Ferguson recently spoke with The Washington Post about the ways retirement will look different for his generation and others working today than it did for his father and for those who retired before him.

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The interview has been edited for length and clarity.

Since you took over TIAA-CREF in 2008, what have you found to be the biggest challenges hurting retirement security or financial security overall?

Two big trends have come to the fore. First, obviously 2008 itself was a severe financial crisis that ate deeply into the savings for many middle-income Americans and other Americans as well and we have been coming out of that relatively slowly. All of that has occurred as the baby boom population is entering retirement age and so we have quite a toxic brew of circumstances right now: Individuals are reaching retirement age coming out of a really tough financial situation. And it turns out even past the current situation most folks hadn’t been saving much for retirement anyway. And so the 2008 crisis and the slow turnaround has only exacerbated the situation that was already well advanced. But I do think the situation was not well understood until baby boomers started to hit the traditional retirement age of 65.

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So in addition to the financial crisis, people are not saving enough and people are living longer. Does that make longevity a risk?

Longevity is both a risk and an opportunity. It is a risk because many people when they get to retirement do not use what’s called an annuity, which creates basically guaranteed income for life. So the risk of increased life spans is that we might outlive our savings.

The second risk has to do with something else that’s creating a great deal of uncertainty, which is, as we live longer the demographers and doctors tell us that we are likely to be living with one or two chronic illnesses. So that throws a new element of uncertainty in this, which has everything to do with rising health-care costs.

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On the other hand, we can decide how we want to use that extra time and that might mean for some of us working longer. Maybe not the way we did when we were younger but taking on a part-time job to supplement our income, for example. So it can also mean creating an opportunity to save a bit more as we get older.

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Is finding a part time job now considered a regular part of retirement planning?

I think for aging baby boomers, we are unlikely to have the same retirement as our grandparents: get to age 65, 66, 67 and sit in a rocking chair for the next few years. I think most of us are going to be much more active, and finding a part-time job is likely to become a part of the definition of retirement.

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Are there other ways retirement will look different for today’s workers?

Remember when the retirement age of 65 was created, life expectancy itself was 66, 67, 68 years. Now for women it’s about 81 years, so we have many more years in retirement.

The 401(k) is the primary vehicle for retirement savings for most workers today. Should it be? How can it be improved?

The 401(k) was never intended to be the primary retirement tool. It was created at a time when it was meant to be a supplement. In the private sector and even to some degree in the public sector, defined benefit plans have become much less common for most people. The 401(k) has become by default, not by intention, the primary retirement tool. It should not be. It’s not structured to be the primary retirement tool.

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Far too few people take advantage of having a retirement option. Behavioral scientists tell us one way to deal with that is to have automatic enrollment with an opt-out, but that’s not yet the norm. The second challenge with the 401(k) is even folks who participate have tended to save too little. Now I think it’s safe to say the average 401(k) balance is around $82,000, somewhere in that range — far too little to be a savings nest egg.

The final challenge is they don’t include an option within the plan to have guaranteed income for life.

What should the government do to address any of those concerns?

I think the solutions have to do with government and policy makers, with employers and with individuals.

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The government has to come to grips with how it wants to handle the Social Security challenge. For all of us Social Security is really the bedrock retirement system. And the trustees have said that in just 15 or 20 years the Social Security trust fund will only be able to pay out 75 percent of its obligations.

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Secondly, the government can require that plans show how much guaranteed income can be purchased with the assets that an individual’s accumulated. I think individuals think of themselves as having accumulated a certain amount of assets, but in terms of what that turns into in terms of income for life is for many of them not something they understand.

For employers, it’s very much making sure they can offer retirement plans but also they take advantage of behavioral economics and the design of a plan to include things such as automatic enrollment with an opt out, for example. And also frankly to include objective advice because the decisions around saving for retirement can be complicated.

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And design plans to maximize participation. For example we know if there are more than 10 or 15 or so investment options in a plan that tends to create confusion and actually lowers participation. And so optimizing your number of options so that you make it easier for the employees to participate.

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And finally for the employees, obviously there’s an issue of enroll, save and plan.

For families juggling multiple financial obligations like child care expenses, student loan debt and housing costs, what is one simple thing they can do now to improve their retirement security?

To raise the importance of retirement savings to a level that’s on par with other challenges. Individuals tend to think about issues in the future and they delay and the reality is the sooner one gets started saving the better, but in the end it’s never too late to start saving.

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Do you recommend people at least max out their matching contribution if there is one?

Absolutely, you certainly have to contribute enough to get the matching contribution because that is automatically doubling your money. One has to be incredibly unsophisticated not to take the match, not to double your money right away. So that’s a simple thing individuals should be doing.

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Do the challenges to saving vary depending on where you are in life?

The challenge does vary. Very young people, particularly now, are struggling with student debt. But even before, I think they had a tendency to save too low because they thought they had plenty of time, which is true. But if they don’t save they don’t get the magic of compound interest and investment opportunities.

Middle-aged folks often save too little because they’ve got to worry about education for children, maybe aging parents themselves, paying off a mortgage. So they have many financial demands even if they have one or two good jobs in the household. And then older folks often don’t save because they think it’s just too late.

So we have in each age cohort, if you will, different rationales– none of them necessarily good — for avoiding the inevitability of having to save for one’s retirement in a world where defined benefit plans are now more the exception than the rule.

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What advice do you have for someone who is about to retire so that they can avoid running out of the money they have?

First, truly ask what kind of retirement can you afford and start to think about that question of a part-time job. Certainly, be very clear about the ability to pay down debt wherever you can, wherever that makes sense so that you free up as much cash flow for consumption as possible. And obviously think very clearly about how to reduce expense to the point where you still have an enjoyable retirement but obviously a less expensive one. Folks should also recognize that retirement economists say that you want to replace about 75 to 80 percent of your pre-retirement income during retirement.

So what that means is you should think about having expenses that are modified down to about 75 to 80 percent. People who are close to retirement really need to start thinking about expenses they can jettison. Ways to maintain a good lifestyle at a lower cost.

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The other thing retirement economists suggest is to delay taking Social Security as long as possible. That ends up being for most people a good decision.

Let’s talk about the markets a little bit. It’s a tricky time to be an investor. The stock market has gone up and up and up and even the bond market has done well after years of people anticipating that rates would go up. How should you use either of these if you’re close to retirement?

You want to think about what your risk tolerance is, which is true at any age. And once you get a sense of how much risk you think you can tolerate then you want to adjust the portfolio to reflect your comfort area. Second is to recognize that many individuals will have 20, 25 maybe 30 years living in retirement. So you want to be prudent but you don’t want to be overly conservative because a person in retirement wants to take advantage of the possibility of equity gains to some degree.

So as you get close to retirement being prudent doesn’t necessarily mean moving all of your money into fixed income securities. The risk is that you put all of your money into fixed income at a time when rates are relatively low and you’re basically stuck with a low coupon for a long period of time.

The other thing to realize is that even though inflation is low now, inflation may not be equally low for the entirety of their retirement period. And generally speaking most people think that equities are a better inflation hedge than fixed-income securities.

You became interested in finance at a young age after your father took you to the Federal Reserve bank to buy treasury bonds.

Yes. My father was a government employee here. He had grown up in the Depression. As a result of that experience he became very interested in the way banks worked and the way markets worked. Every once in a while would go down to the Fed to buy Treasury securities. It wasn’t just that. Our conversation around the dining room table often had to do with stocks and interest rates and banks and CDs. I got all of my early financial literacy sitting around the dining room table with my parents.

Whose responsibility is it to teach young people financial literacy?

Financial literacy starts in the home for sure, but there is a role for the schools to play. Absolutely in my household you can imagine we spend a fair amount of time talking about investments and savings. We try to set up our kids with very small, little brokerage accounts so they can get the experience themselves of thinking about investments. The challenge I think America has around financial literacy, is that the people who are supposed to be teaching it in school, the teachers, often are not comfortable with financial topics. So because adults aren’t very financially literate, then kids aren’t very financially literate either.