— The race is on to save Americans’ golden years.
aging of baby boomers, the looming funding crisis for
Social Security and the meager size of many workers’
nest eggs — if they have them at all — have spurred
candidates, lawmakers and experts to propose ways to
boost retirement savings.
even are talking about making changes to Social
Security, long known as the third rail of politics
because touching it was thought to be a career-killer.
The looming financial train wreck awaiting the popular
entitlement program and the increasing number of older
Americans who depend on it hasn’t left much of an
consensus has developed that the nearly four-decade-old
transition from employer-sponsored pensions to
individual 401(k) plans has been a failure for all but
the wealthiest Americans and that something needs be
done — soon.
point was driven home June 24 when markets convulsed
over Britain’s vote to leave the European Union. Like
the financial crisis and 2007-09 recession, which
drained 401(k) accounts and pummeled Americans’
finances, the British vote shook retirees.
longer we wait, the more draconian the solutions will
have to be," said former Sen. Kent Conrad, D-N.D.,
who co-chairs the Commission on Retirement Security and
Personal Savings launched by the Bipartisan Policy
Center think tank.
Barack Obama has pushed retirement savings initiatives,
presidential candidates have talked about Social
Security on the campaign trail and several states,
including California, are taking their own steps to help
workers put away more money.
more activity around retirement savings than there has
been in 20 years," said Teresa Ghilarducci, an
economics professor at the New School in New York and
expert on the issue.
illustrate the dire situation facing millions of
22 percent of people ages 45 to 59 said they have no
retirement savings or pension, according to a recent
Federal Reserve study. And only about half of
private-sector workers participate in a retirement
savings plan, Bureau of Labor Statistics data show.
workers are worried about just making it to the next
paycheck, let alone saving for retirement, particularly
after the financial hit from the recession. About 46
percent of adults in the Fed survey said they did not
have enough saved to cover a $400 emergency expense.
Security is supposed to be the backstop for such
cash-strapped Americans. But that safety net is fraying.
program’s trust fund for retiree benefits will run out
in 2035, Social Security’s trustees reported last
month. The program would keep running, but only with
incoming taxes from workers. That would mean it would
have to cut benefits by 23 percent unless Congress and
the president agree to put more money into the system.
two presumptive major-party presidential nominees are
promising to deal with the problem but have not released
have said from the very beginning, we are going to
protect Social Security," Hillary Clinton said at a
Democratic debate this spring.
opposes increasing the retirement age, reducing cost of
living adjustments, cutting benefits or privatizing the
bolster the system and boost some benefits, Clinton said
she is open to raising the $118,500 cap on income that
is subject to Social Security taxes so the wealthy would
contribute more. Her rival for the Democratic
nomination, Bernie Sanders, wants to tax income up to
Trump, the presumptive Republican nominee, has been much
less specific, saying he would preserve Social Security
by increasing economic growth. He criticized his primary
opponents for proposing cuts to the program, such as
raising the retirement age and reducing benefits for
higher-income recipients. Trump also indicated he
opposed Democratic plans to increase benefits.
going to save your Social Security as is," he said
at an April town hall meeting in Wisconsin. But a
campaign policy advisor recently said Trump was open to
enacting bipartisan changes to the program.
who has spoken with the Clinton campaign on retirement
issues, said, "There’s been a sea change in the
way politicians view Social Security.
reason why we’re talking about expanding Social
Security is precisely because the retirement crisis is
bigger than people thought and more immediate than
people thought," she said.
Security’s precarious finances are only part of the
problem, experts said. Americans need to save more on
their own to supplement Social Security benefits — now
an average of about $1,200 a month — as life
expectancy is increasing.
created the 401(k) provision of the tax code in 1978 to
give workers a tax break on deferred income. In 1979,
the year before that took effect, about 38 percent of
private-sector workers participated in a traditional,
defined-benefit pension plan, according to the Employee
Benefit Research Institute.
401(k) plans became more popular, the number of people
with traditional pensions began falling. It was down to
15 percent last year, the Bureau of Labor Statistics
61 percent of private-sector workers had access to a
401(k) plan last year, but only 43 percent participated.
highlights a big problem with 401(k)s: People have to
elect to contribute.
wants guaranteed retirement accounts funded by mandatory
paycheck deductions that would earn "a secure,
modest, guaranteed rate of return" paid out in an
annuity for as long as a person lives.
Bipartisan Policy Center commission, on which she
served, issued a lengthy report last month proposing a
comprehensive plan. It included raising the cap on
income subject to the Social Security tax to $195,000 by
2020, gradually increasing the retirement age for full
benefits to 69 by 2070 and creating retirement security
plans for private-sector workers.
plans would be run by third-parties, relieving
businesses of the administrative burdens and financial
liabilitywhile providing new incentives for automatic
enrollment, said Conrad, the former senator.
only thing the employer would need to do is do a payroll
deduction," he said. "It’s critically
important you have not only Social Security’s future
assured, but you have additional savings vehicles that
you take advantage of, especially at work."
Obama administration has tried to boost retirement
savings outside of Social Security. Last year, the
Treasury Department began offering starter retirement
accounts called myRAs. But the administration has been
unable to push through a proposal to require businesses
who do not offer retirement plans to automatically
enroll employees in individual retirement accounts.
federal action stalled, some states are acting on their
California, lawmakers are close to creating the first
state-run retirement plan for private-sector workers
whose employers don’t offer one. The proposal,
awaiting legislative approval, would enroll workers
automatically and let them save 2 percent to 5 percent
of their wages unless they opt out.
other states have passed or are considering similar
plans requiring employers to automatically enroll
workers in some form of retirement savings account.
has been pushing for state action on automatic
enrollment until it can be done nationwide.
said the state plans are "attempts to deal with a
very real need," but he believes a national
solution is needed.
emphasized to people how critically important Social
Security really is because that’s the one thing they
can really depend on," he said.
I think it told a lot of people you’ve got to pay more
attention to your own situation. You just can’t hope
that something good’s going to happen. You’ve got to
plan for it, and you’ve got to work toward it,"