Bogle is founder of the Vanguard Group and president of Vanguard's Financial Markets Research Center.
Retirement security for at least half of our citizens is going to come from Social Security only. They can't possibly save enough of their meager incomes. Bringing up a family is expensive.
So, whether we like it or not, Social Security is where we've got to begin. The best way to improve the security of Social Security is to do some simple things to fix the system. A good example would be raising the retirement age. Our lives have gotten much, much longer since the Social Security Act was passed in the early 1930s. Secondly, do a small adjustment to the cost-of-living adjustment. Finally, there could be some limited means-testing on the receipt of Social Security at the highest levels of income and wealth.
Now the private system is really pretty easy to fix but, again, there's no will to do it. The solution is entry requirements for offering funds in the defined-contribution [401(k)] field. We need some kind of a gatekeeper -- let's call it a Federal Retirement Board -- that should and would focus on index funds. I know a lot of people don't want that much government, but the way things are going now, we need something.
I'd like to say we ought to require index funds, but I don't think the world is ready to do that. As investors wake up to the shoddy deal they get, they're going to move to a place where they get the market return. Investors aren't going to be stupid forever. Since time is money in this business, let's give them a much better shot at doing the right thing now.