Golden egg with a crack in it
Skip it. Read Sass’s [book: The Promise of Private Pensions] instead. Ghilarducci’s writing is clunky, the book is overloaded with numbers that distract rather than inform, and it’s studded throughout with offset boxes that give you “numbers to digest” or “bottom line”s; these end up sounding condescending and annoying and distracting, rather than informative. The book generally feels like a hastily assembled and incompletely edited collection of miscellany, rather than a coherent story about pensions.

Throughout the entire book, Ghilarducci refers to her solution to the retirement-security problem, namely a defined-contribution scheme to augment Social Security; this solution appears in chapter 10. It would be a progressive alternative to the failing 401(k) system, which doesn’t encourage people to save and instead just gives prosperous people a tax-advantaged place to park money that they would have saved anyway.

So that’s a fine idea, but … why not just expand Social Security and be done with it? The only real objection Ghilarducci raises to this expansion is that it suffers from Social Security’s pay-as-you-go approach — i.e., that Social Security transfers from current workers to current retirees, rather than setting aside an account for each worker. But as Ghilarducci lays out repeatedly, this isn’t really a problem: Social Security’s trustees use very conservative assumptions when measuring the program’s solvency; and even under those assumptions (which, to repeat, are likely *overly* cautious), any solvency problem can be fixed by little tweaks. E.g., removing the cap on earnings subject to FICA. So her only objection to expanding Social Security is that it may have a funding problem that it doesn’t actually have.

On the other side, she freely admits that her defined-contribution benefit scheme — since it is explicitly designed to be funded in advance, rather than pay-as-you-go — will not be able to help those who are going to retire soon; they won’t have any time to contribute to her defined-contribution scheme. So the downside to her plan is that it leaves out most everyone who’s retiring today. The downside to simply expanding Social Security benefits up to what other countries use for their pension schemes is … nothing noticeable.

Had Ghilarducci just advocated expanding Social Security and being done with it, the book would have been very short. Better to skip it and read elsewhere about expanding Social Security. I’ll try to find a good book to recommend in that direction.