Promoting Individual Retirement Saving

The discourse on individual retirement saving continues to heat up! Recently a series of forums have been held on this topic here in DC. In late April, we had the chance to attend one such forum which was moderated by J. Mark Iwry of the Brookings Institution and Retirement Security Project. Presenters included Teresa Ghilarducci of the New School for Social Research, Gene Sperling of the Center for American Progress, and David C. John of the Heritage Foundation and Retirement Security Project.

To provide some context for the discussion Mr. Iwry opened by making a few statements regarding retirement income. He first insisted that the retirement security problem is largely a health care problem because it accounts for such a large amount of retiree out-of- pocket costs. He followed by insisting that program and policy change needs to target moderate to lower income people and utilize more saving incentives.

Ms. Ghilarducci's points of emphasis were that those currently in their 40s and 50s are likely to be the first generation to experience a significant decrease in living standards in old age. However, EESI data shows that this is not a new problem for women and especially women of color. Her presentation centered a Guaranteed Retirement Accounts (GRAs) proposal. Under the GRAs plan, most employers and workers would be required to contribute. Contributions would be lightly subsidized, returns would be guaranteed, and the investment funds would be managed by the federal government. The GRAs would serve as a supplement to Social Security income.

Mr. Sperling's presentation focused on the idea that we need to "disrupt the system as little as possible" by implementing a portable saving system with a matching tax credit -- the Universal 401(k) Plan with automatic enrollment features.

Mr. John’s proposal focused on individual responsibility and individual savings. He made the case that savings would increase with automatic enrollment (employee participation as the default option). He also encouraged employers and employees to take advantage of existing payroll deduction systems.

While we always support increased dialogue surrounding retirement security, it was clear that this forum’s focus was primarily on those with the means to save. The reality is that few and fewer Americans have the extra resources to do so. A robust discussion on retirement security should include program and policy changes that would positively affect those working so hard each day just to make their basic ends meet, that do not have the extra funds to allocate to savings. With the rising cost of necessities such as food and gas this cohort is only going to balloon. This growing majority needs solutions that acknowledge and honor their years of work and does not penalize them for their self-sufficient manner during their working years. We hope that advocates and policymakers find the Elder Economic Security Initiative useful in informing the various proposals. The difficulties faced by low wage workers and the cumulative disadvantage faced by the majority of women in the workforce are largely left out of the discussion though they are an integral part of the spectrum.

For more information on the forum described above, please visit the following webpage: http://www.aarp.org/research/ppi/policylive.html

Comments Please: We must focus program and policy discussions to building upon current structures in a manner that reasonably recognizes the current economic landscape. Specifically, what kinds of program do you think those who are most vulnerable during their retirement years would benefit from the most, with regard to retirement income adequacy?