Open Forum at University of Denver Features Roger Ferguson Discussing Economic and Demographic Challenges Impacting the Future of Retirement

TIAA-CREF President and CEO Roger Ferguson spoke at the University of Denver on October 15 in an open forum session that included the university’s faculty, staff, students, and retirees. His remarks addressed the key economic and demographic challenges facing the nation and how they are impacting the future of retirement in the United States. Ferguson highlighted how TIAA-CREF is transforming to meet the 21st century needs of its customers.
You can read his remarks below.The event was part of an ongoing series of interactive sessions held throughout the year to engage TIAA-CREF’s participants, plan sponsors, and other stakeholders and to foster dialogue on a variety of issues. At the 2014 CREF meeting of participants, Trustees were elected for four-year terms, and as a result, the next Trustee election will be held in 2018.  TIAA-CREF is committed to continuing to provide ongoing opportunities for open dialogue between participants and management in the interim, as events such as this one demonstrate.

University of Denver Open Forum Featuring Roger Ferguson

October 15, 2015
It’s a pleasure to be with all of you.
I want to thank Chancellor Chopp and Vice Chancellor King for the opportunity to speak on campus today.
TIAA-CREF and the University of Denver have a long history together.
DU became a client in 1921 – just three years after TIAA was founded by the great steel baron and philanthropist Andrew Carnegie to solve a key problem of his time: the inability of college professors to retire with financial security.
TIAA was created to help higher ed employees save for retirement – which in turn helped to build the strength and vitality of America’s higher education system.
Today, we serve not just higher ed but the broader not-for-profit sector as well – people and institutions who make a difference in the world.
TIAA-CREF has grown to become a Fortune 100 financial services organization and a global asset manager with award-winning performance.i But we remain driven by a clear goal: to deliver outcomes that matter to the people and institutions we serve – like all of you who are DU employees or retirees.
You are indeed fortunate to have an employer committed to your lifelong financial security – or in the case of retirees, to have had such an employer.
Many Americans face a much different environment – one made all the more challenging by several economic and demographic issues and trends that have significant implications for our economy and for the financial security of Americans in the 21st century.
My remarks today will address these issues. Specifically, I’ll cover four areas:
  • First, the state of the global economy and markets.
  • Second, a longer-term issue: the aging of populations in the U.S. and globally.
  • Third – the importance of financial literacy in today’s environment.
  • And finally – the implications of the changing environment for individuals and for TIAA-CREF, as we evolve to keep pace with our customers’ evolving needs.
Most important – I look forward to having a lively dialogue with you during the Q&A session.

Economy and Markets

Let’s begin with the economy and the markets.
It’s been a bit of a roller coaster in the markets the past couple of months.
In our view, the recent stock market volatility shows all the earmarks of a correction, rather than the beginning of a bear market, which is always associated with deteriorating economic fundamentals.
Nothing has changed in terms of the economic fundamentals in the U.S.
The economy is still growing reasonably well. It’s on same trajectory now as it has been for much of the recovery from the financial crisis – with growth at about 2.5%.
Labor markets have been steadily improving – although the September jobs report revealed what appears to be a setback, with hiring a lot lower than expected.
The unemployment rate remained unchanged at 5.1%, but that was largely because of a rise in the number of people leaving the labor force.
Still, housing is moving in the right direction. Consumer spending was stronger-than-expected in the second quarter, and businesses are increasing their spending.
The big question remains when the Federal Reserve will raise interest rates.
The Fed has communicated very clearly that its top concern is labor markets, which it sees as a better gauge of economic activity than GDP.
As a result, the September jobs report has led many to question whether the Fed will delay raising interest rates until next year
The Fed does not make decisions based on one month’s data. However, the recent jobs report will likely increase uncertainty about the economic outlook, at least among some of the Fed policymakers who voted to delay a rate hike in September.
Given the uncertainty, we expect market volatility to remain elevated in the coming months.
Taking a global view, Europe remains on a stable recovery footing. However, events in China are causing concern.
Some fear that the extreme swings we’ve seen in global equity markets are a reflection that the Chinese economy has become fundamentally weak. But that notion doesn’t really hold up under scrutiny, because nothing has changed materially in China’s growth rate since the beginning of the year.
Yes, China is slowing, but that trajectory has been consistent for some time, and no one should be surprised at this point.
The bottom line is that China – even as the world’s second-largest economy – is still going through some growing pains.
As its economy matures, China will inevitably experience recessions like the rest of the world.
For other emerging-market countries, there is merit to concerns about economic health. Many of them lack the advantages that give China a greater ability to withstand shocks: a large dollar reserve account and a positive current account balance.
All in all, global growth is slowing modestly, but the trend is not changing and there are no material red flags on the horizon.

The Aging of the Population

Let’s now take a longer-term view – and look at a trend that has big global economic implications for the future: the aging of the population.
In the U.S., average life expectancy has hit an all-time high: nearly 79 years – as mortality rates have decreased substantially for 8 of the 10 leading causes of death.
Those who make it to 65 can expect to live a lot longer than the average – to about 85 for women and nearly 83 for men.
We’ve also seen a big decline in the birth rate.
Today, there are just 2.1 births per woman in the U.S. – about half of what it was at the height of the Baby Boom.
Aging is not just an American story – it’s global, and it’s most stark in Europe and Japan. But even the developing nations of East Asia and Latin America are aging rapidly.
As longer life expectancies combine with lower birthrates, the elderly will make up an ever-larger share of the world’s citizens. The United Nations forecasts that by the end of the century, about 20 percent of the world’s population will be 60 and over – a big jump from 1990, when 9 percent were 60 and above.
Longer lives sound pretty good from the perspective of the individual – at least as long as one stays healthy.
But taking a macroeconomic view, we can see that an aging population has significant economic implications for our society.
Some fear this trend will usher in a period of reduced economic growth and innovation.
One thing is certain: it will have a profound impact on the retirement landscape.
With fewer workers supporting more retirees, public pension systems will be squeezed.
In the U.S., we are already seeing the strains on the programs that provide people with financial security in retirement: Social Security, Medicare and to some extent, Medicaid.
In 1950, there were 16.5 workers for each retiree drawing Social Security benefits.
Today, there are 2.8 workers per retiree, and forecasts call for a 2-1 ratio in coming decades.
The Trustees of Social Security say the program will be depleted by 2033 if no action is taken to shore it up.
Governments around the world are making changes to their pension systems – like raising the official retirement age – to make them sustainable.
In most of the 30 countries that make up the Organization for Economic Cooperation and Development, the official retirement age will be at least 67 by around 2050.
A big worry – especially as 10,000 Baby Boomers a day turn 65 in the U.S. – is that people do not have enough savings to sustain themselves through longer retirements.
In fact, some are predicting that a worldwide retirement crisis will play out over the coming decades, with far-reaching consequences like falling living standards in wealthy countries and frustrated expectations in developing nations.
The situation has been called “one of the defining challenges of the 21st century.”
In the U.S., we face a big deficit in retirement savings.
The Senate has pegged the difference between what people have saved for retirement and what they should have saved – at more than 6 trillion dollars.
The Federal Reserve has estimated that fully 1/3 of American workers have nothing at all saved for retirement.
Meanwhile, even people with solid nest eggs could see their financial security threatened by spiraling healthcare costs, since healthcare represents one of the most significant expenses for retirees – and Medicare covers only 62% of those costs.ii
Women face special challenges in planning for a secure retirement. For one thing, they live longer than men, so they have more years to fund.
But they can also end up with a retirement nest egg that’s half that of a man of the same age and occupation. That’s because women still make less than men, and they spend an average of 10-12 years out of the workforce caring for children and parents.
The lack of savings among Americans is exacerbated by the near disappearance of traditional pension plans in the private sector.
And in the public sector, unfunded liabilities threaten the viability of pensions for government workers at the state and local levels.
It’s clear that we need to take action as a nation to head off a retirement crisis.
  • First, we must make structural changes to Social Security, Medicare, and Medicaid. These programs are the foundation of our nation’s retirement security, and they must be made sustainable for current and future generations.
  • Second, individual Americans must save more for retirement. Workers – especially young people but even many Baby Boomers – need to prepare themselves for retirements that could stretch for decades.
  • And third, many Americans will need to delay their retirement and stay in the workforce longer than they had planned.
We must take action sooner rather than later. The longer we wait, the larger will be the “legacy liability” that we pass on to our children and grandchildren – in the form of tax increases on future workers and as benefit reductions on future retirees.
But the good news is that these are solvable problems. We just need to be proactive and solve them.

The Importance of Financial Literacy

The precarious state of the retirement landscape brings me to another area I want to address today: the importance of financial literacy.
I mentioned earlier that we’ve seen a decline in pensions across the private sector.
In this new environment, individuals bear a much bigger burden for ensuring their own financial security in retirement.
They must make decisions about saving and investment to ensure they do not run out of money in retirement.
To make wise decisions, they need a strong foundation of financial knowledge.
But the truth is that surveys have repeatedly shown low levels of financial literacy in our nation.
TIAA-CREF cares deeply about financial literacy because we know how important it is to achieving retirement security.
Research has shown that people with a high degree of financial literacy are more likely to plan for retirement.iii
And in turn, planning for retirement is a powerful predictor of wealth accumulation.
People who plan for retirement have more than double the wealth of people who do not plan.
Conversely, people with a lower degree of financial literacy may tend to borrow more, accumulate less wealth, and choose investments with higher fees.
They are less likely to invest in stocks, more likely to experience difficulty with debt, and less likely to know the terms of their mortgages and other loans.
The lack of financial knowledge is not only detrimental to individuals – it can also have much broader economic consequences.
Consider that low financial literacy was identified as one of the root causes of the financial crisis by the President’s Advisory Council on Financial Literacy.
We at TIAA-CREF are especially concerned about financial literacy among young people.
The financial literacy of American high school students has fallen to its lowest level ever.iv
I should point out that TIAA-CREF is trying to do its part on this issue.
We are collaborating with the Council of Graduate Schools on a program to raise the financial literacy levels of college students – which we think is especially relevant as student debt levels have grown to over $1 trillion.
We awarded grants to 15 universities to design financial education programs, with the goal of helping students make better and more informed decisions about saving, spending, investing, and borrowing.
There are also 19 institutions participating in the program as affiliates – and I applaud the University of Denver for its leadership in joining this group, and making sure to be a part of the solution for addressing this critical issue.
Early next year, we will be publishing a monograph of the findings and best practices, which will be available to every college and university in the U.S.
Our collaboration with the Council of Graduate Schools is part of our broad commitment to engaging Gen Y and helping young Americans build financial well-being.
We have also created a financial education platform and a website for millennials called Starting Your Financial Life. We know that those of you who are millennials face some special financial challenges.
Student loan debt is certainly a major issue for many. You must also contend with ever-more sophisticated financial products and services as you make choices about debt, spending, saving, healthcare coverage, and retirement planning that are very different from those your parents faced.
We hope our resources can help you meet these challenges.


So let’s shift gears and talk about what all of this means.
I wish I could say there’s a full-scale movement afoot to address the shortcomings in the U.S. retirement system.
In the absence of that, it’s vitally important that individual Americans understand the implications of some of the trends I’ve discussed.
First, individuals must recognize that they are likely to live longer – and thus are likely to be retired for far longer – than previous generations. For the younger people in the audience, you may have more years in retirement than in your working careers.
Americans must prepare by saving diligently – and by making sure they have the financial knowledge to make wise financial decisions.
These issues are vitally important – for their impact on individuals’ lives and their ability to achieve financial security in retirement – and more broadly, for their potential to affect our nation’s continued economic progress going forward.
TIAA-CREF will continue speaking out on this issue, because we believe we have a great model to offer and a great story to tell.
We have a nearly 100-year track record of helping people retire with financial security.
That doesn’t mean we rest on our laurels though.
We are transforming to meet the 21st century needs of our clients – and to ensure that we remain relevant for the next 100 years and beyond.
That why we have broadened what we do. We started as a retirement-only company, but over the years, we have added businesses in life insurance, state-sponsored 529 plans, and Trust services, as well as an online bank*, for our individual clients. For our institutional clients, we added planned giving services through our Kaspick & Company subsidiary and endowment management services through our Covariance business.
We are becoming a fully-diversified financial services organization that helps customers across the entire non-profit world achieve financial well-being at every stage of life.
As part of this journey, we’ve made a huge investment in enhancing our technology and improving our digital customer experience – and we’ve achieved high rankings for our websites for plan sponsors, participants, life insurance, and mutual funds.v
We are also evolving our brand to make it more contemporary and relevant to a broader range of our clients across every stage of their financial lives.
We have ramped up our communication, education, and advice efforts and are addressing unique needs of key groups in exciting ways – including women, Gen Y, and most recently, the LGBT community.
We’ve had a very strong year thus far in 2015.
Our Asset Management expertise was recognized with one of the industry’s top awards – the Lipper Best Overall Large Fund Company Award. This marks the third year in a row that we’ve won this awardvi – a feat no other company has ever achieved.
We acquired the remaining ownership of our global real estate joint venture, TIAA Henderson Real Estate, becoming the 2nd largest commercial real estate manager in the world.
We were named a 2015 World’s Most Ethical Company by the Ethisphere Institute.
And for the third year in a row, we earned a spot on DiversityInc’s Top 50 Companies for Diversity ranking, coming in at No. 37.
Those are just a few examples – but it gives you a sense of what’s going on across the organization. It all comes back to one simple goal: We are committed to strengthening TIAA-CREF’s position as a leading provider of financial and retirement services by enhancing our ability to deliver strong financial performance and serve our clients for the next 100 years and beyond.vii
We think that in today’s challenging environment, this is more important than ever before.


In closing, I just want to reiterate that we are deeply honored to serve the University of Denver.
For those of you who are employees and retirees, thank you for the trust you’ve placed in TIAA-CREF.
And for the students here today, I hope you will take the information I’ve shared as a challenge to ensure that you have the financial knowledge and focus you need to achieve financial well-being in your own lives after graduation. And remember, it’s never too early to start saving – even just a little bit on a consistent basis can make a big difference in your own lifelong financial security.
Thank you again, and I am now happy to open the floor to your questions and comments.
i The Lipper Award is given to the group with the lowest average decile ranking of three years’ Consistent Return for eligible funds over the three-year period ended 11/30/12, 11/30/13 and 11/30/14 respectively. TIAA-CREF was ranked among 36 fund companies in 2012 and 48 fund companies in 2013 and 2014 with at least five equity, five bond, or three mixed-asset portfolios. Past performance cannot guarantee future results. For current performance and rankings, please visit
ii EBRI "Amount of Savings Needed for Health Expenses for People Eligible for Medicare: Good News Not So Rare Anymore," October 2014, Vol. 35, No. 10
iii The Economic Importance of Financial Literacy: Theory and Evidence, by Annamaria Lusardi and Olivia S. Mitchell, NBER Working Paper 18952, April 2013.
iv Mandell, Lewis. “The Financial Literacy of Young American Adults: Results of the 2008 National Jump$tart Coalition Survey of High School Seniors and College Students,” Jump$tart Coalition for Personal Financial Literacy, 2008.
v Source: DALBAR Financial Services Market Research Firm. DALBAR is a well-respected market research firm that regularly analyzes financial services websites to evaluate their online services. DALBAR ranks them for both functionality and experience design, looking for consistent, appealing, and user-centric services. The participant site, My TIAA-CREF (, ranked number 5 out of 30 (Q215); the plan sponsor site, PlanFocus®, ranked number 1 out of 29 (Q215); the life insurance public site for life insurance/annuity ranked number 1 out of 29 (Q215); and the public site ( for mutual fund consumer website ranked number 2 out of 32 (Q215).
vi The Lipper Award is given to the group with the lowest average decile ranking of three years’ Consistent Return for eligible funds over the three-year period ended 11/30/12, 11/30/13 and 11/30/14 respectively. TIAA-CREF was ranked among 36 fund companies in 2012 and 48 fund companies in 2013 and 2014 with at least five equity, five bond, or three mixed-asset portfolios. Past performance cannot guarantee future results. For current performance and rankings, please visit
vii Performance is subject to market fluctuations, and lifetime income payments are guarantees based on TIAA’s claims paying ability
The material is for informational purposes only and should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. Certain products and services may not be available to all entities or persons. Past performance does not guarantee future results.
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TIAA-CREF Individual & Institutional Services, LLC, Teachers Personal Investors Services, Inc., and Nuveen Securities, LLC, Members FINRA and SIPC, distribute securities products.  Annuity contracts and certificates are issued by Teachers Insurance and Annuity Association of America (TIAA) and College Retirement Equities Fund (CREF), New York, NY.
Kaspick & Company provides investment advice only through investment management agreements that establish investment advisor-client relationships under the terms of each client’s agreement.
Covariance is a registered investment adviser and is an independently operating subsidiary of Teachers Insurance and Annuity Association of America.
TIAA Henderson Real Estate Limited (TH Real Estate) is a real estate investment management holding company owned by Teachers Insurance and Annuity Association of America (TIAA). TH Real Estate securities products distributed in North America are advised by UK regulated subsidiaries or TIAA-CREF Alternatives Advisors, LLC, a registered investment advisor and wholly owned subsidiary of TIAA, and distributed by Teachers Personal Investors Services, Inc., member FINRA.
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