Planning for a Longer Life

Sita Slavov is a professor at the Schar School of Policy and Government at George Mason University, where she studies retirement, aging and Social Security. She has worked at the White House Council of Economic Advisers and at a think tank, and has testified before the United States Senate.

The episode was Aly Muhammad Dadwani's first as solo host, and the first from Decoded's chapter at George Mason University. It opens somewhere unexpected: her cat, George Michael, and the Econ 5K, a virtual race held alongside the American Economic Association's annual meeting, where economists compete for artistic merit by running routes that sketch out economics graphs.

People are living longer and having fewer children, so in many countries there are fewer workers for each retiree. Professor Slavov sees this as one of the biggest challenges society faces, because systems like Social Security pay today's retirees largely from the taxes of today's workers.

She thinks younger workers should expect to work longer than their parents did. She explains what r-star, the economy's neutral interest rate, is, and why low interest rates combined with slow wage growth hit mid-career workers hardest: their savings grow slowly just as they need them to grow fastest.

She also argues that living mostly on Social Security can make sense for people who earned low wages all their lives, but not for most college graduates, who will need savings of their own. Her research shows that immigrants who arrive after 40 tend to retire later.

Having testified before the Senate, she describes how economists and politicians think differently about the same problem. She also explains what she says will happen if Congress waits until the Social Security trust fund runs short in 2032.