As I wrote last month, we have a retirement crisis. Most of us don't have nearly enough money to retire. It's bad, and it will affect millions of Americans.

But it's nothing new. Americans have never been prepared to retire.

What can we do about it? What kind of retirement system might work better?

I asked Nobel Prize-winning economist Joseph Stiglitz. Here's what he had to say (transcript follows):

Joseph Stiglitz: The change in the retirement programs in the United States present both challenges for the individuals and challenges for our economy. Moving from defined benefit to defined contribution, has made our economy more volatile because when you have an economic downturn, the individual is left bearing the consequences and that forces him to make adjustments, which he would not have to make in a defined benefit program. So actually we call these automatic stabilizers or automatic destabilizers, and we've made our system less automatically stable. That's a real macroeconomic problem.

For the individual, managing their portfolio is enormously difficult, too. Most don't have the sophistication, the understanding. They don't even have the understanding of how much they need for their own retirement; totally understandable. If you were 30 years ago, 20 years ago thinking about how much you'd need for retirement, and you were say, somebody who was very risk averse. You'd say, I don't want to gamble; I just want something safe. Your advisor would have said, Put your money into Treasury Bills and into government bonds. Would he discover government bonds are paying almost nothing? You can't live off of it. No way that they could have anticipated this, absolutely no way because there had never been a period in our history when bonds were yielding such low returns.

So let's be real. There was no information on the basis of which they could have managed that. And that risk really should have been borne either by companies or by government, but not put on the average American, middle class, individual, for which there is no financial instrument, no financial instrument by which they could have managed that risk.

The article Joseph Stiglitz on America's Retirement Mess originally appeared on

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