Running out of money in retirement is the top concern for Americans. It’s not surprising when you consider that nearly 70 percent of people ages 55 to 64 have less than a year’s salary in retirement savings, a number far below what they’ll need to maintain their standard of living in retirement.
The increasing lack of retirement security and finding ways to solve the ongoing retirement crisis were the focus of a panel hosted by Kathleen Kennedy Townsend, director of retirement security at the Economic Policy Institute and Teresa Ghilarducci, Schwartz Professor of Economics at the New School for Social Research earlier this month in Washington, D.C.
“One of the fundamental rights needs to be that if you work, then you should be able to retire with dignity; but we are failing in that mission, said panelist Tony James, executive vice chair of Blackstone. James co-authored the book Rescuing Retirement with Ghilarducci.
To date, 10 states have enacted laws designed to improve retirement security, and many others have introduced similar legislation; but state programs have their limits. To have real retirement security, a federal retirement plan is necessary. One plan that could garner bipartisan support is the guaranteed retirement account. GRAs are like the once-popular defined-benefit pension plans that offer lifetime income. These accounts are universal, affordable, portable, and provide workers with a monthly check that lasts them the rest of their lives.
“Retirement security for everyone is the kind of social contract we need to have in America,” said AFT President Randi Weingarten, who was also part of the panel. Weingarten said GRAs offer the best way to keep the social contract with those who have worked their entire lives.]
And the 55 million workers who are employed by businesses that do not offer a retirement plan can contribute 1.5 percent of their pay to a GRA that would be matched by their employer. GRAs create a way to save for retirement and supplement Social Security, added Weingarten.
Earlier this year, Weingarten and Kennedy Townsend wrote an op-ed about GRAs as a solution to the retirement security crisis.
In years past, the defined-benefit pension offered a sense of security, said James. Most Americans who have pensions today have them in the form of a 401(k), also known as a defined-contribution plan. Although the idea of giving workers a choice and taking the obligation away from the employer seemed enticing, it has been a massive failure, said James. “The loss of the defined benefit has created an anxiety for Americans. The 401(k) has failed people, and employers see no real benefit in having them. That is why it will take some government intervention to solve some of the problem of retirement security.”
“The idea of a guaranteed retirement account is worth exploring,” said panelist Chad Bolt, legislative assistant to Sen. Sherrod Brown (D-Ohio). “GRAs could crack the code for retirement security.”
“We must provide a fully funded retirement system for all Americans,” noted Ghilarducci. “Kudos to the states that are trying. Change starts with the states, so we know we’re on the road to a solution.”