6. Long-Range Goals

The most significant aspect of the task force report, in our estimation, is its bold new look. The documentation clearly shows that the solutions of the past will not suffice for the future.

We suggest that an important next step is to cost out alternative plans for meeting the goals we seek. We can then proceed in orderly fashion to assess priorities, to formulate the legislation, and to propose specific measures to be taken by the private sectors of our economy to make economic security in old age a reality. This is the only basis for that real social security which we set as a national goal some 30 years ago.

Although this testimony has focused on income adequacy, it should perhaps be noted that income cannot be entirely separated from facilities and services. Elderly persons are now discovering that it is not enough to have entitlement under Medicare for home health service. if no home health aides are available in the community. Income that would enable the payment of at least a modest rent will not help if safe and suitable housing is not to be found in the neighborhood, nor is free carfare an advantage if there is no public transportation. The task of correlating the many facets of the income factor is formidable at every level, from the Federal Government to the rural township. 7. A National Information and Technical Assistance Center

The final point I should like to emphasize about the task force report is the urgency it reveals for planning and initiating appropriate action to meet both current crises and long-range goals. The National Council on the Aging has felt a growing concern about the proliferation of fragmented programs to meet a national problem of such staggering proportions.

The need, as NCOA sees it, is for a mechanism by which the complexities and interrelations of the problems of aging can be understood, and by which this understanding can be focused on action and utilized by individuals and agencies-public and private-which can or should contribute to the solution of problems of aging in our society.

For this purpose, the National Council on the Aging proposes to establish a National Information and Technical Assistance Center which will provide a focal point for all of our efforts to find more effective ways to deal with the interrelated problems of poverty, employment, housing, health, isolation, and loneliness. This Information Center will compile, assemble and maintain the most comprehensive and reliable information currently available on the problems of aging. It will bring together a professional staff to provide information and to undertake specialized studies tailored to specific needs of organizations and individuals. A highly sophisticated information and retrieval system, utilizing appropriate computer and communication techniques, will serve as the foundation for the new Center's functions. The Information Center will be linked with pertinent collections of information presently maintained by other public and private agencies and organizations. The work of the Center will greatly strengthen the basis for future public policy development and will provide guidelines for action on a nationwide basis. Thank you, Mr. Chairman.

The CHAIRMAN. Thank you very much, Mr. Shelley. I think we will have to move along now. I would like to, as we hear each of you, explore further, but the exigencies of time are such we will now hear from Mr. Greenough.

STATEMENT OF MR. GREENOUGH

Mr. GREENOUGH. Could I request permission to put the full statement in the record* and I will skip parts of it for your lunch-hour convenience.

The CHAIRMAN. Yes.

Mr. GREENOUGH. Mr. Chairman, I am William C. Greenough, chairman of Teachers Insurance & Annuity Association and the College Retirement Equities Fund, TIAA-CREF. In your letter of invitation you asked me to comment especially on private pensions and on methods of relating pension income to changing economic conditions. This has to do with how we can:

1. Provide part of the security for our older citizens through portable private pensions.

2. Protect their retirement income from the dangers of inflation, and

3. Provide for them a rising standard of living commensurate with the rising productivity of our economy.

Perhaps I can best serve by describing how all three of these objectives have for many years been met in the private pension sector, through the unique TIAA-CREF retirement system for higher education. I will comment briefly on this nationwide system of portable pensions, and then on how to fund pensions so that they can adjust to changing economic conditions.

Pension portability-History.-Andrew Carnegie, in 1906, established the Carnegie Foundation for the Advancement of Teaching to support higher education by pensioning older professors, since few of them had been able, on their low salaries, to save enough for their old age. The "breakthrough" of this free pension plan was the idea of transferable pensions-the professor could move about among colleges and universities without losing any part of his pension. This transferability has been a tremendously invigorating force in American higher education.

After a while the free money for pensions ran out, so the Carnegie Foundation and the Carnegie Corp. established TIAA, in 1918, to provide contributory annuities, immediately vested and portable throughout higher education and throughout the Nation. The idea was that the college and the individual would jointly pay for an annuity, to be owned entirely by the individual, whether he stayed at one college throughout his career, as so many do, or transferred among several colleges while developing his special knowledge and experience, or, for example, transferred from a college into governmental service and then back into the academic world.

In no event would he forfeit his TIAA-CREF pension benefits accumulated while at the colleges. This transferability has meant true security for a profession in which most of the practitioners still are not too well paid. The college's and the individual's contributions

*See statement, p. 59.

were to be fully funded and invested through TIAA so that the pension expectations would always be realized.

This portable private pension system has worked well for half a century and it now covers more than 2,000 colleges, universities, scientific and other educational institutions and their more than 250,000 staff members.

Assured and immediately vested pensions are not only a possibility in the private sector, they are an actuality, and have been for the last 50 years. Right now, bills are pending in Congress, S. 1290 and H.R. 9010, to charter the College Benefit System of America in order to protect against certain dangers at the State level to the continuance of this nationwide system of fully uniform and portable annuities.

Inflation and annuities. There was a continuing, challenging problem, one to which we are all addressing our attention today, the problem of inflation and of sharing equitably with our older people some part of the enormous increases in the productivity of this economy. Here, again, let me draw on actual experience.

Post-World War II inflation took an awful toll from the income of people living on fixed dollar annuities, professors along with everyone else. Faced with this situation, we instituted in 1950 at TIAA a series of studies to see what could be done.

We early came to the conclusion that "there was at least one major inflation during every period in American history equal in length to the working and retired lifetime of a single worker." As an example, people retiring in 1950 had started work two major and one minor inflations ago and one horrendous and several much smaller depressions

ago.

Our economic study, "A New Approach to Retirement Income," also concluded that "security in retirement poses a difficult problem when it means not only providing a sufficient annuity income in dollars but also a reasonable income in current purchasing power."

THE VARIABLE ANNUITY

As a result of these studies, TIAA in 1952 established the College Retirement Equities Fund, the world's first variable annuity. These annuities are based on common stock investments, with the full performance of the investments flowing through to the participant during his retirement.

Although far ahead of its time, CREF was quickly adopted by our contributing colleges and universities and by most of the members in their retirement systems. At present 97 percent of the college staff members have elected to participate in CREF concurrently with their TIAA fixed dollars annuity.

Does this kind of a fund have some promise of providing a retirement income that does adjust better to cost of living and productivity increases? Here again, the longest and best experience is with CREF. If an individual had retired in 1952 on a TIAA and CREF annuity, his variable CREF annuity would now be paying him three and a quarter times as many dollars as originally.

That is, an original CREF annuity of $100 a month in 1952 would, starting May 1, now be paying $325 a month. I hasten to point out that this hasn't been a straight line up. Falling stock prices, as in 1957 and

1962, are reflected in reductions in CREF annuities those years. But the overall trend has been upward.

If a participant in a college retirement plan had, along with his college, commenced participation in TIAA-CREF in 1952, contributions of $50 a month to CREF to the end of 1968 would have equalled $9,600, and his credit in the CREF retirement fund would have been over $24,000-compound investment rate averaging nearly 11 percent a year. I give this experience to date in order to comment, Senator Williams, directly on your question to me. It shows how some of the enormous productivity of our economy can be made to flow through to retired people without transferring, or taking it away, from those in the work force. This flowthrough in the case of CREF has helped make the academic profession more attractive, has helped bring able people into the profession in spite of strong competition and has helped keep them interested even though colleges cannot compete with governmental employments in terms of the power and scope of decisionmaking, or with private enterprise in terms of salaries and deferred compensation, profit sharing, bonuses and other such arrangements. Or even in tranquillity.

Other Adjustable Pension Arrangements. Following the innovation of CREF, a number of contrainflationary devices have developed. Variable annuities are now taking hold, and are to be found in many industrial and business firms and in the State retirement systems of Wisconsin, New York and New Jersey. Cost-of-living escalators are in the U.S. Civil Service retirement program, in the pension plans of several State retirement systems and in a number of private plans.

Plans incorporating differing formula escalators on the retirement benefits during old age are also being used. Separate accounts of life insurance companies have entered the picture and where the benefits are allowed to flow to the participant instead of reducing the employer's pension costs, are helping to provide added retirement security.

Interest in equity and escalator arrangements has also been high in other countries, especially Sweden, Holland, England and Japan.

PRIVATE PENSIONS AND PRODUCTIVITY

Private sector pensions now have assets of over $145 billion. This includes State and local retirement systems, trusteed, negotiated and insured plans. These represent actual savings for retirement, available for investment in productive enterprise thereby enriching the lives of the workers as well as retired people.

These pension savings finance plants, equip them with modern machinery, build houses, shopping centers, roads, office buildings, airplanes, ships-products used by both retired and active people. These direct investments in productive enterprises have a number of desirable consequences.

The active workers in our labor force benefit through higher wages reflecting their increased productivity from modern, up-to-date plants and equipment and the power to run them. Pension plan savings provide a large and increasing part of the many thousands of dollars of plant and equipment available to each worker to increase his production, and to finance the house he lives in.

Thus the total product is increased instead of merely being shared or transferred differently, since savings help provide the capital investments that render the young participant in a pension plan more productive, while his greater productivity means increased corporate earnings returned, in part, to him through his participation in his pension plan.

The retired worker benefits directly from his share in the increased productivity made possible by his own savings. This is especially true if invested in equities under a pension plan permitting flowthrough to the retired person.

And he and the worker both benefit without detracting from the relative economic position of the other, that is, without transfer payments or other drains on either side.

It is estimated that a trillion dollar economy, which we may reach in terms of constant dollars by 1975, will require an additional $500 billion of invested capital in the 6 years between now and that time. In all probability a major portion of that great wave of capital development in this country will come from private pension savings. We must make sure that we don't kill it, that we do encourage it.

The CHAIRMAN. Thank you very much. We appreciate your addressing yourself to this specific part of our question.

I have a feeling that another committee will probably be calling on you for further testimony along the same lines, the Labor subcommittee. The Labor Committee will be going into pensions. I think your experience, the pattern you have developed so successfully may be helpful to our committee.

(The statement referred to follows:)

PREPARED STATEMENT OF DR. WILLIAM C. GREENOUGH, CHAIRMAN, TEACHERS INSURANCE AND ANNUITY ASSOCIATION AND COLLEGE RETIREMENT EQUITIES FUND

In the Special Committee's letter of invitation I was asked to comment especially on private pensions and on methods of relating pension income to changing economic conditions. This has to do with how we can:

1. Provide part of the security for our older citizens through portable private pensions.

2. Protect their retirement income from the dangers of inflation, and

3. Provide for them a rising standard of living commensurate with the rising productivity of our economy.

Perhaps I can best serve by describing how all three of these objectives have for many years been met in the private pension sector, through the unique TIAACREF retirement system for higher education. I will comment briefly on this nationwide system of portable pensions, and than on how to fund pensions so that they can adjust to changing economic conditions.

PENSION PORTABILITY-HISTORY

Andrew Carnegie, in 1906, established the Carnegie Foundation for the Advancement of Teaching to support higher education by pensioning older professors, since few of them had been able, on their low salaries, to save enough for their old age. The "breakthrough" of this free pension plan was the idea of transferable pensions-the professor could move about among colleges and universities without losing his pension. This transferability has been a tremendously invigorating force in American higher education.

After a whle the free money for pensions ran out, so the Carnegie Foundation and the Carnegie Corporation established TIAA, in 1918, to provide contributory annuities, immediately vested and portable throughout higher education and throughout the nation. The idea was that the college and the individual would jointly pay for an annuity, to be owned entirely by the individual, whether he

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