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Retirement in America: Security for Some, Crisis for Others

By Steve Bell

Friday, August 1, 2014

Jacob Morello contributed to this post.

Five of the foremost experts on different phases of the American retirement system met at the Bipartisan Policy Center (BPC) on July 30 in an attempt to outline the real state of workers’ preparedness for retirement. While the main theme of the panel was “heterogeneity,” meaning that every individual faces a different retirement challenge, they all agreed that “it’s a crisis for you if you’re not prepared.”

Panelists included James Poterba of MIT and the National Bureau of Economic Research; Andrew Biggs of the American Enterprise Institute; Ben Harris of the Brookings Institution; Lynn Dudley of the American Benefits Council, and Kristi Mitchem of State Street Global Advisors.

The event was held under the auspices of the BPC Commission on Retirement Security and Personal Savings (CRSPS), a 19-member group representing a wide range of expertise and stakeholders in the retirement arena. Co-chairs of the commission are former Sen. Kent Conrad (D-ND) and James Lockhart, now an executive with W.L. Ross & Co. and former head of the Pension Benefit Guaranty Corporation.

While all agreed with Poterba’s overview that American retirement is a three-legged stool—personal savings, employer-provided retirement plans, and Social Security—panelists emphasized different aspects of the retirement challenge.

Poterba and the rest of the panelists agreed that reforms to the present system will not work if they are “one size fits all.” Future retirees fall into many different categories, including: those who will depend almost entirely on Social Security; those who do not have sufficient work histories to qualify for Social Security; those who have retirement plans from their workplace, as well as Social Security; and those who have Social Security, retirement income from workplace plans (e.g., pensions, 401(k)s), and other personal savings, such as in Individual Retirement Accounts (IRAs).

Foremost among challenges in the present system that the panelists mentioned are access to tax-advantaged retirement accounts; broadening the number of businesses, especially small businesses, that offer retirement plans to their employees; help for those workers who don’t qualify for Social Security benefits nor have private pension plans; and improving financial literacy among all Americans facing retirement.

In the spring of 2015, after a year of deliberations, the Commission will release a series of politically practical reforms that simplify the retirement system and improve access to all Americans.

In the coming weeks, commission staff will publish a series of blogs that provide context on major issues, including defined benefit pensions, defined contribution retirement plans, longevity and long-term care risk, Social Security, the fate of the Pension Benefit Guaranty Corporation’s (PBGC) multiemployer fund, among other issues.

KEYWORDS: 401(K)S, INDIVIDUAL RETIREMENT ARRANGEMENTS, SOCIAL SECURITY