America's Road to a DIY Retirement

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So, Jason's like,

what is a Tantine?

So a Tantine is an informal kind of insurance

in which a group of people get together

and they pool their money

and as each member of the Tantine dies off,

the money is then redistributed among the survivors.

Jason's like writes the intelligent investor column at the Wall Street Journal.

He spends a lot of time thinking about how people invest

and how they use to invest.

You may have heard about Tantines from popular culture.

They've been the subject of an episode of The Simpsons.

How many of you were familiar with the concept of a Tantine?

Essentially, we all enter into a contract

whereby the less surviving participant becomes the sole possessor of all them 30 pictures.

We're in the animated television show Archer

and we're also the subject of a 1966 movie called The Wrong Box, starring Michael Cain.

Grandfather has murdered Uncle Joseph

and then suffered a coneption fit.

No, never failed.

And he did it because he wanted me to have the Tantine.

Tantines originated in Europe

but became popular as a financial tool

in the early years of American independence.

Alexander Hamilton even proposed using a Tantine system

as a way to manage and fund national debt.

His plan wasn't approved

and Tantines eventually lost popularity due to fraud and corruption.

They also had a bad reputation in popular culture.

Members of some Tantines developed an unfortunate habit of murdering some of the other members

to get the money early.

But before they fell out of fashion,

Tantines were some of the earliest tools that people used for retirement.

If you think about it is in principle not that different

from a lot of forms of ensuring for retirement.

And it's an interesting metaphor for the risk that's inherent in every retirement system.

We're all making a gamble

that the money set aside for retirement either by us,

by our company or by the government will be there when we need it, when we retire.

And it doesn't always feel like a gamble

but there's always some risk inherent in it.

Today, Americans no longer resort to Tantines for retirement.

We rely instead on three main pillars of savings,

pensions, social security, and savings in a 401k or IRA.

That system might be less secure than we think.

People like to call this the three-legged stool

but the stool is a little shaky.

What would you say is the shakyest leg of that stool?

Well, where are they all at equal risk of collapse?

I think all the legs of that stool are a little shaky.

A lot of Americans don't feel like they're financially prepared for retirement.

Only about a third of people approaching retirement age report feeling, quote, on track.

I'm a nervous season like Trishon.

It's hard even with the money that we make to feel like we're putting an adequate amount

aside for our future.

So I don't get no 401k or no pension or any of that kind of matter.

So I'm in the process of looking for like a side hustle, maybe a little crypto.

I feel like I'm going to have to work till I die.

For more than a hundred years, the US has been grappling

with what retirement should look like and how we should achieve it.

At the same time, the challenge has been growing.

People are living longer and have many more post-work years than they used to.

Who bears the responsibility for funding our retirement?

And how is that changing?

It's Sunday, March 8th.

I'm Catherine Sullivan for the Wall Street Journal.

This is USA250, a podcast series connecting America's economic present to its past.

We'll be occasionally dropping into your What's News feed over the next few months

with stories that interrogate, celebrate, and make sense of our economic history.

This is episode three, America's Road to a DIY Retirement.

The fact that a human life is twice as long now,

as it was just a hundred years ago, is this enormous shift

just in what we expect a life to be.

And it struck me that this is one of the biggest challenges,

morally, ethically, economically, politically,

that modern society's face.

James Chapel is a professor of history at Duke University

and the author of the book Golden Years,

how Americans invented and reinvented old age.

I asked him about when the idea of retirement began to take hold in the US.

What emerges in the 20s and 30s is an idea that old age should be a time

for relaxation and leisure.

This was a new concept.

Until this point, most people just worked until they died

or were cared for by their families or went to spend their last years

in poor houses.

There wasn't yet a vision of older people moving to Florida on mass

and organizing their lives around golf or pickleball.

But during this time, groups had begun to advocate for a government pension.

These groups came from all ends of the political spectrum.

One of the most popular and also one of the most outlandish

was started by a man called Francis Townsend.

Francis Townsend was a physician.

He comes out of the tradition of Midwestern socialism.

He moves to California.

And he starts this movement that kind of takes fire.

There are Townsend movements in clubs across the whole country.

Millions of supporters.

And it is, I think, at least in its pure uncut form, the crackpot scheme,

that drove the Roosevelt administration crazy.

President Franklin Delano Roosevelt's administration was focused

on pulling the country out of the Great Depression.

And to that end, the Townsend plan had a straightforward demand.

$200 a month for everyone over the age of 60,

funded by a 2% sales tax.

That's about $5,000 a month in today's dollars.

The catch?

You had to spend the whole benefit within the month.

This is the middle of the Great Depression, right?

One of the problems is, how can we save this economy?

How can we jumpstart consumer spending?

And Townsend's idea is like, okay, let's give old people

a huge amount of money, enforce them to spend it.

And so he has a vision where the spending of older people

kind of rejuvenates the whole American economy.

Here's a news reel of Dr. Townsend,

fielding questions about the program from senior citizens.

May I ask a question?

Do my wife and I both get the pension?

Yes.

Husband and wife will each receive $200 a month.

I'm over getting there.

How long will I have to wait to get the pension?

If we all continue to do all our part,

we should be able to elect the next Congress of the United States

and the Townsend Plan should follow soon after that.

Townsend's slogan was, youth for work, age for leisure.

The idea took off.

Over 7,000 Townsend clubs formed across the country,

working to advocate for the plan.

They organized massive letter writing campaigns to members of Congress

and even set up trial versions of the program.

And so they did some tests where they found some older couples

in random places and gave them all this money.

And they're like buying fur coats

and automobiles, not kinds of things.

And as an attempt to prove the viability of this scheme.

The movement put enormous pressure on lawmakers

to create some sort of safety net for older people.

And the pressure worked.

In 1935, President Roosevelt signed Social Security into law.

This Social Security measure gives at least some protection

to 30 millions of our citizens who will reap direct benefits

through unemployment compensation, through old age pensions,

and through increased services for the protection of children

and the prevention of ill health.

Social Security then as now is largely financed through payroll taxes

and is paid out to eligible workers based on their years

of highest earned income.

Historians tend to think that Social Security emerged because,

at least in part because,

the Roosevelt administration knew they had to do something

because this is what people are clamoring for.

Average monthly payments for early Social Security recipients

were only about $23, a far cry from Townsend's vision.

But the passage of the program took the steam out of the Townsend movement.

Its clubs across the country eventually closed their doors

and Social Security became, and still is,

the largest anti-poverty program in the nation's history.

It also became the first leg of Americans' retirement stool.

Under the Social Security Act, most American families are now able

to ensure for themselves an income that is guaranteed for life.

It's an income provided not by charity or relief,

but by federal, old age, and survivors' insurance.

Insurance that is bought and paid for.

At the same time, more and more corporations started offering

employees pensions, also known as defined benefit plans.

Thanks largely to the work of labor unions.

Growing numbers of American workers added the second leg

to their retirement stool, the pension.

But there were problems on the horizon

that would disrupt the nascent retirement system.

After the break, the stool starts to wobble.

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In 1963, car manufacturer Studebaker went bankrupt,

and cancelled its pension plan for thousands of workers

who had been counting on it.

And it wasn't just Studebaker that was failing its pensioners.

By 1965, over 4,000 pension plans had been terminated

over the previous decade, leaving 20,000 workers

per year in a lurch.

In 1972, NBC News documentary spoke to workers

from all over the country who hadn't received the pension

they'd been promised from their companies.

You wake up in the middle of the night in a cold sweat knowing

all your work, all your life is gone down a drain.

I don't know, it's very...

It's a deep emotional thing with me.

Sometimes up.

I'm ahead of it sometimes, I'm down.

Complaints about pension failures moved Congress to act.

In 1974, they passed a law that was meant to put guardrails

on private pensions and prevent even more widespread failures.

It was called the Employee Retirement Income Security Act,

or ERISA.

They also created a new tool that allowed individuals

to save for their retirement on their own, the IRA,

or the individual retirement account.

James Chappell from Duke says these changes that began

with ERISA marked a shift in responsibility.

Little by little, the government was encouraging individuals

to take on their own retirement planning.

And so it's such a big shift from what we saw in the 1930s

where the government is the solution to problems.

In the late 70s and 80s,

Washington is not even claiming that anymore.

They're quite clear, like these are not our problems to solve.

These can be solved by you, these can be solved by the private market.

This is where Americans start to believe

that retirement is no longer a public good, but a private good.

And that belief took off.

With the failure of several high-profile pension funds

due to Baker, the option to take full control

over your retirement savings looked pretty appealing.

It also looked appealing to companies.

So companies did not love offering pensions?

Justin Bear is the Deputy Markets Editor, the Wall Street Journal.

He wrote about this period in a forthcoming book

about the Financial Services Company Fidelity.

Particularly if you were in a very cyclical business

where your earnings may differ widely from year to year.

And a down year of having to then set aside

part of those profits for your pension plan

because the market didn't perform well.

That was not a great situation to be in.

So they were very happy to look for any opportunity

to sort of offload that responsibility onto their employees.

Fidelity and other firms like Vanguard

had been behind the scenes, managing pension funds for companies.

But they soon pounced on the new individualized plans

that the government had opened the door to.

You know, I think in the case of Fidelity and others,

part of the appeal is, oh, this is another platform

through which we can sell mutual funds, right?

Which was for them still very much the biggest business

and the main thing that they did.

Investment firms realized they could go directly

to individuals to sell them retirement plans.

And the IRS continued to pass more regulations

allowing for personal retirement accounts.

Consultancy firms would scan new tax laws

looking for ways to manage savings.

So this guy, Ted Benna,

he had been running one of those pension consulting firms

at the time and he was one of those guys

that would scour every new law for applications

that might benefit his clients.

Here's Ted Benna.

1978, one of these end of the year tax bills

where things get thrown in.

You know, in order to get votes,

Section K was added under 401 of the IRS code.

It was a page in AF law. That's all it was.

The provision allowed for companies

to provide cash or deferred arrangements to employees.

Here's Benna again explaining his innovation

on a financial podcast.

So what I came up with was the idea of

let's increase the ante.

Let's add a matching employer or contribution.

It says, well, if you're willing to defer this

for retirement, you'll get a tax break

but you'll also get additional money

via an image.

Benna realized companies could use these matching funds

as perks to offer employees.

Companies liked them a lot more than traditional pensions.

The industry starts to adapt.

They get it.

But employees were skeptical.

There's a funny story where a lot of companies

started calling these programs

salary reduction programs,

which was not very appealing, right?

If you're an employee, you're just starting out

and they say, oh, we've got this new retirement plan

it's called salary reduction plan.

It's like, well, why don't I get paid less?

It's crazy.

Companies eventually rebranded the plans.

And by the mid-1980s,

major Fortune 500 companies began to embrace

the 401k.

By that point, it looks a lot more appealing, right?

Because the market is really taking off

in starting in the early 80s.

And so suddenly the idea that you'd be picking winners,

picking funds, you really like,

that seemed a lot easier when the market

is rising sharply as it did for that period.

By the early 1990s, 401k type plans

had overtaken the pension.

They became the third leg of the

retirement planning stool.

But when the 401k was introduced,

employees may not have understood the trade-offs

between these types of defined contribution plans

and pensions.

I think what was not as well understood

by employees was how, yes,

over a long period of time,

market goes up usually.

But it doesn't always meet your timetable, right?

So I think where it's hurt the most has been

when we have disruptions to the market,

we have down markets at moments

when you have a lot of people

who are edging closer to retirement.

And then losing 20% or 30% of that,

it's so close to the finish line,

is very painful.

That exact thing happened over 15 years ago

during the 2008 financial crisis.

After 2008, I recall I wrote an article

even about the 401k and whether it had failed.

Anne Targason covers retirement

at the Wall Street Journal.

She spent 18 years talking to people

about how they're managing

or planning to manage their retirement.

She remembers a moment when it looked like

maybe people were not comfortable

with keeping their retirement exposed

to the stock market.

It was in 2008 during the Great Recession.

At the bottom of the crisis in March of 2009,

the market had lost more than 50% of its value

from its peak in October 2007.

The value of people's IRAs

and 401k's plummeted.

Of mortgage, chances are your monthly 401k statement

will remind you that you've lost

a good chunk of your savings.

Trillions of dollars have evaporated

from those accounts

that have become the prime source of retirement funds

for a majority of American workers,

affecting their psyche and their future.

People were really worried about the reliance

of 401k's stock market risk.

And some fraction of the experts I spoke to

were willing to throw in the towel on the 401k

and declare it a failed experiment

and people were coming up with alternative ideas.

Some wanted to build out social security,

others wanted to find ways to go back to pensions,

some kind of hybrid,

just something that would reduce the level of stock market risk.

None of these options gained steam.

And instead, Americans embraced the 401k even further.

And here we are.

Here we are in 2026.

And the 401k is sort of booming.

Auto enrollment in 401k's has tripled since 2007.

Roughly 43% of Americans contribute to one.

But anxiety about savings hasn't eased.

I think probably people maybe have great

or anxiety about retirement

because it's up to them to save in a 401k.

And then it's up to them to figure out,

okay, well, I have a couple hundred thousand dollars.

Is that actually, how am I going to make that last?

According to the Bureau of Labor Statistics,

around 70% of private sector workers

have access to a 401k style plan at work,

but only about half actually participate in it.

Well, that's up from prior years.

It still means a lot of Americans

don't have the tools they need to save for retirement.

President Trump has floated the idea

of providing retirement plans to these workers,

but he gave few details of the plan.

It's one of the big problems

that are retirement saving system confronts,

which is that we don't have universal access

to these savings programs at work.

Lots of big companies offer retirement savings plans,

but small businesses don't have the bandwidth

to offer matching plans for their employees,

leaving those workers at a disadvantage.

Dozens of other countries require companies

to provide retirement plans for their employees.

It's always been in this country

left up to companies to employers

to decide whether to offer these programs or not.

So it's just the bias of the way our system is set up.

After the break, we look at new uncertainties,

coming for the future of our retirement system.

There's a discussion going on now

about what kinds of investments

can go into a 401k.

Last August, President Trump signed

an executive order allowing 401k's

to invest in, quote, alternative assets.

That's things like private equity,

real estate debt, and cryptocurrency.

According to a poll conducted on behalf of the Wall Street Journal,

only about 10% of Americans

are looking for more investment offerings

in their 401k's.

Ferguson wrote about this.

I have walked up and down six avenue

and interviewed people about this question

and what I generally found on the basis

of an afternoon spent doing that

is that men in their 20s,

especially those who work

in the financial services industry,

tend to be like,

they actively want this.

Other people were sort of like,

what is private equity?

Can you explain that to me?

The White House told me the order

is the playing field for individual investors

who want access to potentially lucrative

private and alternative investments

and is, quote, not an endorsement

of any particular asset class.

A lot of the lobbying for this

is coming from the private equity industry.

Private equity is looking for access

to the roughly $10 trillion

currently invested in 401k plans.

It would be a lot more business for the sector,

but it's unclear whether 401k administrators

will be willing to offer these alternative assets.

Private equity funds generally come

with much higher fees than publicly traded assets.

Private markets also carry more risk for investors.

Some experts think placing these assets

in 401k is too risky.

Former Goldman Sachs chief executive Lloyd Blankfein

told the Wall Street Journal about what he sees

as a short-sighted decision by the private equity industry.

I think it's crazy to put those assets there

and I think it's crazy from their point of view.

They have nice lives.

They make a fortune.

The companies are huge.

They already own their yachts and whatever it is they want.

Why are you going into this dangerous territory

just to make your business a little bit bigger?

And that represents such a big

potential problem in the future.

There's another potential problem

coming in the future.

But this one has to do with social security.

The program is extremely popular.

Around 40% of seniors rely on social security payments

to make up at least half of their monthly income.

Between 12 and 15% rely on it for over 90% of their income.

But a lot of Americans believe it will

run out completely in their lifetimes.

Honestly, I feel like there won't be

so security by the time I end up retiring.

I don't rely on it at all.

Would you?

It's just security won't exist but the time

because there's still paying people from the 1800s that died.

This isn't true.

Social security is not disappearing.

But it is facing a budget crisis.

A lot of people, not everybody,

but a lot of people have some level of anxiety

that that social security will be cut

because social security is facing a funding shortfall

that depending on who's doing the estimating,

it's likely that it'll hit in like 2032, 2033, 2034.

Somewhere around there.

According to the Social Security Trustees report,

the funding shortfall will come in 2033.

If Congress doesn't find a solution to this problem,

benefits could be cut by more than 20% across the board.

To people know that this is commenting and it's looming,

and Congress has to come up with a fix.

This year, the Office of the Chief Actuary

published a menu of over 140 potential changes

that could be made to fund the program.

People are floating proposals,

but often they're not bipartisan.

It's clear that it's still early days

in the process of fixing social security,

or even addressing social security's funding shortfalls.

Social security has faced a funding shortfall before.

In 1983, Congress passed bipartisan reforms

to shore up the program just months before funding ran out.

To close the gap, they made several different changes,

including raising both taxes and the retirement age.

This time, they have about seven years left

to stabilize the program.

Despite all the uncertainties in our current system,

Jason Swag, our investment columnist,

doesn't think we should just go back

to the old system of pensions.

I think there's a tendency among a lot of people today

who comment on retirement plans

to glamorize defined benefit pension plans,

and to say, oh, back in the 1950s,

you know, oh, leave it to beaver.

It was a great time to retire.

You know, you sat in front of your black and white TV

and you spent your monthly pension check

and you lived the good life

and you had the American dream come true.

Even at their peak, pensions only provided payouts

to less than half of Americans.

And often, those payouts were very small.

In fact, the good old days were kind of bad,

or maybe another way of putting it

is the good old days never were.

In the present, as in the past,

a comfortable retirement was never guaranteed.

We may have created the illusion

that all Americans could retire into a life of leisure,

but that was never true for everyone.

There's always been some risk.

If a whole bunch of people are investing

to ensure themselves against the risk

that they'll run out of money

and they're putting their money in the stock market,

it makes very good sense to remember

that the New York Stock Exchange originated

in a place called the Tontine Coffee House.

Tontine, as in the last man standing version

of retirement insurance,

the coffee house, established and financed

as an actual Tontine,

is where some of the earliest trading took place

after the button would agreement was signed nearby

in 1792, creating the stock exchange.

It shows how inextricably linked

these two ideas are.

The idea that retirement

is an insurance policy against risk

and it's pooled with lots of people,

and that is inextricably linked

to the stock market.

It just is.

Is it still all just a gamble?

It is somewhat of a gamble.

There's a common belief

that if you hold stocks long enough,

you're effectively guaranteed

a robust positive return.

And both statistically and historically

is not really true.

I hope, and this is the gamble that I'm taking,

and everyone invested in the stock market

is taking it with me.

I hope that the stock market

will perform great over the next few decades

so that the money I have invested in it

for my retirement will continue to grow,

but there's no guarantee of that.

And that's it for this special edition

of What's New Sunday for March 8th.

USA250 America's Road to a DIY Retirement

is produced by me, Catherine Sullivan,

with supervising producer Jana Heron.

Additional support from Flauna Patterson

and Chris Zinsley, sound designed

and mixing by Michael LaValle,

fact checking by a partner Nathan.

Special thanks to Elysium and Elle,

and Anna Maria Andriotis.

Michael LaValle wrote our theme music.

Aisha Elmoosleem is our development producer,

Chris Zinsley is our deputy editor,

and Flauna Patterson is the Wall Street Journal's

head of news audio.

I'm Catherine Sullivan, and we'll be back

in a few weeks with another installment

of our USA250 podcast.

What's news?

We'll be back with a new episode tomorrow morning.

Thanks for listening.

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