What’s the magic number for retiring?

Retirement in America increasingly means working into old age, with most seniors unable to support themselves on Social Security and savings alone, according to noted retirement expert Teresa Ghilarducci.

The reason: The nation's retirement system has left behind the bottom 90% of workers, Ghilarducci told CBS MoneyWatch in discussing her new book, "Work, Retire, Repeat: The Uncertainty of Retirement in the New Economy." Ghilarducci, a labor economist and a professor at The New School for Social Research in New York, also said the nation needs a "bold plan," which she calls the "Gray New Deal" after the Depression-era New Deal, to shore up retirement for millions of Americans.

Ghilarducci's research shows that only 10% of Americans between the ages of 62 and 70 are both retired and financially stable. The majority of older Americans are either retired, but living below the standard of living they enjoyed while working, or still working because they can't afford to stop, she found in analyzing data from the University of Michigan's Health and Retirement Survey.

30% of Americans lack any retirement savings

That's perhaps no surprise given the sobering reality of retirement savings in the U.S.: About 3 in 10 Americans who are 59 or older do not have any money put away for retirement. At the same time, some policy experts and lawmakers point to a decades-long improvement in life expectancy as a solution to Americans' lack of retirement readiness. Because people are living longer, they argue, they should extend their working lives into old age.

Republican lawmakers have proposed raising the retirement age for claiming Social Security to 70, up from about 67 now, citing longer lifespans. And there's also a growing belief among younger workers that they'll be able to work into their late 60s or even longer, even though the average retirement age is 62, with many older people leaving the workforce unwillingly, typically because they were fired or encountered health issues. 

"We found that most people who are retired didn't retire when they wanted to, but because they were forced out," Ghilarducci said. "Even though we have this idea that people could just decide to work a little bit longer, it probably isn't their choice."

In other words, you can plan to work longer, but life might have other plans for you. CBS MoneyWatch spoke with with Ghilarducci about her new book. It has been edited for length and clarity. 

Why is this book needed at this moment?

Teresa Ghilarducci: The problem of American workers not having enough money in retirement has not gone away, and in some prospects it has gotten worse because of the growing increase in U.S. wealth inequality. A fake solution to the problem was emerging and getting stronger and had support in cocktail parties, in academia and in the halls of Congress. That solution was that we could solve the retirement crisis by people just working longer. 

And the reason why it was appealing is because it's pretty cheap — employers like it because more labor supply in the market just means a weaker labor force in terms of bargaining power. And I think individuals like the idea of it — the sound of it: "Oh, good. I could just like retire when I want to."

What I found is that when people approach retirement age and they don't have enough money, then they do stay in the labor market — but not in their career jobs. They have to go to much lower-paying jobs. And a lot of those jobs actually hasten death, hasten disability, morbidity and pain. And so what we are doing is forcing a group of people to live the end of their lives with more pain and more wear and tear than other people.

If lower-income Americans aren't living longer, yet they're also working longer in old age, does that mean their retirements are shorter?

We see big gaps with the rich and the poor in terms of who gets to retire. At the lower end, the typical person has 12 years in retirement, and at the higher end the wealthy are retiring for about 20 years. 

And at the lower end, those retirement years are filled with a lot of need for assistance with daily living, with high levels of morbidity. Whereas the rich not only get to retire for a longer period of time, but they're healthier for a greater share of that time.

It's been more than 40 years since the U.S. shifted to 401(k) plans from traditional pensions to fund retirement. How has that gone?

Experts 40 years ago put pen to paper and said, "This is all going to work out because if people start saving when they're 25 and 30 and keep it in the market for the entire time they're working, then they might have enough to supplement Social Security and keep their pre-retirement living standards."

But it turns out that people's careers and labor market experiences are not like what you see on an Excel spreadsheet. Most people suffer through two or three recessions, and at least one of those could affect you. If you've had a life event, like you've had to move or you've had a divorce, or you've had to draw down your 401(k) for whatever life's emergencies offer up, then that spreadsheet projection falls apart. 

The 401(k) system was too flimsy. It was a do-it-yourself system where people did not have the right tools to do it. It's sort of like me going to the grocery store and getting what I need to fix my plumbing, What has happened is that most of us are coming into retirement without enough money, and we have no way to make it last a lifetime.

Are there certain types of workers who have effectively been left out of the retirement system?

The design of the system creates more wealth inequality because it leaves out people without college educations; it leaves out people who are lower middle class and lower income. It leaves out people in whole industries.  A lot more workers are working on a contingent basis, so it leaves out people who don't have traditional employer relationships. 

The tax code and the design of the 401(k) has left behind basically the bottom 90% of the labor force.

You note that there's a belief people retire first and then claim Social Security, but you found that's not the case. What's happening?

One of the key assumptions behind the working-longer hypothesis is that you'll delay claiming your Social Security benefit, which gives you a huge benefit for claiming later. 

And to my shock, when I looked at the data I saw that most low-income workers collected their Social Security as soon as they could. And they did that to boost their monthly income from work. They stayed above the poverty line, but it also helped their employers because the employers of low-wage, older workers know that the Social Security system will come in and supplement what they don't pay their workers. 

It's very perverse. It means this ability to delay claiming is really a benefit that falls to the wealthy, who can afford to delay claiming. 

Tell me about what you call the Gray New Deal.

The name of the Gray New Deal emphasizes that the real solution has to be bold, just like the New Deal was bold. We have to support workers — older people who want to work as well as ensure against poverty in old age and make sure that people can maintain their living standards. 

One goal of the Gray New Deal is to make sure that a middle-class worker can remain a middle-class retiree. It gets people into an universal pension system into saving for retirement at the beginning of their careers — that principle is embodied in current legislation called the Retirement Security Act for all Americans. 

It's more money into the individual, private system, and more money into Social Security and then support for people who want to work, such as enforcing laws against age discrimination and more training for older workers. 

What grade would you give the American retirement system overall?

I give a D, because it's so inadequate for so many people and it's so unfair. It doesn't get an F because the top 10% of the labor force has done just fine.

Aimee Picchi

Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.

Twitter