Following is the unofficial transcript of a CNBC interview with TIAA President and CEO Thasunda Brown Duckett and CNBC’s Sharon Epperson live during CNBC’s “Equity and Opportunity: Securing an Economic Future for All” today, Tuesday, April 4.
TIAA CEO Thasunda Brown Duckett: Closing The Racial Retirement Gap
SHARON EPPERSON: Thasunda, thank you so much for joining us. It’s a pleasure to talk to you about this very important topic because so many people are worried about their retirement right now. They’re worried about their money overall. When I think about TIAA, I think about the long history.
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Over 100 years of providing guaranteed lifetime income and insurance to teachers and educators back then and now about 5 million clients. But there's no safety net like that anymore for people. American workers are concerned about the responsibility they have now to provide for their own retirement, whether it's their 401K, their 403B if they're educators, their IRAs, and then they're also worried about their everyday money.
They're worried about – one of our surveys from CNBC just showed that only 13% of Americans are very confident in the U.S. banking system. So all of this is creating stress, anxiety, worry over money. What are the steps that people should be thinking about taking right now to cope?
THASUNDA BROWN DUCKETT: Well it is a pleasure to be here, Sharon, and when I think about the problem, just to really frame it. Today, we have a $4 trillion savings gap in our country. 40% of all Americans run the risk of running out of money. And as you look at minorities or women, that number is even more pronounced.
54% of African Americans do not have enough saved to maintain their lifestyle in retirement. So there is a real problem. And when you think about the root cause we know that particularly for people of color, we've struggled in our country with structural and systemic issues that caused a real wealth gap. When you look at Black families 85% less wealth accumulation than compared to white families.
And the backdrop of what's going on today where so many Americans are making really tough decisions. So what can we do? As you mentioned when it comes to retirement, it is so important especially in this environment that we stay the course.
And the way in which we can stay the course is to make sure that we are all providing access to in-plan workplace benefits that gives exposure to saving while you're working to be able to make it easy to be able to save so that you are taking the necessary steps to have a secure retirement long term while you're managing the changing environment and high stress environment that we're dealing with today.
EPPERSON: But understanding how to take the appropriate amount of risk to make sure that your investments lasts as long as you do in a very volatile environment at a time when many people are struggling just for day to day is difficult. I'm thinking about the recent data that the TIAA Institute and George Washington University came up with that talked about how little money people have outside of non-retirement savings for a month or the difficulty they have in making ends meet for just one month.
So how then are they supposed to figure out how to then save for retirement? Is it the fact that we need to have more financial education at work about what's available to them, but also how they manage day to day?
DUCKETT: Yeah, I mean, there's a lot when you're dealing with the environment that so many Americans are facing. But when I think about and you've hit on this the importance of financial education, it absolutely is critical. We know that when you know better you do better.
We know that when – and the study shows – that when people have financial education, they're prepared and equipped to make smarter decisions, even in a tough and challenging environment. But of course, education is not enough. We have to make sure that we're addressing the income inequality. And we also have to make sure that with education, comes access and ease of access.
So what do I mean? As you become more educated about your balance sheet, your personal balance sheet, as you talk to a financial advisor to say let's look at what I'm bringing in today and how can I take a look at my current bills, but also I need to make sure that I have that rainy day fund, and I need to make sure that I can continue to save for my retirement. How do we make it easy?
And that's why I say that an in-plan work-plan benefit is one step where you auto enroll someone where they are in, where they can continue to increase knowing that when times get hard if they need to opt out, they can but doing everything that we can to make it easier with that knowledge to stay the course to stay on track.
Especially when you're dealing with volatile markets, you want to stay the course, you want to make sure that you are educated, you're meeting with an advisor so that you can weather the storm and continue to stay on track with your goals.
EPPERSON: Yeah, when I think about the disparities, though, and in terms of retirement savings between Blacks and Latinos and whites with Blacks and Latinos so much further behind, I also think about the creation of small businesses, the creation of entrepreneurship, and the place where people of color are really advancing quickly and there they don't have the luxury sometimes of an employer having a retirement savings plan for them.
So how do you build wealth when you don't have a 401k, when you're an entrepreneur and as many people of color many women are doing today?
DUCKETT: I think you're absolutely right. We know that half of Americans do not have access to a workplace benefit. And so when I think about solutions, it's going to take all – it’s going to take the thought leaders, policy to make it easier for small businesses to provide workplace plans for their workers, as well as making sure that that the product solutions are available and the education is there.
How do we made sure that when you are that entrepreneur that you are aware of retirement solutions, like an IRA, that you can take advantage of? How do we make sure that the education is there for you in a way that's easy to understand, and easy to access the products, the tools and solutions? So there's work on the policy side to make sure that more small businesses can provide workplace benefits.
And I think it's important that we continue to make sure that we're educating entrepreneurs because remember, it's not what you make, it’s what you keep. And education and understanding what to do with that dollar for not just today and not just for tomorrow, but as we think about building wealth, particularly in minority communities, African Americans, how do we also transfer?
So we have to think about it in a holistic way, and making sure that we're reaching not just those that are in workplace benefit options, but also how do we make sure that those options can be available for entrepreneurs and small business owners.
EPPERSON: And understanding that adults need this education just as much as children. I mean, we're looking at the states in the large majority of states that don't even provide financial education in schools. So workers are getting to the workplace, this is where they're learning how to make sure they make the most of what they make.
DUCKETT: Now, you're absolutely right. I mean, if I think about progress, 21 states, I believe, provide or require personal financial education as part of a course to graduate. Clearly, we need to make sure that in those states is that curriculum provided everywhere regardless of zip code.
And we need to make sure that all states can make sure that we're providing financial education, strong curriculums in school. But as you said, it can't stop there. How do we make sure that all of us that are running companies are providing education and making it available?
But it's not enough, Sharon, to just have it. It is our responsibility to make sure that we say are our employees engaging? Are they using the information? Is it helpful? Are we providing time? Are we making it in snackable bites? Because people are really busy and have to have little information to consume each step of the way. So are they engaging the information in a way that they're taking action?
And the action can be, are they able to save more? Are they able to have that $400 In case of an emergency? And are they on track to not just take part in the benefit that we may be offering but are they maximizing that benefit and taking advantage of the match and really getting on a path to a secure retirement?
So education early? Yes. Education in the workplace? Absolutely. Engagement and making it easy for people to take advantage of that education and turn it into solutions. We have to make sure that we're looking at that information, too.
EPPERSON: That kind of engagement can help people's understanding of some of the difficult decisions you have to make when you're deciding what to do with your money, how much to save, where to save it.
And one of the things that comes up frequently every year, the TIAA Institute does this financial literacy survey – it is Financial Literacy Month now in April – and it's interesting to me that every year it seems that comprehending risk and insurance issues, insuring your money, protecting your money. Those are the areas that people are really having a difficult time grasping, particularly Blacks and Latinos.
DUCKETT: Well, it is such a great point, especially in this environment, where you see inflation is high. There's a lot of uncertainty. You're thinking about, you know, do I have to tie my retirement? What does that mean? And so when we think about education, we have to also have a conversation not just about investments, but also insurance.
How do we make sure that people can have access to guaranteed income? Social Security was never designed to be the only protection and clearly we've had to find benefits, the closest thing to a pension but that is rapidly declining.
What we do, as you said earlier, at TIAA what we've done for over 100 years, is make sure that we're providing an implant annuity that is part of your allocation so that you have investments and you have insurance and implant annuity that can help you provide a life time income check that you cannot outlive, and that is absolutely an important part.
And it's something that we've been doing for over 100 years and continue to do to make sure that we're serving the participants that we serve.
And so when I think about solutions for everyone, and when I think about African Americans and Latinos, etc., I think it's important that the education has to be comprehensive and complete. It has to make sure that we're talking about saving, investing but we're also talking about the guarantee because there's real longevity risk that we have to make sure that we are tackling.
EPPERSON: But I wonder how many workers, how many Americans of all races understand that when you look at the market volatility, yes in the stock market, but then people were surprised to see volatility it can’t happen, yes it can. In the bond market, that they're now other options that they have for their retirement savings plans.
Can you talk a little bit about that? Because I think when people hear the word annuity, they get worried because they remember stories of decades ago, but there have been policy changes to make it more accessible, more flexible.
DUCKETT: Well, no, you hit that and what we've been doing for over 100 years is an implant annuity, low cost, great value. And when you think about it, yes, even bonds have volatility. And so what is the importance of having an in-plan low-cost annuity that is part of the allocations is not increase the cost to the participant but what it provides is cognitive risk. It covers longevity risk, and market volatility.
It's a level of constant opportunity to know that you will not make less. And so it's a protection. And to provide you that guaranteed income, that paycheck for life. And so that is very important. And what's been terrific, as you noted, is the secure act 2.0 which was a bipartisan because this is an American issue, regardless of where you live. It's all of us that are being impacted.
Having policy that makes it easier for in-plan benefits to take advantage of an in-plan annuity as part of your allocation that will make it easy for people. So yes, education but how do you make it easy and with 2.0 it’s providing the ability to have an in-plan solution when you think about annuities, low cost, and the policy is also providing opportunities for auto enrollment and to those benefits and auto escalation.
Because we know making it easier – the statistics show when people enroll auto enroll even with the flexibility to opt out, they stay the course and then making sure they're building over time so that they're maxing out their contribution and being on a path to have a secure retirement.
EPPERSON: And the concern by some that may say well, why would you auto enroll or auto escalate retirement savings at a time that people are having difficulty making ends meet, why is it still important to do that?
DUCKETT: It's important in any economic environment, but remember, they still have choice. And so with that individual if they are sitting here saying wow, I have to have – I have to make a tough decision. And that happens in this environment. You have the choice to be able to opt out.
But what we do know and what the data has shown is that when you make it easy and people are opting in towards their retirement, they're using that as the very last resort, which is good because you want that retirement to build so when you need it at time of retirement when you are not working, you want to make sure that those dollars are there and that you've been able to accumulate those dollars for decades.
It's important to stay the course. But again, there is option for those who may need to make a different decision when they're dealing with a real economic issue.
EPPERSON: I'm still thinking of those that are really just concerned right now about making sure they have the pay to be able to afford what they need to do day to day. And so before one can save for retirement, you have to have the income to be able to do that.
So the issue that is faced by many people of color, many women, of not having equal pay, how does that impact what the long term financial future is going to be for Blacks, Latinos, and women? Many that are underrepresented.
DUCKETT: Absolutely. No, you’re absolutely right. As we think about the fact that women make 30% less or have 30% less in retirement, we know the disparity on the dollar when it comes to women and African Americans and Hispanics and other minorities. We have to address the income gap. And so when I think about what we can do as CEOs in business, we can do four things.
One, we can make sure that we understand that yes, talent is created equally opportunity is not. And so when we look at the composition of our workforce, do we see a disproportionate of women or people of color at the lower rung and are they not moving up? And if they're not, that's that broken rung. But we have to have a mindset and believe that talent is created equally.
Secondly, we do have to disaggregate the data, so that we're not just saying 50% of our workforce are women or X percent Hispanic or African American, but where are they? And by disaggregating the data we can see are they on a path to have income earning potential? Are they moving up? And if not, why not? Are they in tech? Are they in asset management?
What aspects of my business do I see that number growing or do I not see it growing in a way that we know that there's higher income earning potential? And that leads us to policies and practices.
It's talking about rescaling the workforce and saying these are the jobs of today and tomorrow, how do we take our existing workforce and make sure that they have access to take in a course – a cyber course at a university that we pay for so that while they're doing today's jobs, they are getting the skills to put them in the best position to get promoted and have mobility, particularly when we're talking about women and people of color.
And then lastly, we have to look at the outcome. It is not enough to say that we have great programs. It is not enough to say that we have all of these benefits. We have to make sure that everyone is participating and when they're not, we're not going to get the outcome that we derive. So it's not enough to have the program, we have to be intentional.
We have to make sure we're engaging and we have to make sure that we're disaggregating the data to say where are we not seeing representation and what can we do about it to improve the outcome? Because we do believe talent is created equal, opportunity is not.
It's when we do those things we are able to then have more African Americans have higher earning potential that can then allow more African American families to be able to have more disposable income to be able to save and invest and hopefully transfer wealth and not debt to the future generation.
EPPERSON: Exactly. Those points that you made about making sure you have the data, making sure you keep track of the outcomes, is critical for retirement savings. Also, it's not enough to offer as you're saying, an employee a 401K plan without tracking, how are they using it? How does that differentiate between different races, between men and women?
And what can we do to make sure that everyone is educated about how best to do that? And so, as we're looking at making sure that we have the pay gap, you know, trying to focus on that that we're focused on making sure that people have the right skills to increase their pay.
And we're looking at the retirement savings. There's something that you brought up that I think a lot of people don't think about and that is the longevity risk of what is going to happen with the money that you have saved. So how do people who often that is not a discussion, right? And many people say how am I supposed to figure that out? How does that work into making sure that you have enough?
DUCKETT: That's right. Well, when we think about the gaps, I break it into three areas. There’s the access gap that we talked about – how do you make it accessible for everyone? The savings gap and then the guarantee gap. The guarantee gap is precisely about addressing the longevity risk. You cannot time how long you're going to live.
But what you can do is have a guarantee level of income in addition to Social Security, that can give you the confidence that no matter how long you live, you will have a paycheck coming in to help you with your everyday expenses. And that to me is very important to include when we're talking about solving the wealth gap across all minorities and all sectors of the population.
EPPERSON: Absolutely. There's so many opportunities. We're always talking about the disparities. And what I appreciate in this conversation is that you were talking about solutions and the opportunities that are available to everyone, but that many people of color may not be aware of or may not have taken full advantage of. But now we know what to do to because Thasunda told us what to do. So thank you. Thank you so much for joining us. Thasunda.
