In one of the most dramatic moments in the Senate in years, 80-year-old John McCain rallied from surgery and a diagnosis of brain cancer to cast a 1 am vote that torpedoed Republican efforts to repeal Obamacare — for now. The vote had been put on hold once already, to give him time to recuperate.

For all the drama, we shouldn’t be surprised that a medical emergency interfered with Senate business. The highest levels of American politics bear an uncomfortable resemblance to a gerontocracy. From the Senate to the presidency to — perhaps most strikingly — the Supreme Court, top positions are held more and more by people in their 70s or above.

Disruptive medical tragedies are an unavoidable statistical consequence of this trend, as is the risk that key political actors will develop cognitive impairment. There’s no easy solution to the problem, but it demands a frank conversation.

Reforms such as term appointments for justices could help with the problem, but it’s just as important to try to shift societal norms to take more seriously some elemental realities of human aging.

Tact and, perhaps, anxiety surrounding our own mortality too often short-circuit these conversations. 

McCain’s diagnosis was hardly the first time senatorial health played a key role in the partisan battles over health reform. The Affordable Care Act passed in the first place because 92-year-old Sen. Robert Byrd was wheeled out onto the Senate floor for three vital votes in 2009. And Byrd’s votes were especially critical as a result of Sen. Edward Kennedy’s poignant struggle with the brain cancer that killed him, at 77, in August 2009.

Kennedy was replaced by Republican Scott Brown, depriving Democrats of a filibuster-proof majority and therefore almost destroying the centerpiece achievement of the Obama presidency.

Blanket judgments about older politicians are of course indefensible. Many of our older leaders have more skill and intellectual firepower than most of us will ever have. Feel free to debate Mitch McConnell on legislative tactics or Hillary Clinton on health policy if you doubt me. Countless examples, down to @JohnDingell’s hilarious Twitter feed, remind us that gifted people contribute to our common life well after the conventional retirement age.

Still, people who do not watch Congress regularly can be taken aback by just how advanced in age — and sometimes evidently slowed — people at the pinnacle of power can be. Viewing the confirmation hearings of Christopher Wray, the new FBI director, the magazine writer Jason Fagone tweeted:

In the body as a whole, 23 senators are at least 70. Seven are 80 or older.

The geriatric Supreme Court has long inspired hand-wringing but no action. Rumors abound that Supreme Court Justice Anthony Kennedy, now 81, may retire. Five of the nine justices are older than 67, three are 78 or older, and several have serious age-related health problems. Out of fear of letting President Trump choose their successor, Justices Stephen Breyer and Ruth Bader Ginsberg surely feel obliged to hang on until at least 2020, if they can.

Worries about decline on the bench aren’t theoretical: After William O. Douglas suffered a stroke in 1974, it took 11 months for his colleagues to convince him to retire. Chief Justice William Rehnquist fended off suggestions that he might be too weak to work as he underwent chemotherapy and an emergency hospitalization, before his death in 2004.

Obviously, the more elderly our judges and politicians become, the higher the probability of illness or death within their ranks. By my count, 29 senators and House members have died in office since 1999. More than half were 72 or older when they died. 

Twenty-nine deaths may seem like a lot, but it’s actually less than what one would predict, given the statistics for the entire US population. Below, I used the most recent government age-specific mortality data to calculate the probability of dying within six years for a randomly selected American man or woman of a given age.

A randomly selected 70-year-old American woman would have an 18 percent mortality risk. By age 80, this mortality risk doubles to 36 percent. 

Sen. Dianne Feinstein (D-CA), who is 84, has not ruled out running for reelection. At her age, the randomly selected man or woman would have a less than 50 percent statistical chance of serving a full term.

Senators like Feinstein, of course, are hardly a random draw from the US population. People that successful tend to be vigorous and healthy, and to have access to excellent medical care and other supports. But the statistics remain daunting, especially when one adds rising age-related incidence of mild cognitive impairment to the mix. Over age 70, almost one-fifth of American adults experience some mild cognitive impairment.

I find much to admire in Sen. Feinstein’s pioneering career. She is smart and tough. She works well with Republicans. But I do not believe she should run again. She’s been in office since 1992, and she would almost certainly be replaced by another Democrat who shares her overall values. It’s time to give someone else a chance in this major position of influence and power.

That doesn’t mean that Feinstein should withdraw from public life. Consider President Jimmy Carter’s glorious post-presidential career. At 92, he continues to work to improve public health around the world — and to wield a hammer for Habitat for Humanity.

Rumors regularly hit Washington about the cognitive function of various senators. Strom Thurmond served to age 100, and was visibly infirm and unable to perform his senatorial duties toward the end of his service. McCain’s confused questioning of former FBI Director James Comey led to much commentary, before his diagnosis, as did Sen. Orrin Hatch’s parroting of a young aide’s talking points in a colloquy with Sen. Claire McCaskill.

80-year-old senators tend to be healthier than the average octogenarian. They also might be too driven to step aside.

The potential presence of mild impairments should not disqualify people from public office. At 75, Edward Kennedy remained one of the most effective senators in American history — whatever his capacity for rapid memory recall. Still, health and mental acuity is a relevant concern when we expect senators to spot likely problems in eleventh-hour amendments to health legislation.

The prevalence of real dementia is far lower than the risks of mild cognitive impairment, but annual risks among the healthy roughly double every five years after age 70. By age 85, almost one-third of adults experience some form of dementia.

On the one hand, competitive and successful senior politicians are surely less likely to suffer these difficulties. On the other, driven people are less likely to be self-reflective about when it’s time to move on.

Then there’s the presidency. Ronald Reagan’s age at inauguration, 69, caused some concern — at the time he was the oldest to take the job — but Donald Trump is 70.  Vox’s Matt Yglesias has argued that Sen. Bernie Sanders is now the Democratic frontrunner for 2020. The three leading Democratic contenders — Elizabeth Warren, Joe Biden, and Sanders — would be 71, 78, and 79, respectively, on Inauguration Day 2021.

Some medical experts have expressed concern that President Trump may be experiencing mild cognitive impairment: They say it’s reflected in declining verbal complexity in his responses to media interviews. Yes, there is more than a whiff of politicking in some of this discussion. But this remains a legitimate issue, especially in light of similar assessments made regarding President Reagan, who later succumbed to Alzheimer’s.

There are reforms that could help, but we need to change norms too   

One useful reform would be to subject all candidates for major office to a proper medical review from nonpartisan authorities. Presidential candidates might be examined by the staff of Bethesda Naval Hospital. They should be entitled to privacy regarding matters that don’t affect their capacities to hold public office, but qualified and nonpartisan medical authorities should have an opportunity to examine them and to review their records.

In this, as in so many other areas, President Trump made a mockery of the process by submitting a gonzo health report from his Manhattan physician. (“If elected, Mr. Trump … will be the healthiest individual ever elected to the presidency.”) That seemed funny when the smart money assumed a Clinton presidency. It’s less funny now, as we depend upon Trump’s health and mental acuity as he negotiates with North Korea.

We should also scrap lifetime appointments to the Supreme Court in favor of fixed 18-year terms. Under such a system, each presidential administration could appoint one Supreme Court justice every two years on a predictable schedule. (It’s noteworthy that these changes would increase the prospects for older jurists to be appointed in the first place. Today, a president would be foolish to nominate a 65-year-old to the high court, but the calculus changes if terms are limited.)

Aware of the challenges facing elderly judges, the Ninth Circuit Court of Appeals has several sensible programs. It “offers a battery of mental health assessments, hosts discussions with neurological experts and has created a hotline where staff may report signs of cognitive decline in their colleagues,” notes the law professor and biographer David J. Garrow, who has long expressed concern about cognitive decline on the bench. The Supreme Court could take a cue. 

Justices should take personal responsibility too. Justices should not serve 30 or 40 years, particularly when they can be replaced by someone from their own party. In 2011, Randall Kennedy called upon Justices Ginsburg and Breyer to immediately retire. They should have done so.

Is Sanders “too old” to run in 2020?

Let’s also work to establish sensible norms for people running for high office. Senators over the age of 75 should not ordinarily run for reelection, in my view. Candidates well over 70 should not ordinarily run for president either. Yes, I would say that to Joe Biden and Bernie Sanders, although I would proudly support either man against Mike Pence or Trump.

I’m confident that Biden and Sanders could run effective and compelling presidential campaigns. I’m much more worried about their capacity to continue to perform at a high level over the full course of their presidencies. For that reason, I also want presidential candidates of every age to openly discuss how they plan to manage their health issues as they assume the weightiest job in the world. It’s not dirty pool for reporters and political opponents to press them on such questions.

We should address these matters without rancor or cruelty, but also without euphemism or undue reticence.  

These matters are hard to talk about in American politics because they are hard to talk about in our own lives. I see my mortality etched on my father’s face, as my daughters see it in mine. Mortality and bodily fragility are two great constants of human life.  How we handle those constraints provides a small but important test of American democracy.

Harold Pollack is the Helen Ross professor of social service administration at the University of Chicago.

The Big Idea is Vox’s home for smart discussion of the most important issues and ideas in politics, science, and culture — typically by outside contributors. If you have an idea for a piece, pitch us at thebigidea@vox.com.

In a recent interview on Vox, Ezra Klein asked Hillary Clinton to name three books everyone should read that have influenced how she thinks about policy. She mentioned Christopher Lasch’s work, without naming a title (his best known book is probably The Culture of Narcissism), and Habits of the Heart, a collection of sociological pieces on the nature of American community written by a team led by Robert Bellah. But her fullest comments were reserved for the most recent book by Harvard government professor Robert Putnam:

I think there’s a lot of wisdom in Bob Putnam’s latest book, Our Kids. I think there’s a really great story that he tells about going back to the town he grew up in outside of Cleveland, where kids of all different backgrounds, economic family standing, and they’re all together and everyone was in it together. And there was so little distinction, and there was so much economic integration in that small town. Now he goes back to it, and it’s so divided. It’s divided on income; it’s divided on race; it’s just a very different environment. And winners and losers are preordained at a very early age. So I think that’s a book that people should read right now.

Putnam, past president of the American Political Science Association, is best known as the author of Bowling Alone, which explored the decline in “social capital” in the United States: the shift from communal engagement to more solitary activity. (Disclosure: I helped conduct research for that book many years ago, and I consider Putnam a mentor and friend.) He has advised presidents in both political parties about what might be done to strengthen social ties in America.

After I heard the interview, I emailed Putnam to congratulate him for the name check, and to continue a conversation we had started last year when Our Kids first appeared.

The book begins with a poignant account of Putnam’s boyhood home of Port Clinton, in Ottawa County, Ohio, just east of Toledo. The social and economic challenges in this former manufacturing stronghold reflect some of the deepest problems facing America today. Not coincidentally, Ottawa is a battleground county within a battleground state that may determine the 2016 election.

Our Kids then provides a statistical dive into the hugely different opportunities available today — both nationwide and in Port Clinton — to middle-class and affluent children and to kids whose families occupy roughly the bottom third of the income distribution.

Putnam is alarmed about the decline of social ties over the decades, and equally alarmed about the corrosive impact of inequality on the life chances of millions of children across America. Yet he combines that alarm with a Progressive Era optimism that Americans can be mobilized to address these inequalities through both moral appeal and appeal to our enlightened self-interest.

Putnam and I caught up recently to discuss how Secretary Clinton’s interview captured her liberal-communitarian worldview. After our conversation, Clinton has made “stronger together” a central slogan of her campaign, a deliberate contrast to Donald’s Trump’s rhetoric pitting different American subgroups against one another, and a stark challenge to Trump’s claim that he “alone” can fix our problems. Below is an edited and condensed transcript of our conversation.

Harold Pollack: When you and I corresponded about Hillary Clinton’s praise for your book, you mentioned that Clinton is a “liberal communitarian.” First of all, what do you mean by that, and how do you think that would actually matter in terms of what she might do as president?

Robert Putnam: It’s easier to answer the first of those questions than the second. I basically agree with the way that E.J. Dionne divided up the political world in his book of a few years ago, Our Divided Political Heart. He said that over the course of American history, American political debate has moved back and forth along two, not one, big dimensions. There is a left-right dimension, which is basically a dimension of how much you care about equality. It’s about class differences and so on. Then there’s another that he says is basically orthogonal to that, which is the dimension between individualism and communitarianism.

Those two dimensions create a two-by-two table, if you’re simplistic about it. That is, you can be a conservative and an individualist. In our current political discussion, that refers to libertarians, basically. They’re generally conservative. They’re not all that concerned about equality, but they are certainly hostile to any collective action, especially any collective action by the state.

Then there is another kind of conservatism that is actually much more communitarian. In contemporary jargon, those are people you might call compassionate conservatives. It has historically meant a certain kind of noblesse oblige Tory-ness. In the Bush family, there are a number of representatives of this kind of outlook, people who are conservative but believe that we’re all in this together.

HP: Sticking to the liberal column, there’s the communitarian box and the more individualistic box. Can you unpack a bit the tension between those two groups?

RP: I want to be careful, because these liberal individualists are many of my best friends. They’re inclined to emphasize individual rights — what Michael Sandel calls the “unencumbered self,” the individual without context.

Communitarian liberals are more inclined to be conscious of social ties, and so are more likely to think about social-network-based solutions: still wanting equality and therefore being liberal in that sense, but being more attentive to social networks. I’m usually described by other people as a liberal or left-wing communitarian.

HP: Are you comfortable with that description?

RP: Yeah. You’ve got to be careful when you accept labels, because they don’t necessarily mean the same thing to everybody else. Yes, if you interpret liberal communitarian or left-wing communitarian in the sense that I just described, I think Hillary Clinton is, too.

I think, actually, it’s not an accident that the other people whose books she mentioned are all also from that same quadrant, [although] I’m not sure that they would like to be put there. I don’t mean she was trying to convey a message. I think it’s really true that that’s her intellectual matrix.

The travails of Port Clinton, Ohio

HP: Your book starts with an account of Port Clinton, Ohio. The trajectories of places like Port Clinton seem to be a fundamental backdrop of the 2016 election. You note the economic decline of this solid working-class community.

We can deconstruct the book in lots of ways, but the basic idea is that this area of Port Clinton was a successful working-class place that once nurtured you and that now seems to have both decayed and to have fallen prey to profound inequality. One can easily imagine a Sanders or a Trump speech entirely based on Port Clinton. I don’t know if you read it the same way.

RP: Yeah, I do. I think [Sanders and Trump] are both very, very different people with very different politics, but both are popular in Port Clinton today.

A lot of my own political outlook and social outlook comes from the fact that I grew up in that other Port Clinton, which was high in social capital and also high in class equality, though as I emphasize in Our Kids, there was also race and gender inequality in Port Clinton in those years. That sort of egalitarian, communitarian ethos feels correct to me and also normal to me. If I were writing a critical intellectual biography of this guy, Putnam, I would theorize that a lot of what he writes about is a somewhat idealized version of his hometown.

I do think there is a direct connection between this year’s election and this communitarian versus individualistic dimension — what we might term the “we/I” distinction. By many measures, I think the 1950s and 1960s were a high point in we-ness in America. I think now, after 60 years of moving in an “I” direction, we’re now at a level of I-ness that is probably more extreme than any period in our history.

Donald Trump is the apotheosis of I-ness. It’s kind of like I-ness taken to the most ridiculous extreme. It’s all about him personally. I don’t want to say that Hillary Clinton is devoid of self-interest. Of course not. But I do think her outlook, her philosophic outlook, is very much a “we” outlook. I think this year’s election will be more defined by the “I/we” or individualistic-communitarian dimension than it will be by the left-right dimension, honestly.

[In fact,] if you flatten this year’s campaign into a single left-right dimension, there are issues in which Trump looks like he’s to Clinton’s left.

HP: Trade, for example?

RP: That would be one, but not only that. If you flattened politics to a single left-right dimension, that’s one reason he sits uncomfortably with many members of the Republican Party. If instead you see their differences through the lens of “I/we,” I think they are poles apart.

Port Clinton: a bellwether city where Trump has significant support

HP: If I can get back to Port Clinton, Ohio may be the most critical state for Donald Trump. You can imagine the voters of Port Clinton will pick the next president of the United States.

RP: Port Clinton is the county seat of Ottawa County, and Ottawa County is the bellwether county in the bellwether state of the United States. Historically, that’s true.

HP: Are you hearing anything on the campaign trail that suggests anyone across the political spectrum is really offering public policies that might help the people in places like Port Clinton, who are suffering in the way you laid out in your book? Are you hearing things that are making you optimistic, that, hey, there’s some things we might do for these places?

RP: Yeah, I think that, actually, there are a lot of things we could do. … I don’t think this is a question of policy wonkery. It’s not that we don’t know what to do to help poor kids. We know a lot of things would work — and many of them happen to be in the 2016 Democratic platform. A lot of things have been shown to work. I think the problem is fundamentally political.

I could go through some of the policies that I think are honestly no-brainers, but the question is the politics of this. We’ve become so polarized politically that as a reformist trying to change America, I’ve moved my attention to the state and local level, because I think we’re a little less frozen in our political corners at the local level than we are at the national level.

I’ve said before, I think the problem of poor kids is a political problem, meaning there are some things that I think people on the left, like me, think would be really good to do, like raising the minimum wage or making early childhood education universal. Not just pre-K, but I mean going back really early. [Or] like helping restructure the economy in ways that would provide the working class with a decent chance going forward.

In some of those areas, I’m enough of an expert to say exactly how to do it. Some, like the economic side, I’m not able to say exactly what could be done.

I do think that, for example, Port Clinton was badly hurt by trade. No doubt about it. Many of the dads of my classmates had well-paying UAW jobs in local factories in Port Clinton, and there are no UAW workers in factories in Port Clinton anymore.

There are things that we can do to help people like that today, [including] substantially upgraded assistance to workers who were displaced by trade. That, I think, is more or less the evolving consensus in the Democratic Party, and I share those views.

Plus, you have to know there’s a good chance that Donald Trump will win Port Clinton. He’s doing very well in many of the struggling white counties in Ohio.

HP: How many of his supporters around Port Clinton are actually going to vote?

RP: That’s the right question. I don’t know the answer to that. Probably many won’t, but that doesn’t make me happy.

The top one-third of earners no longer interact with the bottom third

HP: Do you think that liberal cosmopolitans like myself need to find a different way to relate to people like those you spoke with for your book — to reach out in a different way to them?

RP: The answer is yes. I think the category of people that you’re calling liberal cosmopolitans, really the upper and upper middle class of America, are increasingly disconnected from working-class America. I mean that in a very specific sense. Our residences are increasingly segregated by class. Our schools are increasingly segregated by class. Our extended families are increasingly separated by class.

Therefore, where two generations ago it would be not at all uncommon for people from opposite sides of the tracks to be on the same bowling team, it’s now extremely rare. Not just because bowling teams are rare, but it’s extremely rare because of big structural change — economic and other changes that have moved us toward two separate places.

I draw hope from earlier periods of American history when we have solved problems like this. The most important example that I use is the transition from the Gilded Age to the Progressive Era.

I think it’s not at all an accident that one of the first things that began to shift America from the Gilded Age toward the Progressive Era is the publication of How the Other Half Lives, which was simply a verbal and photojournalistic description of life on the Lower East Side of New York, meant to be read by affluent folks in the Silk Stocking districts of the Upper East Side of New York.

Basically, Jacob Riis, the author of that book, along with a talented and aggressive young politician who read it — namely Teddy Roosevelt — did actually trigger change in American politics.

I do not mean for a second that Our Kids will have anything like the same historic effect that How the Other Half Lives demonstrably had, but that’s the genre in which I wrote it. I wrote it because I thought that people like me — unless you’re a specialist in working on the subject of working-class Americans — are much more ignorant of the actual worsening conditions of life lower in the hierarchy than we were, or people like us were, 30 or 40 years ago.

HP: Obviously, the rising income and wealth share of the super wealthy is very important, but I wonder if the focus on the top 1 percent allows many of us in the top 20 percent to avoid confronting the fact that we are living different lives than those available to the bottom 80 percent.

RP: That’s exactly, Harold, why the argument in Our Kids is framed not as Bill Gates’s kids versus some homeless kids. That’s why virtually all of the graphs and charts in that book, and virtually all of the analysis in that book, is phrased in terms of comparing in round numbers the upper third of American society — those who have a college degree — and the lower third, those Americans who didn’t get past high school.

Of course the income distribution is important. I’m not for a second saying it’s not important. The focus purely on what’s changed recently with respect to the distribution of income encourages this focus because recently the big change has been this pulling away of the upper one-tenth of 1 percent from everybody else.

That has somewhat distracted us, and maybe even allowed us to escape worrying about what I think is the more deeper change, that pulling apart physically and psychologically and sociologically and politically, the upper third and the lower third.

HP: Two things really concern me when I consider whether we will engage in these problems. You note one in your book: the scary feedback loop between the fraying of the country and unequal political participation. One of the big differences between the upper third and the lower third is the upper third votes. What can we do to equalize the playing field when it comes to just the basics of political participation?

RP: The easy answer, of course, is to halt and reverse the voting obstruction policies, [including voter ID laws]. There’s been a wide discussion about how to increase voting turnout by institutional changes.

Actually, I think much more important is social organizing, political organizing. If you look back at the earlier period of the Progressive Era, which is where I draw most of my inspiration, it was not just that some sympathetic voters on the Upper East Side of New York began to worry about folks on the Lower East Side. There was a lot of organizing going on, to pull isolated individuals, who were down at the bottom, together into a stronger coalition. That’s true especially in terms of unions, but also in terms of political organizing in that period

Sometimes people [believe] that I ignore the importance of political organizing, especially political organizing of the have-nots themselves. That’s not at all my view. Let me cite one of my first encounters with Hillary Clinton, actually. In January 1995, I was invited with some other people to Camp David to talk with the president about what was going to be the State of the Union message that year.

I — as I have done perhaps too often — began talking about the Progressive Era and the inspirations it holds for our times. Hillary Clinton, at that point, who was in the room, interrupted me and said, “Yes, Bob, I agree with that, but let’s go back. Let’s imagine that Bill is one of the Progressive Era presidents trying to make things happen: to have a Federal Reserve system, to have a federal income tax, to have child labor laws, or to have various kinds of social insurance programs. Those were the kinds of things that were needed then, were done then. And they were led by Progressive Era presidents, but they could also call upon the unions and have the unions, as a base, strengthen their hand.”

Clinton said: “Now, if Bill calls up the same allies today, this won’t happen.” Not because he’s moderate or conservative, but because many of these allies no longer exist. All of those working-class and progressive organizations don’t exist now or are much weaker now than they were then.

The point she was making is absolutely right. It wasn’t just top-down, “bridging” social capital that was important in that earlier period. It was also bottom-up, “bonding” social capital, coming out of the working class.

Remember, what was the subject of her thesis at Wellesley? It was Alinsky. I don’t mean to make her sound like a student radical. She certainly isn’t that now, if she ever was. But it’s true that being aware of the importance of synergy between top down and bottom up is not just some tactic that some political consultant told her about. I think she really does, in a deep sense, understand that.

Harold Pollack is the Helen Ross professor at the School of Social Service Administration at the University of Chicago.

The mortgage meltdown that preceded the Great Recession decimated minority wealth in my neighborhood, a majority–African-American suburban community in South Chicago. Housing prices fell, and remain more than 30 percent below what they were in 2006. Our area is still dotted with dozens of fading for sale signs, sometimes in front of foreclosed or empty homes. Things never fully recovered.

Race and segregation play a big role in this story. Five of the 10 Chicago zip codes with the highest foreclosure rates are at least 94 percent African American.

And this is a national problem. As one shocking 2011 report concluded: “Approximately one-quarter of all Latino and African-American borrowers have lost their home to foreclosure or are seriously delinquent, compared to just under 12 percent for white borrowers.”

In the runup to the foreclosure crisis, nearly 50 percent of loans to African Americans were subprime. Nonwhite homeowners were much more likely than white homeowners to receive subprime loans — even when the nonwhite applicants qualified for better mortgages.

Black borrowers are charged roughly 0.3 percentage points more in interest than white borrowers, even accounting for individual debts and credit histories. (That translates to an extra $40 per month on a $250,000 mortgage.) And that common phrase “accounting for” itself freezes in amber many other factors, which are themselves the product of long-term disparities.

Minorities’ struggles with homeownership are one facet of a larger story. When all types of investments are taken into account, there’s a startling wealth gap between white people and African Americans — and between white people and Hispanics. According to the Federal Reserve’s Survey of Consumer Finance, the median net wealth of non-Hispanic whites in 2013 was about $142,000. The comparable figure among nonwhite and Hispanic Americans was $18,100, down from $21,900 only three years before.

What explains the gap? It’s obviously hard to generalize about the decisions and circumstances of millions of white, black, and Hispanic households. The tangled causal pathways are often hard to pin down. But a big part of the story is that young white people tend to come from more economically secure backgrounds, making it easier for them to make educational and financial investments early in life that pay off in the long run.

With less wealth to start, it’s harder for minorities to invest for the long term

As a percentage of annual income, non-Hispanic white workers have three times as much in retirement accounts as their Hispanic or African-American counterparts. And when researchers examine what’s actually in different retirement accounts, African-American and Hispanic workers are notably less likely to invest in high-yielding stocks instead of safer investments such as bonds or money market funds. Only 30 percent of black people have stock investments, compared with 57 percent of white people.

Underexposure to equities softened the blow of the stock market swoon of 2007 and 2008, but it also deprived minority households of corresponding gains when markets recovered.

Some of these disparities reflect differences in investment sophistication that might be reduced through information and behavioral-economic nudges. Programs that automatically enroll workers into sensible low-fee target-date funds — and then let them opt out if they want to — would be helpful. But the larger problems go beyond information and reflect the reality of people’s economic and family lives.

Kai Yuan Kuan and colleagues tracked workers’ 401(k) contributions, investment practices, and withdrawals at a single firm between 2003 and 2010. It’s good practice for workers to save 20 percent of their gross income, but few workers in any racial or ethnic group managed to do that.

Still, white people managed to accumulate much more money than their minority counterparts. And, surprisingly, the gap didn’t arise because white people contributed that much more. Median 2010 contribution amounts were similar across racial and ethnic groups. The difference was that nonwhite workers were more likely to withdraw money or to borrow against their 401(k) accounts.

Minority workers effectively used their retirement accounts as a short-term savings vehicle and emergency fund rather than as a long-term tool for retirement. Not surprisingly, then, they invested their 401(k) in money market funds and other really safe assets. Although these choices provide low long-run returns, they make a certain amount of sense for families who have little other wealth and who might need to address an unexpected contingency or help a loved one facing sudden need.

In short, our 401(k) system was designed by and for upper-middle-class people. It imposes penalties on early withdrawals, based on the assumption that workers will have other ways to address short-term life challenges. It doesn’t work well for workers who are less likely to have a broader financial safety net. It was entirely predictable that intergenerational wealth disparities would reproduce themselves as less-advantaged workers use the existing system differently.

Buying a house too early can be a trap

(bikeriderlondon/Shutterstock)

For better and for worse, housing is a standard aspirational path to wealth accumulation in minority communities. And it’s not hard to see why.

There is something unique about crossing the threshold at your own front door. Housing is one form of wealth that you can see, touch, and smell. Investing in a house seems less risky or ethereal than buying a stock index fund whose value can plummet at any time. Buying a home offers the prospect of gaining access to a safe and pleasant community with good, integrated schools while building family wealth at the same time.

But buying a home can be risky too. In a recent article, I emphasized that homeownership is the most leveraged and undiversified investment most of us will ever make. And every disadvantage and risk of homeownership is an even greater disadvantage and risk to families who are just starting out. If you stretch to buy a home, you can get into real trouble if something happens to your marriage or your job.

Families who lack financial reserves are unlikely to get the best mortgages, especially within an opaque and often discriminatory credit market. A lack of personal savings or access to family assistance gives many families a dangerously weak safety net if something were to go wrong.

So young families should be wary of over-investing in homeownership. Employment or family instability could necessitate costly moves. It’s wise not to leap into buying a home until one has gotten a handle on high-interest credit card and student loan debt and accumulated a nice down payment plus a few months’ living expenses as an emergency reserve.

If you get on a firm financial footing first, homeownership can be a blessing. If you buy a home before you’re financially ready, it can lead to lost wealth, foreclosures, and a lot of stress.

That means many families should wait years before buying their first home. That’s a tough pill to swallow — and society should be doing more to help close racial wealth gaps. I wish the Obama administration had been much more aggressive in its efforts to help families refinance bad mortgages. And programs like Pell Grants and child care subsidies can provide financial help to people trying to move up the economic ladder whether they own a home or not.

It takes patience, hard work, and discipline to accumulate the financial rewards that make comfortable homeownership possible. The economic playing field can be pretty tilted, too. There’s no easy path to leap over racial disparities in opportunities and family resources.

Last month I did a Reddit “Ask me Anything” on personal finances to promote my new book on the subject. I got hundreds of questions and comments about a wide variety of financial questions.

This being Reddit, many questioners were young adults who wanted advice about how to manage their credit cards and tens of thousands of dollars in student loan debt. Many were early in their work years and trying to figure out how best to save for retirement or (eventually) their children’s college. Some older questioners were nearing retirement and wanted a better plan for how to draw down their savings safely and effectively.

I hope I helped these readers make better financial decisions. But if you’re facing a tricky financial situation, or just struggling to make ends meet, online resources aren’t always enough. So you might help yourself by doing something counterintuitive: paying a financial professional to advise you about how to manage your money.

I come to this view somewhat reluctantly. Financial services don’t come cheap. If you’re already struggling to make ends meet, it’s hard to justify paying someone to help you. Helaine Olen and I note at length in our book that many specific products and services offered by financial professionals are overpriced or actually harmful. You don’t need someone to sell you complicated variable annuities, actively managed mutual funds, or “heard on the street” stock tips. You’re better off sticking to vanilla index funds.

Still, the right advice, offered under the right consumer protections, can save you a lot of money in the long run. A financial professional can help you get a handle on your spending, sensibly structure and manage your financial portfolio, help you understand the trade-offs as you consider whether and how to buy your first home, and a lot more.

Free resources will only get you so far

Of course, you shouldn’t spend money for financial advice if you get the information you need for free. For example, your employer’s benefits office might be able to connect you with an adviser from a reputable provider such as Vanguard, Fidelity, or TIAA-CREF who can provide sensible information — sometimes more substantial guidance — about your retirement accounts. There are also automated online services called “robo-advisers” that help people choose the best mutual funds for their retirement savings.

But of course people face financial challenges that have nothing to do with investing for retirement. Am I ready to buy a home? What kind of insurance should I purchase? How can I reduce my expenses to save for my children’s education?

For complex financial questions, there’s no substitute for having a face-to-face conversation with a human being. And this advice can be extremely valuable — saving thousands of dollars in lower fees, a lower tax bill, or saved expenses.

If your income is low, you might be able to find a financial coach who will give you advice for free (more on that below). But if you make too much to qualify for these services, then you should consider paying for a financial adviser.

Paying the full bill ensures you’re getting impartial advice

Some financial “advisers” are really salespeople who make money by steering clients toward expensive financial products and then pocketing commissions. If an adviser isn’t charging you (or perhaps your employer) money, then he or she may be making money on the side in ways that creates huge conflicts of interests.

So the first time you meet with a financial adviser, you should have a direct and cordial conversation about how your financial professional expects to get paid. Some advisers make money by charging clients directly. Others work for nonprofit organizations that provide financial advice for people who couldn’t otherwise afford it. But if an adviser makes the conversation awkward or gives vague answers, that might be a sign that the adviser has a conflict of interest; you probably should go elsewhere.

More specifically, your financial adviser should commit in writing to act as a fee-only fiduciary adviser in all of her dealings with you. This guide from the National Association of Personal Financial Advisers (NAPFA) provides useful advice, including ways to check on complaints from past clients. NAPFA’s website can help you find a fee-only fiduciary adviser in your area.

The case for paying an adviser by the hour

There are two different ways to hire a financial adviser. One option is to hire someone to manage your assets for an annual fee, perhaps 1 percent for average investors. That’s valuable for some people who need ongoing investment management or have recurring life issues that require ongoing advice.

But it’s also pretty expensive. Barring special circumstances, most people don’t need that level of continued hand-holding. Leaving aside your home, your wealth should be concentrated in low-cost index funds that don’t require active monitoring. You can use cheaper services and online tools to understand whether you are saving and spending at a sensible pace. And the fees do pile up.

Therefore, an hourly adviser is often more sensible. The Garrett planning network and others allow you to find a fee-only fiduciary adviser in your area who charges on an hourly basis.

This person won’t sell you securities or continually manage your investments, but she can answer a wide variety of important questions. Advisers may also be aware of tax breaks, insurance products, or other financial opportunities you’re not. Millions of people could benefit by bringing their shoebox full of papers to an hourly adviser and buying an hour or two of focused advice. She will provide useful answers and send you on your way.

You can expect an hourly fee around $250 for this sort of service. This isn’t cheap, but it often pays for itself. If this person helps you make a more sensible budget, or if she finds a 401(k) investment that charges just 0.1 percent less than what you currently pay, the visit will more than pay for itself in the long run. You’re not wasting your time on sales pitches for overpriced investment products. And you’re not hitching your wagon to someone for a large recurring expense.

You might qualify for financial coaching

Suppose you have a modest income and you need more basic help. Maybe you’re trying to get a handle on credit card debt, establish and follow a sensible budget, improve your credit rating, or save up an emergency fund for car repairs or sudden medical bills. For these basic issues, you might consider attending sessions with a financial coach.

Such coaches can help you get on sound financial footing, and provide feedback and accountability to help you stay on course. The Working Families Success Network is one way to find such services, which are now available in many cities across the US. Your local United Way may also offer valuable services through Financial Stability One Stop Centers.

Unlike the commercial services I discussed earlier, financial coaches are typically free. They are usually connected with nonprofit social service agencies and can often help you with other needs you might have such as job assistance, legal aid, or tax preparation. They can connect you with other kinds of resources if you’re in more serious financial trouble and have debts you can’t realistically pay.

The Urban Institute recently conducted a nice randomized trial of financial coaches provided by two providers in New York and Miami. The mixed findings are instructive regarding both the benefits and the inherent limitations of such efforts.

Clients who worked with financial coaches reported being less stressed than their counterparts in the control group, which didn’t meet with a financial coach. Clients were also more likely to do basic things well: paying bills on time to reduce late fees, reducing balances in long-term delinquency, making regular deposits into a savings account, chipping away at high-interest debt, building up a modest emergency fund.

Financial coaching didn’t much help with bigger challenges such as avoiding foreclosure or bankruptcy, where the fundamental problem is that people didn’t have enough money to meet their obligations. It’s unclear that such services help people markedly reduce their spending, which isn’t easy. Financial coaches also would not be appropriate for more complex investment questions that typically arise for clients of higher incomes.

Coaching helps people do the relatively easy things better, which is no small thing.

Many people make poor financial decisions in their 20s. I was one of them. When I landed my first job at 22, evaluating missile guidance systems, I stuffed the boring 401(k) paperwork into my desk drawer, never to be read. The Dow Jones Industrial Average was then about 1,500. It is now more than 10 times higher.

Professional athletes face the same problem in a much more dramatic way. The lucky ones earn millions in their early 20s, in on-field careers that typically end before age 30. They face the sudden burden of managing large amounts of money — money that they hope will last a lifetime.

Their wealth is also public. They have people in their lives who want or need financial help. They are targets for unscrupulous financial professionals as well as well-meaning friends and relatives who steer them into wildly inappropriate investments.

As a result, around 78 percent of retired NFL players experience serious financial problems within a few years of retirement. About 16 percent go bankrupt within 12 years. It’s easy to assume the resulting disasters are the product of stupidity or irresponsibility. It’s easy to point to athletes who blew their money on women or bling. Sometimes racial and class stereotypes come into play, too, now with the added twist of head trauma.

But these stereotypes are unfair. It’s rare for elite athletes to succeed based on their physical gifts alone. Most people who excel at that level are intelligent and focused. But they are so focused on using their talent and discipline on the playing field that they don’t learn to methodically manage their money. Most are also like most other young adults, too: typically naive and impatient in basic financial matters.

I discussed these issues with Donté Stallworth. Stallworth attended the University of Tennessee, where he studied psychology on a football scholarship. He was drafted by the New Orleans Saints in 2002, and played wide receiver in the NFL for 10 years. He now works as a journalist and a football commentator. His Twitter feed @DonteStallworth conveys the complexity and the craft of professional football, as seen by an expert practitioner of the game.

The interview has been edited for length and clarity.

Harold Pollack: How did you feel when you first started making serious money as an NFL player?

Donté Stallworth: The first check that I got from the NFL was $1 million. I thought: “What is this?” Obviously, I had already signed my contract and knew what to expect, but when I was working in the summer in college, the biggest check I ever had received was for maybe $300. The check just looked fake. I really didn’t know what to do with it.

HP: Isn’t it a little insane to get a $1 million check? Things would be so much better if you had gotten a check for maybe $500,000 and the remainder had been put in an annuity that would give you a monthly check for the rest of your life. Why don’t they pay it that way?

DS: Being able to reflect on things now, that seems like a great idea. I don’t think the NFL or the NFL Players Association would change how things work now. But from a financial adviser’s standpoint, and even from a player’s standpoint, that is something that the player should probably take ownership of.

Throughout the season, if the guy is making, let’s say, $4 million, $5 million, you get all of that money in eight checks, every two games. I’ve started to believe that it would be better if players at least got that money spread out over the course of the entire year, not just the football season.

You get these checks and they’re $60,000 or $80,000. That messes with you, mentally. You really don’t understand that once you’re done playing, these checks will stop. When you get back into the “real world,” your boss may not even be making $150,000 or $200,000 per year. That’s not even the NFL league minimum nowadays.

What NFL players do with their millions

Stallworth in 2005.

HP: So you get that $1 million. What do players actually do with it?

DS: Many guys, especially the higher-drafted guys who are getting a lot of money, will buy their parents a home, buy themselves a home. Then they’ll buy a car and get their parents a car. After that, it’s kind of up in the air.

I did everything in my power to make sure I was up to the best of my football ability: my speed, my strength, my route running. My main focus was on football, trying to put myself in position to be drafted first wide receiver. Looking back, I wish I had taken that same approach to my finances before I was drafted. I didn’t. A lot of guys didn’t.

I wish I would have taken the same approach to learning about finances and learning how to budget, taking the same approach that you do when you’re watching game film, when you’re lifting weights and running for three hours, conditioning. I don’t think we put in that same time to learn about our finances as we do on the football field.

Some guys are totally on it. Right away they put themselves on a budget. There are many smart guys who do know the ins and outs of investing. These are the smarter ones; Jonathan Vilma, for one. That guy is on top of everything.

HP: How do you know what to do when you suddenly have that much money? It’s hard to get into your head, “I can do this, but I can’t do that.”

DS: That’s key. When you initially get this money, you have to take ownership to understand: “I have all this money now, but it’s not going to last forever.” If you’re lucky in the NFL, you get to play past the average of three years. I was blessed to play 10. You have to understand that you could be making three, four, five million dollars a year. Then the next year it’s all over. You’ll never make that type of money again.

A lot of guys live like they’re going to be making $5 million for the next 20 years. The smarter guys would say that you want to put yourself in a position where you don’t have to work when you’re done. Live like a prince now if you have to, so you can live like a king later.

HP: How do athletes decide where to put their money?

DS: Ninety-nine percent of the guys know nothing about the investment world. You’ll hear from so-and-so that, “Tom Brady is doing this,” or, “We’ve worked with Brett Favre.”

They throw names out there. When you’re a rookie or a young guy, you’re thinking: “If Tom Brady’s doing this, of course I should be doing it too.”

That is how a lot of guys get taken advantage of. It’s the people that you trust, the people that you meet. You’re automatically a target. There are people whose lives are solely based around clinging to athletes. They try to find ways that they can get money out of people. I’ve seen it, I’ve lived it. It’s just horrible.

A lot of my friends were caught up in this casino scam. This guy scammed guys out of millions. This was years ago, and they’re still trying to work out the logistics of getting their money back.

Learning to say no

HP: You were also a public rich person, a celebrity. What is it like to not only have money but to have everybody around you knowing that you have money, to have your money be a topic of public conversation?

DS: It’s tough, Harold. Not only are your family members and cousins, even distant relatives, expecting you to be the money guy, it’s also friends and other people. When you are put in that situation at such a young age, it’s hard to say no to some of your family, or to some of your best friends. A lot of times, guys don’t say no.

I had one relative who I hadn’t spoken to — not one time — the entire time I was in college. Then once I got drafted, she asked me if she could have $50,000. This was before I even got any checks or anything. I remember thinking to myself, “A ‘congratulations’ first might be a better way to go about this.”

As a young athlete, before you made it to the NFL, you would always hear those stories. But you never would believe it was true. So when it happens, it’s like, “Wow, $50,000. They’re asking me like it’s $5 or like it’s $5.” You get that often. It’s very difficult to learn how and when to say no and not feel bad about it.

HP: How do you manage that? How do guys manage it?

DS: Some guys don’t ever manage it. These are the ones who go broke the fastest. It took me a while to learn, until I had people I was able to talk to, people who were in the same position.

Let’s face it, every professional athlete that I had come in contact with — especially guys who are making millions of dollars a year or close to that — has been in that position. You want to be in a position where you can take care of your immediate family, the people that you feel responsible for.

In my case it was my mother, and I was the one to take care of my immediate family. I also had close friends I would like to be in position to help if they needed it.

I won’t say that I felt obligated to do it. But I have literally millions of dollars in the bank, and somebody is asking me for $1,000. It doesn’t seem that bad. Then $1,000 will turn into $5,000, or it will turn into more frequent requests.

You automatically become that safety net. Instead of someone taking responsibility for their own finances, it’s like, “Uh, I can spend this and if there is an issue I can just ask Donté for $500 and it won’t be an issue.”

HP: It seems to me that financially successful African Americans face a particular challenge. You’re more likely than I am to be connected to many people in serious need. There is also a culture of loyalty and mutual support that makes it easier for people to put the hand on your shoulder, or that makes you feel obligated when people need help. I don’t know if that’s real to you.

DS: That’s very real. When you do come into this type of money, there are so many people to whom you become that safety net.

Then you have to worry about if you don’t “loan” someone $1,500 or $2,000 — and it’s usually a “loan” — people will decide that you’ve changed or you think you’re too good. We could spend another hour talking about those situations. They happen often.

Helping pro athletes learn to manage their money

HP: Did you take any courses in college on budgeting or the stock market or anything like that?

DS: I didn’t. I really wish I had. There are not many jobs where you’re 19, 20, 21 years old that make you a millionaire, or at least wealthy, literally overnight. That just doesn’t happen often in this world.

I would definitely advise the young guys to take some type of business course to help them understand their finances better once they make it to the professional level, or even if they don’t make it to that.

HP: Do the players union or the teams help you transition into that?

DS: Yeah, the NFL does a pretty good job. They have preseason symposiums where they’ll bring in all the drafted rookies. They give you advice on the wide range of things that you need to be aware of as a young adult coming to the world of the NFL: on-the-field issues, off-the-field issues, financial issues, legal stuff. Each team also has a player development director whose sole job is to make sure that everyone is on board, especially the rookies. The NFL Players Association also does a great job and has a great benefits package for players post-career.

HP: Do agents help you with these financial things?

DS: Some agents will recommend people that they know or have worked with. Others will totally stay away from it. They don’t want anything to do with your finances.

HP: I can imagine how the agents might not want to get involved. They might wonder what might happen to your relationship if they hook you up with an adviser and things don’t work out.

DS: That’s exactly what it is…

The NFL has a great program, too, if you’re looking to get into some type of investment or want to start working with a certain financial group. The NFL works with the FBI to make sure people aren’t scamming. They run background checks. I think the NFL is doing pretty much everything it can, outside of actually making these programs mandatory.

HP: Should college football programs be doing more to help their players financially?

DS: We can go into talking about how college kids should be able to have some type of compensation. That’s a whole other conversation. I do believe it should start in college somehow. The NCAA should take more responsibility. They make hundreds of millions of dollars from college kids every year. There should be some better way to prepare these guys to be financially successful.

When the end is in sight

HP: As an athlete, you always know that your time is limited. At what point do players start thinking about what their subsequent career will look like when they can no longer be on the football field?

DS: That varies. The average NFL career is three or three and a half years. For someone like me, drafted in the first round, I knew (or at least assumed) that I would be around for a while. My own turning point was probably when I turned 30.

For my first seven or eight years, it just never dawned on me that I couldn’t play forever. Obviously I knew that in the back of my mind, but it just never hit me. I was living in the moment, playing the game. You live from meeting to meeting, practice to practice, game to game, week to week, season to season.

When I got close to 30, I started to realize that I wasn’t in my prime anymore. I could feel my skills very slowly starting to diminish. I wasn’t as fast as I used to be. Then you start to understand, “Okay, this is the point where I maybe need to start thinking about what I’m going to do for the next 50, 60 years.”

HP: What kinds of jobs do people take when they leave the NFL?

DS: Many guys like to stay close to the game because it’s what you know. It’s what you’ve done your whole life. A lot of guys get into coaching, whether it’s on the college, pro, or even high school level. A lot of guys get into the television side and try to stay close to it somehow.

When you leave the NFL, it’s almost like you’re in the draft again, but you’re kind of drafting yourself now. You have to understand everything that you’ve learned throughout your NFL career, how that can help you moving forward. A lot of guys get into the business and financial sectors. That’s good. Not only are they in a position to understand their own personal finances, but they’re able to work on other portfolios and see how money is supposed to be handled. They can pass that information along to other professional athletes, and to others.

Harold Pollack teaches social service administration at the University of Chicago. He is co-author, with Helaine Olen, of the new book The Index Card: Why Personal Finance Doesn’t Have to Be Complicated.