okay, hey, my name's, uh, Ted Benna.
I'm commonly known as the, uh, father of 401K.
[narrator] In 1980, Ted was working as a benefits consultant in Pennsylvania,
when he stumbled upon a new section of the tax code.
Section 401, paragraph K,
which let employers give cash bonuses to their employees at a later date,
pre-tax.
And Ted realized
that meant employees could give some of their salaries to themselves
at a later date, pre-tax.
To encourage employees to do this,
employers could promise to match some of that money.
He'd invented a whole new kind of retirement account,
the 401K.
But unlike a pension, which guarantees you a certain payout,
with 401Ks, the only thing you can guarantee is what you pay into it.
How you invest it and the stock market affect what comes out the other end.
The 401K system shifted responsibility
from the employer directly to the employee.
[narrator] Many employers ditched their pension plans,
while 401Ks took off.
[Teresa] Basically because workers lost bargaining power in the 1980s,
it grew to be a substitute for good pensions.
[narrator] Today, about half of American workers have access to a 401K.
401K was never intended to be our national retirement system.
[narrator] Otherwise it would've been called something like…
National Retirement System.
401K, actually, is a fluke, legislatively.
[narrator] And there's pretty mainstream consensus,
it hasn't worked out.
The 401K has-- has not been a good deal for most Americans.
Most Americans don't have enough saved for their later years.
Thirty years later, how are the 401K plans doing?
Jill, I think it's time to declare the 401K a failure.
[gasps]
[narrator] The core problem with this 401K-based system
is that it's basically on you to save for your retirement.
Do-it-yourself retirement.
[narrator] Which means you have to be financially savvy enough
to grow your own investments,
and also make sure you're not being charged high fees in the background.
We also need to save a lot more money than we used to.
Back in the glory days of the three-legged stool,
retirement was often just five or 10 years.
Now, it can be decades.
That's a lot more years of living to fund.
Ultimately, everyone finds a different way to pay for those extended years of life,
based on the jobs they have, the money they make,
and what they do with it.
But if you're an average person hoping somehow to reach that $1,000,000 goal,
first you'll need an individual retirement account,
and a 401K is just one of many options.
I have four different types of retirement accounts.
[woman] There's the 401K, there's a traditional IRA.
I have a Roth IRA.
Index funds that are equities-heavy.
[Bianca] I have a SEP-IRA.
[woman] An HSA. There's traditional brokerage accounts.
The whole concept of how to do it can be really confusing.
[narrator] And overwhelming.
The scoop from financial experts is that
if your employer offers a 401K with a match,
you should do that.
But bottom line,
the most important thing is that you save at all,
starting as soon as possible, and ideally automated,
so money's put away each week or each month
without you having to think about it.
But deciding to do that for your future self,
that's the hard part.
[Hal] I'm given a choice between
doing something that I want to do right now
or not doing that and making a sacrifice for my future self's benefit.
Well, why should I do that?
That guy is a stranger to me.
I started thinking with my collaborators,
how can we get people to better identify
with who they'll be when they retire?
One of the things we hit on was,
"Well, maybe we can try to make that future self more vivid."
"Can we actually get people to meet their future selves?"
[narrator] So Hal conducted an experiment
where he made old-age 3D avatars of the study participants.
This was in 2011. Technology wasn't quite as good as FaceApp then.
We tested to see whether or not being exposed to these age-progressed images
could motivate people to want to save more.
That's exactly what we found.
[narrator] Afterwards,
the study participants wanted to save twice as much for retirement
as a control group did.
The reality is, we make sacrifices for other people we care about all the time.
We make sacrifices for our kids and our parents,
our spouses, because we empathize with them.
And so if we can provoke a sense of empathy for our future selves,
then we may be more willing to make sacrifices today
for their benefit later on.
[narrator] But psychological tricks will only get you so far.
Sixty percent of the American workforce earned less than $50,000 per year.
The average cost of childcare is about $9,000 per year.
If you add food, rent, other utilities, bills,
the numbers just don't add up.
[narrator] And for many people, the numbers have never added up.
Even in the heyday of pensions, most workers never had one.
And when Social Security was first rolled out,
agricultural and domestic workers were excluded from benefits,
jobs that Black people were more likely to have.
And today, many undocumented people are paying into a system
that has no plans to pay them back.
[speaking Spanish] I pay my taxes and contribute to Social Security,
but because I'm undocumented, I can't reclaim anything.
Over the past 40 years,
where we had the rise of tax-favored, do-it-yourself individual accounts,
that really benefited the top 20% of workers.
[narrator] Because they had the extra money to put into those accounts
and get the tax breaks,
so that money grows even faster.
But poorer people can't.
[Teresa] Because of this do-it-yourself system,
middle-class workers won't be able to keep their standard of living,
and people who are working at low incomes will be quite poor when they retire.
We have millions of people working incredibly hard,
and they still cannot make ends meet.
When I have real tensions between things I need to save for right now,
or spend on right now, versus save for in the future,
it can be understandable when a lot of workers,
especially at the lower end of the income spectrum,
need to spend that money today.
[narrator] And even if you do everything right and save all your life,
you could still find your life savings slashed by a recession,
like we saw in 2008.
This morning's steep declines on Wall Street
hit Americans with already battered 401Ks.
Stock market drops have eroded the value of retirement accounts.
[woman 2] One was 88,000, and then it went down to, like…
50.
I've been a career girl all my life, and I don't deserve this.
[weeping] I'm sorry.
It's all right.
[sighs]
Because we've had this narrative or this belief
that retirement was your own responsibility,
we have, in America, a huge group of people reaching 65
with a deep sense of shame and anxiety.
I have to depend on the charities and the organizations
that I used to be able to abundantly give to.
Do I feel shame and embarrassment? Absolutely.
I'm looking into the possibility to return to the workforce
so that I can pad my retirement just a little bit more.
Because of the setbacks I faced in my life,
I see myself working until I'm 70.
[narrator] Some experts think we should be working longer.
It's good for the economy
for the simple reason that it grows the labor force.
People should, if they can, be working longer.
And the fact that older people are working longer
will be good for the economy, boost productivity,
make everyone wealthier.
I really hate that formulation.
Just because we're all living longer doesn't mean we have to work longer.
At a certain point, people should have the option
to rest and to spend their time doing something else besides working.
And in America today, it's simply not a choice for many people.
[Teresa] The other problem is that we're not all living longer.
We've had such unequal longevity gains
that this whole notion is an insult to most people in America.
[narrator] Most of us will never be able to save a million dollars,
no matter how hard we try.
Our security in old age is the accumulation
of all our privileges and all our hardships.
Student loans, credit card debts, bouts of unemployment, low wages,
medical bills, never owning a home, the inheritance you didn't get…
They stack up.
Almost 100 years ago, a movement swept America.
We declared it a national goal
that everybody deserves to reach old age with well-being and security.
We must face the fact that in this country,
we have a rich man's security and a poor man's security,
and that the government owes equal obligations to both.
In the 1980s, when we were experimenting,
or started our experiment with a do-it-yourself system,
the UK did, too.
[narrator] And by 2000, reports like this started to come out.
My state pension is £87.50 a week.
And on that money, I'm supposed to rent accommodation and survive.
[woman 3] I've got a good family.
Mother's Day and Christmas, I have to ask them for clothes.
They reversed course from the American system
and mandated that employers provide a pension system.
And their pension system is called…
[narrator] The National Employee Savings Trust,
or NEST.
Which has a wonderful image of a nest egg.
[narrator] It's like a mandatory 401K,
where you're forced to save 8% of your salary,
5% from your paycheck and 3% from your employer.
If you earned a median income of about $49,000 a year,
and invested that much over 40 years,
you'd likely not only hit that million-dollar marker, but exceed it.
We could fix our American system overnight.
We could institute a mandatory savings system for all workers.
[narrator] Or we could expand Social Security.
Remember, it's funded from your paycheck.
Right now, about 6% is taken out to fund it.
But high earners aren't paying Social Security tax
on a lot of the money they make.
Because after you've made $137,900 that year,
they stop taking money out for the rest of the year.
That's known as a regressive tax.
And if you're super rich, you could hit that cap in a week,
or if you're ridiculously rich, a day.
They're still getting over their hangovers from their New Year's Eve party,
and they've already paid their taxes to the Social Security system.
[all] Happy New Year!
If we just taxed their earnings like we tax everybody else's earnings,
so much more money would come into the system,
and we could solve poverty and expand benefits.
The retirement savings crisis
is actually a lot easier to fix than most of our problems.
It's easier to fix than climate change.
It's easier to fix than-- than health insurance.
I think we just need to start approaching these questions in a more holistic way.
The question of retirement security doesn't just affect retirees.
It affects everyone in the family.
There has been really amazing innovation in recent years
around what it means to live well as you age.
[narrator] Like this old folks' home in Seattle that made the news
for joining forces with a nearby daycare.
[news anchor] Where the very old and the very young
spend their days together.
I love to hug them and squeeze them and sing songs to them.
I've seen the Village Movement emerge…
[narrator] Which has over 300 registered chapters across the US.
[Ai-Jen Poo] …where older people pool resources
and gets access to services collectively.
[narrator] So they can afford to do the things
you'd see at a retirement community
while living in their own homes.
[Ai-Jen] In Hawaii, many communities are living intergenerationally,
where elders are actually culturally revered.
[narrator] Across the US, that kind of family structure was once common,
but right around the time retirement resort communities were taking off,
it started to decline.
We were sold a dream,
but the reality is, a lot of us will need to rely on our families and friends.
That's really the fourth leg of this stool, and always has been.
[Ai-Jen] In this country, our attitudes around retirement and aging
have everything to do with the fear of aging and disability,
and the way that we've culturally solved for it is to just be in denial.
It actually reveals a lot of things about our society,
our politics, our culture that we've needed to change for a very long time.
[narrator] While most of us will never live out that sunny version of retirement…
If we solve for the people who've been hardest to solve for,
who've really fallen through the cracks for the longest,
we will secure everyone.
[theme music plays]