Time to protect, improve Social Security
According to the National Institute on Retirement Security, 57% of Americans do not own any retirement account assets. That means millions of U.S. workers aren’t saving enough for retirement and will not be able to adequately supplement their Social Security benefits when they retire. We know that those without access to retirement savings will experience a reduced quality of life and greater debt and anxiety in their later years.
Closing this retirement savings gap is becoming more difficult as access to workplace savings is trending downward while companies make the switch from traditional, defined-benefit pensions to cheaper 401(k)s. And of those workers who do have access to these retirement plans, only about half are participating.
This trend comes as Social Security provides fewer benefits than it once did and current and future retirees need more income to sustain themselves through retirements. With people living longer, and health care and everyday costs going up, seniors need more retirement savings to be able to retire with dignity.
If we do not act swiftly to address this crisis, the number of seniors (over age 62) living below or near the poverty line will soar to 21.8 million by 2045 — up 25% from 17.5 million in 2018.
So what can we do?
It’s time to protect and improve Social Security.
Social Security is often the only source of income for many seniors, and nearly two-thirds of beneficiaries aged 65 or older receive 50% or more of their total income from monthly Social Security checks. For one-third of elderly beneficiaries, Social Security provides 90% or more of their income. As the foundation of financial security for many Americans, Social Security provides retirement, disability and dependent benefits. It is Congress’ responsibility to ensure we uphold the federal government’s promise to Americans to retire with dignity, which President Joe Biden calls a “sacred trust.”
With many living on a fixed income, inflation has hit seniors the hardest. Currently, Congress is considering Social Security 2100: A Sacred Trust, a bill that would improve benefits and strengthen the program’s solvency. Social Security 2100 would also provide a modest benefit bump for all beneficiaries and improve the annual cost-ofliving adjustment to better reflect the costs seniors face, making benefits more resilient to inflation.
The bottom line: Social Security is critical to our society and we must protect this program for future generations. It has been 50 years since Congress expanded Social Security benefits and 39 years since it took action to strengthen solvency. The time to act is now.
How do we move forward? To truly meet this looming crisis, we need a comprehensive approach to retirement savings. A meaningful solution will build on Social Security and include policy changes where everyone, especially young workers, women and workers of color, can easily save for retirement and have the ability to carry any retirement savings with them from job to job. Here are some ideas: Make it easier to track and roll over accounts when switching jobs to stem retirement plan leakage. More than one in three of plan participants withdraw part or all of their retirement plan assets following a job change, with the lost savings amounting to between $60 billion and $105 billion per year. Decoupling retirement plans from individual employers could alleviate job-change-induced retirement savings loss.
Expand state-sponsored savings programs. There are ways to support the workers in companies that do not provide retirement options. State automatic individual retirement account programs blossomed when Oregonsaves launched the nation’s first pilot plan to capture workers who weren’t building nest eggs in 2017. Since then, 14 states — including Connecticut’s Myctsavings program — have begun some form of government-sponsored auto-savings plan.
Expand savings options for short-term emergencies. According to the Federal Reserve, more than one in three Americans don’t have enough savings to cover a $400 emergency. Add in the additional challenge of low wages, student loan debt and expensive health care, saving for retirement is a near-impossible dream for many. Pairing an automatic short-term savings plan with a workplace retirement plan could make saving for retirement more achievable for everyone.
This Friday at 11 a.m., we are co-hosting with Kathleen Kennedy Townsend, U.S. Secretary
of Labor’s Representative for Pensions and Retirement, a conversation on this topic and potential solutions with Connecticut and national experts at the Hartford Public Library. This is the second in a national series of conversations to discuss solutions to the retirement crisis and the public is invited to attend and ask questions. There is an answer to the retirement savings and security questions and it is more than individual behavior and choices. It is essential that all of us, in the private and public sectors, continue to work together to better understand and tackle this daunting but fixable challenge.