Giving American Retirement Security the Attention It Deserves
By Ric Edelman and Jason Grumet
Millions of hard-working Americans lack the financial tools, opportunities and information necessary to plan for retirement. That is why we have launched the Funding Our Future campaign, to highlight this problem for policymakers and urge them to pursue solutions.
Through our work, we’ve come across people from every walk of life who share similar fears about their financial future. A few stand out: We met a recent college graduate with $30,000 in student debt who was trying to balance contributing to a retirement plan and supporting her widowed mother. We interviewed a manager at a non-profit organization who built up retirement savings during 40 years in the private sector but still worried she would outlive them. And we spoke with a young trainer in the fitness industry who did not have a workplace retirement savings option and did not earn enough to save on his own.
These Americans are not alone in their struggles to save for retirement. Nearly 50 percent of workers do not participate in a workplace retirement savings plan. Even more troubling, a full 40 percent of Generation Xers are projected to run short of money in retirement, according to the Employee Benefit Research Institute. For all their differences, one thing that Baby Boomers and Millennials have in common is insecurity in retirement.
The pension, a former financial pillar for many Americans, has long been on the decline. Those with workplace retirement savings plans have entered a “do-it-yourself” 401(k) world, where they must make determinations about how to save for the future. More concerning, over one-third of private-sector workers have no access to any type of plan.
For an American society that often struggles with financial literacy, the amount of personal initiative and effort that our current system requires is troubling.
Even after individuals have built up their nest eggs, it isn’t always clear how best to preserve them. Many do not have access to tools that would turn those savings into a stream of income, while others avoid these options given their cost or complexity. For an American society that often struggles with financial literacy, the amount of personal initiative and effort that our current system requires is troubling.
These problems are exacerbated by severe cracks in the financial foundation of Social Security, a program that 62 million Americans relied upon for income in 2017. Without action by policymakers, the program will likely be unable to pay full benefits in just 16 short years. That is not an outcome any of us want to see.
To be clear, the current retirement structures are working reasonably well for millions of people who are on track to accumulate a healthy amount of savings and have them last through retirement. Even for these individuals, however, the complexity and fragmented nature of our system should be improved.
That’s where the Funding Our Future campaign comes in — to build bipartisan awareness of these challenges and publicize the tools to fix them. The Bipartisan Policy Center and Ric Edelman are pleased to be joined in this effort by the Aspen Institute’s Financial Security Program, BPC Action, the Employee Benefit Research Institute, Prosperity Now, UnidosUS, and the Women’s Institute for a Secure Retirement on this initiative. Each of us have different perspectives on the precise challenges and solutions, but all of us agree that the status quo is neither sustainable nor acceptable.
Some of the solutions that exist to these challenges could have broad bipartisan support. For instance, the Bipartisan Policy Center recently convened a commission on how to improve retirement security and personal savings. The report’s recommendations included ways to increase access to workplace retirement savings plans and modernize the Social Security program. If fully implemented, the commission’s proposals were estimated to increase retirement savings for middle-income Americans by 50 percent, cut the elderly poverty rate by one-third, and make Social Security sustainable.
Another alternative is Ric Edelman’s creative proposal to have the federal government invest $7,000 per American child at birth. He projects that placing these funds in an investment portfolio for 35 years would generate enough money to cover Social Security retirement payments and even pay back the government for its initial investment, among other benefits.
Ensuring a comfortable retirement for all Americans is within reach.
Beyond these proposals, several of our partners (and many others) have come up with retirement solutions. The approaches range from helping lower-income Americans build savings, to encouraging retirement innovations at the state level, to improving financial literacy among all Americans.
Despite this array of possible solutions, leadership from policymakers has, with few exceptions, been lacking. Like saving for retirement itself, it is difficult to focus on a persistent problem that is not an immediate crisis.
Our campaign will help call attention to the need for action. It emphasizes highlighting solutions that could make savings easier for people of all ages, help retirees transform their nest eggs into lifetime savings, and save the Social Security system for current and future generations. The new Funding Our Future website will be updated with educational resources to help increase awareness about these important issues. It also calls on the public to get involved and take control of their financial future.
Ensuring a comfortable retirement for all Americans is within reach. By engaging with the Funding Our Future campaign, we hope the public will feel empowered to learn more about these issues and motivate their elected leaders to fix these long-standing challenges.
