MS. DIANE REHMThanks for joining us. I'm Diane Rehm. Eight years ago, economist Teresa Ghilarducci caused a stir when she suggested 401 (k) s were too risky. Some conservatives accused her of wanting to give the federal government complete control over retirement savings. She received death threats, but she hasn't backed down and now she's out with a new book, the title "How To Retire With Enough Money and How To Know What Enough Is."

MS. DIANE REHMTeresa Ghilarducci joins me in the studio. I know many of you will have questions, comments. Do join us. 800-433-8850. Send us your email to drshow@wamu.org. Follow us on Facebook or Twitter. It's so good to meet you.

MS. TERESA GHILARDUCCIThank you so much.

REHMYou know, I think a lot of people during this past opening week of the new year have been watching what's happening to China and the market there. Talk about how worried you think we in the United States should be.

GHILARDUCCIWell, this is nothing like the last time. I was very worried in 2008. The market in China going down and the circuit breaker they have, which is good news, is indicative that we are going to have probably slow growth on the planet in every developing markets and developed markets for the next 10 or 15 years, which really affects people's retirement plans and their targets for saving.

GHILARDUCCISo I think it's prudent for us to take the Chinese news and the U.S. stock market news and just reset, recalibrate our expectations of what we'll earn on our savings accounts.

REHMIf we have savings accounts.

GHILARDUCCIThat's right.

REHMAnd that's what you're concerned about, how indeed people in this country -- you begin your book "How To Retire With Enough Money" with some really sobering figures. The majority of Americans over age 50, you say, have $30,000 or less saved for retirement.

GHILARDUCCIYes. And that will get you about $100 a month for the rest of your life to supplement Social Security. So I and my fellow economists are quite worried about what we call the retirement crisis. And we don’t use that word, crisis, lightly. If we don't do something to expand Social Security and to add to these people's savings account, we're going to see, for the first time since Social Security was implemented, downward mobility of middle class workers will become poor or near poor retirees and a lot of the baby boom generations will do worse than their grandparents and parents in retirement.

GHILARDUCCIThis could affect everybody, younger workers who have to compete with older workers for jobs and it could affect our aggregate demand, the health -- the spending health of our economy.

REHMAnd you say that 401 (k) s and IRAs are partly responsible for this.

GHILARDUCCIYou know what, I've called our do-it-yourself retirement system one that is now composed of voluntary individual-directed and commercially-run 401 (k) s, IRAs a failed experiment. We took a bold step. We, the United States, in our retirement incomes policy about the beginning of the 1980s and implemented -- Congress was part of this and the retail, money management industry was also part of it -- implemented a bold experiment. No other country did it, to have people save for their own retirement, invest their own portfolios, decide how much to save and we gave them out, that if they if they needed it or wanted it before they retired, they could withdraw money before retirement, even though they were subsidized by tax favoritism.

GHILARDUCCIWe're the only country on the planet that allows tax-favored retirement savings to be withdrawn before retirement.

REHMSo what are you saying should be the way we ought to go?

GHILARDUCCIWell, there's some quick fixes to the current system. First, we should ban withdrawals before retirement. The people who have a good retirement system, federal employees, me at a university, people who work for larger middle income firms might have a defined benefit system or TIAA-CREF, which is a forced savings, defined contribution plan, so if we're lucky enough to have those kinds of plans, we have a good design. We have mandatory savings. We can't take it out before retirement and professionals invest the money for us.

GHILARDUCCISo we could provide those designed features for people with IRAs and 401 (k) s and I and my partner at Blackstone, which is a money management or private equity firm, have proposed exactly that kind of pension system for all Americans.

REHMTell me what got you such attention and even death threats talking about having the federal government manage savings.

GHILARDUCCII remember the day that I testified in Congress very well. It was October 7 in 2008. And if you remember those really dark times, Congress rushed some of us to testify about what Congress and the president could do to help just ordinary people. And so we were talking about bailing out the auto industry and taking the toxic assets from banks. And I proposed that the government extend that help to all Americans that had toxic assets in their 401 (k) s. So I was brainstorming, along with everybody else, about how to actually stop the freefall of wealth.

GHILARDUCCI401 (k) s, actually, almost became 201 (k) s in just a couple of weeks and on average, people were losing 25 to 30 percent of their retirement balances. So I suggested sort of a blue sky ways that if people wanted to, they could trade in their 401 (k) s for a guaranteed retirement account and start to protect their retirement assets from, you know, freefall. At least they could protect their principles. It was kind of a complex plan with simple principles that everybody could have a safe and secure retirement plan.

GHILARDUCCIAnd I think the death threats came from people who were just, you know, violent, but also from lots of people who were scared to death and I became the scapegoat or the target for their fears. I have the same plan. It's more detailed and now I'm getting lots of affirmation that it makes a lot of sense to have a universal guaranteed plan.

REHMSo tell me how that universal guaranteed plan would work.

GHILARDUCCIWell, everyone, not just the people who work for firms that have a mandatory contribution to the pension plan, would have an amount taken from their paycheck, every paycheck, and deposited into a guaranteed retirement account. That guaranteed retirement account would be administered by a government agency, perhaps the Social Security system, perhaps the Federal Reserve system, perhaps the thrift savings plan that is the retirement plan for federal employees. It would be managed and accumulated -- the money would accumulate in individual accounts.

GHILARDUCCIBut the poor individual who may be an engineer, may be a barista, have other things in their lives would not have to act like an investment professional to decide where that money would be invested.

REHMHow would percentages be determined?

GHILARDUCCIWell, it would be determined -- the government would determine a minimum, a base. So we have proposed -- I have proposed 3 percent for everyone because that works for a young person just starting. If every young person saved 3 percent in a safe asset...

REHMStarting at age 20, 21?

GHILARDUCCIAt 21, even 25 and to all the young people listening, you have time on your side. But even older people in their 30s or 40s, if they save double that amount, 6 to 10 to 15 percent, they can get there. They can supplement their Social Security, but they have to have protection on the investment risk. I mean, if you're 55 and you've lost 25 percent, you don't catch up, Diane. You are looking forward to being in the labor market for another 10 or 15 years. For some of us, that's not a problem, but for most of us, you start seeing health declines and a heck of a lot of age discrimination.

GHILARDUCCISo what my plan does is get people started sooner and if you're older and you start up this plan, you can save more. The money is invested by professionals and I've also proposed a way to reform the tax code so that it's more fair and a way for the government, very cheaply, to provide a principle guarantee.

REHMSo basically, what you are proposing is a government-run pension system for everyone.

GHILARDUCCIAnd -- exactly. If companies want to provide a better plan through a 401 (k), then bless them.

REHMFine.

GHILARDUCCILet them do it. But everybody would have, basically, a public option. This is very similar to the healthcare debate where we had many people left behind. It was costing us lots of money so now we need a universal plan for everyone.

REHMThe book is titled "How To Retire With Enough Money and How To Know What Enough Is." A clear answer in 116 pages, Teresa Ghilarducci, economics professor at the New School For Social Research.

REHMAnd I do want to let you know that Teresa Ghilarducci is going to continue to take your questions live on Facebook after our show. You can post your questions now at Facebook.com/drshow. And we'll start that at Noon, Eastern Time. Teresa, I must say, so many people have been frightened by all the talk of Social Security won't be there for you when you get ready to retire.

GHILARDUCCIAnd that has been a claim by the right wing since Social Security was passed in 1935. It's not true. I really want to reassure people that there is a lot of money in the Social Security System. If nothing happens, the system will pay three-fourths benefits. But we've been in this situation before and Congress always steps up, especially with lots of public support for Social Security. Republicans and Democrats, the voters love Social Security: 79 percent, 85 percent want the government to increase revenues into this system. So I am confident that in the next one to five years we're going to find the revenue to put more -- for Social Security and perhaps even expand the system. We haven't talked about that in 30 years.

GHILARDUCCIElizabeth Warren, Hillary Clinton, other candidates have talked about taking the system that works well and even expanding it. So I'm confident that the system will be there, certainly. And I'm very confident that it will be even expanded to help prevent poverty among the elderly.

REHMAnd we should say that you are one of many advisers to Hillary Clinton, now that you have mentioned her. I think the worry about Social Security affects people in lots of ways.

GHILARDUCCIWell, I have studied pensions systems all over the world. And unique to the American scene is a great deal of anxiety among older people. Not just because they hear from political elites every once in a while, the Social Security benefits need to be cut. Not true. Economists know it can be easily fixed. But they hear about the Social Security System. But they also know that the financial markets are out of their control and that their pension systems are based on what happens to the financial markets. That's a real shame. Because as you get older, the anxiety about money can actually lead to very unhelpful and unhealthful activities.

GHILARDUCCII've heard of a lot of older people skipping lunch in their 70s and 80s, worried about not having enough money. More seriously, they skip going to the doctors or cutting their pills in half. This is very American. This doesn't happen in other countries and it shouldn't happen here.

REHMI gather you've been a trustee to several large retirement funds. You've seen these perform better than IRAs and 401 (k) s. What happens?

GHILARDUCCIYeah. It's not just my experience as -- being a trustee of large pension funds that are managed by professions, and since we're large we can bargain really good fees from the money managers. But it's well known in the industry that for over 35 years, pension funds have performed better than individual 401 (k) s or IRAs. Why is that? Because one person is puny in the world of money managers. And they don't have the bargaining power to get the best fees.

GHILARDUCCIBut also, individuals -- now think about this -- have to invest in a fund that could be withdrawn from at any time. And so you have a long-term savings motive, but your funds are put into short-term investments like mutual funds. You're paying for a lot of liquidity you don't need and really shouldn't have. So the design of the 401 (k) and the IRA as a long-term savings vehicle is completely flawed.

REHMAnd here's an email on that subject from John, who says, I know people who've used their 401 (k) s to pay for their children's college.

REHMI hope that John isn't one of those people. And he may have advised his friends who he knows that have done that, that it's a mistake and they should stop doing it. Young people have a lot of human capital to invest in and to earn money from for their whole lives. They can borrow to get that human capital, to get a college education. But people can't borrow for retirement. You need to have the funds there. Every $24,000 you take out of your 401 (k) deprives you, when you're old, of $100 a month. And sometimes that $100 is the difference between filling a prescription or not. So make sure you're -- you go to the college that your family can afford. State universities are fantastic deals. And people should take advantage of that.

GHILARDUCCIAnd I work at a private university. Not everybody can afford that and shouldn't. They should really look at their state schools first.

REHMHere's an email from Esperanza, who says, people who are in their 30s and 40s now, what does Social Security look like for them? Lots of us are worried we're paying into the system but we'll never see any money.

GHILARDUCCIThat's totally false. If nothing happens -- and something will -- 30- and 40-year-olds will get at least three-fourths of the benefits promised. So that's a very substantial benefit.

REHMYou keep hearing people say that the money -- there is no Social Security Trust Fund, that it's all been borrowed and used for other things.

GHILARDUCCIYeah. The Trust Fund has government bonds, government IOUs in it. And, by law, the government is to pay the Social Security System actually a nice bond rate. It's a couple of points above the federal funds rate, about 5 percent, 7 percent. And the government has never missed a payment to the Social Security Trust Fund. But really what backs up the Social Security Trust Fund are the people in Congress. And the Social Security Trust Fund and the Social Security System has been projected to be insolvent ever since the system has been developed. That's the way it rolls. And every time the Congress steps up.

GHILARDUCCISo I'm completely confident the next couple of years will either eliminate the earnings cap -- which I recommend -- raise the FICA Tax, tweak benefits, and the system will be solvent.

REHMWhat about raising the age of retirement?

GHILARDUCCIWell, I have been opposed to that. Because there's lots of other easy ways to get revenue. Raising the retirement age sounds like it's a guaranteed employment program for older people. It's not about raising the retirement age, it's about cutting benefits. If we raise the normal retirement you could collect your full benefits up to age 70, that would be a cut in benefits of about 20 percent. So raising the retirement age doesn't mean that people can just keep on working. It means when they collect the benefits, when they get fired or laid off or can't work because of health reasons or because of their partner's health problems, they'll just have a lower Social Security benefit.

GHILARDUCCINow, if people can delay collecting Social Security, that's a great deal. It's one of the best deals on the planet. If you're -- don't have a terminal disease and you can keep on working or you can draw money from your 401 (k), do it. That's my advice to everybody. Every month or year you delay, you get a guaranteed rate of return of something between 6 2/3 percent and 8 percent at older ages. So I tell everybody who will listen, delay collecting Social Security. I heard a story that even the janitors and the security guards at Social Security offices, when people come in to ask when they should collect, the janitors and the security officers tell people in the waiting room, delay collecting, delay collecting.

REHMHuh. Interesting.

GHILARDUCCIBecause they know more.

REHMInteresting. All right. We've got, as you can imagine, lots of callers, 800-433-8850. Let's go to Jules in Baltimore, Md. You're on the air.

JULESHi, Diane. Hi, Teresa.

REHMHi.

GHILARDUCCIHi.

JULESI'm in my 20s. I'm just starting to work and just starting to save. And I'm actually concerned about the percentage of the federal budget right now that goes to entitlements and concerned that that percentage will increase as the baby boomers start to retire. I'm concerned that with expanding Social Security, as Teresa is proposing, my payroll taxes would go up and I would have to pay more and more into a system that will just cost more and more money...

REHMYeah.

JULES...even as the baby boomers are capable of working much longer and are working to much later ages.

GHILARDUCCIYeah. Yeah. No, that's a great question. I am proposing that the tax rates go up a bit. But the magnitude is nothing to be worried about. The magnitude is about 1 or 2 percent of payroll. And that will get the system back to solvency and even expand the system. But more to the point, if we raise the earnings cap -- right now, all the earnings under $118,500 a year are taxed, but all the earnings above that is not taxed for Social Security. All the earnings above that is taxed for Medicare, since 1994, but not for Social Security. So that means the very wealthiest, highest income workers -- there's 110 workers that get over $110 million a year in earnings. They pay their Social Security tax into the first workday of the new year.

GHILARDUCCISo about 600 people who are the very richest Americans have actually stopped paying their Social Security tax, what is it, Thursday of the first workweek? So if we just raise the earnings cap and you probably, Jules, aren't in that category. Maybe you're the 110 people who make $110 million a year? Probably not. You won't see any increase at all. There's a lot of money at the top, you know, to pay for our Social Security System. So I wouldn't worry about the deficit.

REHMAll right. Let's go to Richmond, Va. You're on the air.

STEVENFirst, thank you so much, Diane, for all that you do for civil discourse in this country.

REHMThanks, Steven.

STEVENI so appreciate you and your show.

REHMThank you.

STEVENOn the topic, I wonder what your guest thinks are the main causes of American under-saving? I'm 38 and I often hear from people in my generation that they can't afford to save for retirement. But it's because of things that they take as necessities, like car leases or cable or cell phone plans. And so they say, oh, I'll just work forever. But they're not thinking about health issues in older age. I can't help but wonder if they're counting on something like this big plan coming down the line for them or if maybe they're expecting to inherit wealth from their...

GHILARDUCCIOh, yeah. Yeah. Steven, that's an eloquent question. There is a problem of over-spenders. But over-spenders have always been with us. The main problem -- why people don't save enough is the design of the system we have. Over the past 35 years, we've asked all humans to anticipate their needs when they're older, to curb their consumption and to find an investment vehicle to save their money in. Oh, and by the way, they should decide where the federal funds' rate are going to be or what the risk of financial -- we're really asking too much of people. So the main cause is not too many lattes or cables or car leases.

GHILARDUCCIThe problem is the design of our systems rely on a voluntary, individual directed, really commercial-based system. We need to put back the designs that worked before, when even low-income people -- think of janitors, lady garment workers, home health care workers -- they have low incomes too, but they have a well-designed system to automatically save.

REHMAnd you're listening to "The Diane Rehm Show." Teresa Ghilarducci is here. Her new book is titled, "How to Retire with Enough Money: And How to Know What Enough Is." And it's that last part, how to know what enough is, how do you determine that? How do you, in these 111 pages, advise people to determine what enough is?

GHILARDUCCIThanks for the question. This is the question I get the most. What's my number? So here's a rule of thumb. If you're about ready to retire, you should at minimum have about eight times your final average salary, or basically how much it costs you to live at the lifestyle you're accustomed. So if you're accustomed to $50,000 per year, you should have 8 -- I'm sorry, $400,000 in your retirement account. Sadly, a very -- only a few percentage of people who are nearing retirement have that amount. So I know that's stressful to hear to a lot of older people. If you're in your 40s, you should have about half that, about four times your average -- your target lifetime earnings. And that's probably what your earning now or a little bit more.

GHILARDUCCIIf you're in your 20s, late 20s, you should have maybe one or two times your annual salary. So these are good rules of thumb. To persevere at any savings goal, you need to have feedback and you need to know if you're on track or not on track. So in my book -- it's really a pamphlet. It's something you could put in your pocket.

REHMIt's so tiny.

GHILARDUCCII know it's really small.

REHMAbsolutely.

GHILARDUCCIIt's kind of a booklet. But I think people appreciate it. Because there's a lot packed in there. I have one message in that book, is that information gives you power and also there's nothing to be ashamed of. I think a lot of financial advice books, first of all, try to get expertise and get you to buy the book by saying, I'm the expert and you're the little kid that should be ashamed that you haven't saved enough. And they also try to motivate to buy their books by saying Social Security won't be there.

GHILARDUCCIBoth of those approaches -- scaring people to death about Social Security or making them ashamed that they haven't done something they should -- are very bad approaches to have people take control of their lives and do what they need to do. So my booklet is trying to tell people where they have power and to tell them that the government is a really good partner to help secure their financial future.

REHMAll right. So let's say -- and we're going to have to take a break in a minute -- but let's say you're just starting out. You've got a part-time job. You're 20 years old. You've finally gotten your first part-time job. You're making, let's say, $100 a week.

GHILARDUCCIYeah.

REHMWhat are you telling that 20-year-old to do?

GHILARDUCCIPut $10 every week into a indexed fund. I don't have any connection with Vanguard, but Vanguard money managers are a really low fee provider. They're a mutual company. They're not -- their profits go back to the account holders. So take 10 percent and start saving.

REHMAnd start saving as soon as you get that first paycheck. Teresa Ghilarducci, "How To Retire With Enough Money." Short break. Stay with us.

REHMAnd welcome back. Teresa Ghilarducci is here with me. Her new 111 page book -- sorry, 116 pages is titled "How to Retire with Enough Money: And How to Know What Enough Is." You recommend not living in a high income neighborhood as one strategy. Explain that.

GHILARDUCCIWell, thanks for calling that out. So you often hear from real estate agents, get the cheapest house on the block. But psychologically that's a bad strategy. If you have the cheapest, smallest house on the block, you're looking up. You're looking at people with more income than you. You're setting your consumption standards to your neighbors. And if you have a little bit of envy or anxiety that you're not catching up with your neighbors, you are going to overspend. You're going to feel bad. You're going to have what sociologists call envy.

GHILARDUCCIAnd the better strategy is to live among people with about your same income, or a little bit less. You'll feel like you're the king. You will not look up in the standards. And I can't tell you how many retirees I know who may have accidentally ended up being a little bit better off than their peers, and they hold their head up high, and they love their life and love their stuff.

REHMHere's a tweet from Gary, and there have been several like this, "Why not just expand Social Security that's the lowest risk?"

GHILARDUCCISocial Security is a social insurance program. It's pay as you go, and it redistributes money to people who live a long time, and it gives a higher rate of return to low income people. It's a great program. We need it as a base. But my plan, our plan, Tony James and our plan, provides an individual account that's owned by the individual. You can adjust it. You can add more money to it. You have a guaranteed return, and you have professionals managing it.

GHILARDUCCIAnd our country is based on a public-private government individual system. So our system provides a place for people to take control, tailor their whole retirement package to their own needs. So everyone needs Social Security. We need to actually expand it a bit to prevent poverty, but we need to add on to it, like we did after the war when people had traditional pensions, or people like me who have TIAA-CREF. We add to our Social Security. So I support Social Security and these add-on accounts.

REHMHere's a comment posted on our website. "Starting 401k's are too risky. They are if you put it all in stocks. If it's all short-term government bonds, it's not risky enough. Asset allocation is a different topic from where the assets are invested."

GHILARDUCCIAsset -- it's not a different topic. So in your 401k and your IRAs, most of them, they're restricted to short-term assets. That's an asset allocation. Stocks and bonds that can be liquid and sold immediately is a short-term asset. So you have asset portfolios between stocks and bonds, but more importantly you have an asset portfolio between short and long-term. And professionals have a little real estate, a little infrastructure, a little private equity, a little venture capital, little stocks, little bonds.

GHILARDUCCIYou have a whole panoply of risky assets, safe assets, short-term assets, medium-term and long-term. So it's all about asset allocation. And 401k's and IRAs don't give you enough diversity. They also cost too much. The fees are too high.

REHMSo if someone, say, you, with your TIAA-CREF, suppose that you reach age 75 or 80 and decided to retire. You have the option of staying in TIAA-CREF or converting your TIAA-CREF to an IRA.

GHILARDUCCIMm-hmm, that's right.

REHMWhat would your plan be?

GHILARDUCCIOh, my plan would be to convert it to a annuity. So if you've saved a lump sum, you have that $400,000 and you're in a middle income worker, you convert that into about $800 a month or so, add that to your Social Security of $1,200, and you have that for the rest of your life. What you have is what we call longevity insurance. Now, if you want to save outside of that system, please do. There's lots of vehicles to do it. And then you could have that lump sum to take that Caribbean vacation or to give to your kids or to splurge a little bit.

GHILARDUCCISo what I'm advocating is a way to layer insurance with cash that you can play with. And the guaranteed retirement account adds to the annuity of your Social Security.

REHMAll right. Here's a call from Sharla in Great Falls, Va. You're on the air.

SHARLAGood morning, Diane. Thank you for taking my call. I'm a big fan of your show and...

REHMThank you.

SHARLA...I'm in denial about your retirement next year. (unintelligible) all your work.

REHMThank you.

SHARLAI have a question for your guest, Professor Ghilarducci, I wonder whether the professor's aware of Nobel Laureate Franco Modigliani and Dr. Arun Muralidhar's proposal of 1998 for a guaranteed return plan for Social Security.

GHILARDUCCII am.

SHARLAOh, good. So they seem to propose on their book "Rethinking Pension Reform" something that seems identical to your plan, except that it seems to me that it would be a lot more difficult to initiate it for 401k defined contribution plans, as opposed to Social Security where the Social Security Administration is already in place to do such things.

GHILARDUCCIYeah.

SHARLAAnd then also secondly, I wanted to ask which states, if any, have accepted your proposal, and Connecticut seemed to have recently said that the program will not offer an annually predetermined guaranteed rate of return, because the cost benefit does not support the desirability of the option.

REHMAll right.

GHILARDUCCIYeah, great question.

REHMYeah.

GHILARDUCCISo many people have had this idea. I come from a long line if economists in this country and other countries that have this idea, because it's actually not hard, that people have a guaranteed social insurance program of a base, every country has such a program, some kind of variance. And on top of that, individuals accumulate private assets, financial assets into their account that they can liquidate when they retire. It’s a pretty simple idea.

GHILARDUCCIAnd auto workers, janitors, coal miners, university professors, employees of big corporations have had such a plan. Their defined benefit, their traditional pension is invested in the private market, and it's paid out at retirement to supplement Social Security.

GHILARDUCCISo the authors that you mentioned, including Samuelson (sp?), a couple of Noble Prize winners had the idea, and I have it too, the Social Security system is a very efficient bureaucracy. It's very cheap to run. They have field offices everywhere. And they have your Social Security number. They already have an account for you. So why don't we build on that administrative financial infrastructure and collect through the Social Security system your accounts, and then the government finds the best managers out there to invest it. Just like they do for the federal employees.

GHILARDUCCISo the idea is out there, that you would supplement Social Security with financial accounts. Now, you've asked a question a question about what states are doing.

REHMConnecticut especially.

GHILARDUCCIFor instance, California, there's 23 states that have proposed and are dealing with a plan a lot like mine, but mainly they're trying to deal with the retirement crisis that they're facing. Because fact it, when there are hungry older people in the city of New York and the city of New Haven, in California, it's the mayors and the governors that have to deal with that problem first. The federal government doesn't feed hungry elderly. So they're moving to try to fashion a program. They're getting a lot of pushback from the financial services industry that doesn't want a public option, so there's a lot of variation.

GHILARDUCCII predict that this plan will go by the way of all the other federal programs, that we have a lot of innovation and experimentation at the state level, and then it gets lifted up into a federal plan. One last thing, in 1934 23 states facing a similar retirement crisis had an old-age security plan, just like we're seeing now. One year later all those initiatives disappeared and Social Security was born.

REHMAnd to Bethlehem, Pa. Diane, you're on the air.

DIANEHi, thank you so much for having this conversation. This may be a little bit frank, but are so many of us middle aged women who were married and now are not who ended up in debt because of legal bills and everything else, who are now sandwiched between finishing raising children and caring for older parents, and it really seems like retirement is just wishful thinking. It seems digging yourself out of debt is going to take the rest of your life. And I know I'm not alone in this.

GHILARDUCCII know.

DIANEThere are so many friends.

GHILARDUCCINo, I know. Actually there are tens of millions of women who are in similar situations. A divorce and having adult children and having older parents and also having to be in a labor market where you're perpetually getting less money are significant life events that affect your retirement accumulations. Do you want advice, Diane? Is that what you're asking? I mean, I have solidarity, but do you want advice?

DIANEYeah, I'm not expecting you to be able to solve my problems personally, but I do know that I have so many friends in similar situations, and it just looks completely hopeless. I took what settlement money I had, threw it in an annuity, but when it's going to give me $6,000 a year, I can't expect to live on that.

GHILARDUCCIExactly. Oh, so my advice is -- and I know it sounds like, you know, don't eat cupcakes or a diet, but try to cut down on your spending. But think of it as an empowerment tool, that you can control the pace and content of your life when you're older and your spending now. So do a budget. I know that just sounds like flossing your teeth, but it really helps, and you'll feel great about it. Try to work longer, try to work more, and save your raise. If you get extra income from working, save it.

GHILARDUCCIAnd you have a lot of power as an investor. Get low fee investment. Vanguard is a pretty good place. Other places have index funds so you can save. Pick friends that have very similar goals as you do. Splurges don't actually help brain chemistry and satisfaction. Splurges excite the part of your brain that is excited by cocaine and alcohol. Your dopamine and opiate chemistry goes up, but not your serotonin. So don't splurge. It doesn't make you feel good, just like a cupcake at 11 o'clock at night doesn't make you feel good. It's very temporary.

GHILARDUCCISo there's lots of things you could do as a consumer, an investor and as a worker to control your lives. But I hear you, you're among millions.

REHMAnd you're listening to "The Diane Rehm Show." And good luck to you, Diane, in Bethlehem, Pa. To GJ in Detroit, Mich. You're on the air.

GJThank you, Diane. Great show.

REHMThanks.

GJHere's my question. I'm a retired 63-year-old fella from the Detroit Police Department. And as you know from the papers that our patient was whacked pretty hard. And I had over the years worked other jobs, sometimes full-time, and collected my Social Security quarters that enabled me to get Social Security at the end of the rainbow, so to speak. And why is it that that won't really happen because of this Windfall clause in Social Security? I will just get a fraction of what I put in. And I even went back to work for Social Security, and I understand it really doesn't do me any good no matter how long I wait to get it. I'm curious how did this happen, and will it ever change?

GHILARDUCCIYes. I understand your situation almost perfectly. The Windfall Provision is a bit of an accident, and there are a lot of good people in this town, in Washington, D.C., that are trying to fix it. Keep on pressing your representatives and your union, and also in Congress, to get a fix. You are a perfect example of the accident. The Windfall Provision on paper had a good intention, and that was high-end public employees may look to the system as a low income person, because the system only registers these small quarters that you have. And so the idea was to fix it so that you would not collect like a low income person, because the system is really helpful to low income people.

GHILARDUCCIBut they didn't take into account that people who have a public employee aren't rich, aren't well off, and that they need to have some return from that system. So there are a lot of technicians in this town that want to fix it. Pressure from the people actually could help. So keep on working. Bless you for being a cop in Detroit. That's a really honorable job. And I am really sorry about the bankruptcy of this system that cut your benefits.

REHMOh, boy. And how many people around the country are facing exactly that kind of situation, being laid off from factories closing down, being laid from companies that are no longer in business?

GHILARDUCCII'm so glad you said that, because a lot of people have what I call a faith-based retirement system. They have the faith that they'll be employable when they're older if they don't have enough. And what I want to do to sober people up and change their faith to reason, is that most people who are retired tell surveyors that they retired before they wanted to, either because they were laid off or because of their health. And so don't count on working longer as your retirement system. Cut your spending, save more, invest in low fee accounts, and use your power as a voter to support Social Security.

REHMAnd those are the words of Teresa Ghilarducci. Her new book, all in 116 pages, titled "How to Retire with Enough Money: And How to Know What Enough Is." And she is going to continue on taking your questions live on Facebook as our show closes. How wonderful to talk with you. Thank you.

GHILARDUCCIIt's been a lifetime dream to meet you. Thank you.

REHMOh, thanks so much. And thanks all for listening. I'm Diane Rehm.