Retirement Security

The Asset Building News Week is a weekly Friday feature on The Ladder, the Asset Building Program blog, designed to help readers keep up with news and developments in the asset building field. This week's topics include inequality, retirement, the workforce, and financial services.

The Asset Building News Week is a weekly Friday feature on The Ladder, the Asset Building Program blog, designed to help readers keep up with news and developments in the asset building field. This week's topics include housing, retirement, wealth disparities, employment, and government assistance.

The uproar from the financial industry over President Obama’s proposed “retirement cap” is preposterous, but unsurprising. In the usual vein, the industry presents the proposed limit as an attack on the hard worker and diligent saver, despite the fact that it comes nowhere close to affecting even the top 1 percent of earners. In fact, it doesn’t touch the top one-tenth of one percent. For every 10,000 IRA account holders, a whole six accounts would be affected by the limit. That number is even lower for 401(k) accounts. As Fred Hiatt for the Washington Post explained, the employee-benefit lobby quickly mobilized to forestall this outrageous “’socialist idea’ of ‘raiding’ retirement accounts.” And it is succeeding.

The Asset Building News Week is a weekly Friday feature on The Ladder, the Asset Building Program blog, designed to help readers keep up with news and developments in the asset building field. This week's topics include retirement security, racial wealth disparities, housing, and homelessness.

Until recently, the “three-legged stool” was the reigning metaphor for achieving retirement security. Workers could anticipate being supported as they aged by a combination of Social Security benefits, private pension income, and personal savings. This model no longer holds. Traditional pensions have almost disappeared from the private workforce, personal savings are low, and Social Security benefits face political and actuarial threats. The new model relies on defined contribution (“DC”) plans like the 401(k).

The Asset Building News Week is a weekly Friday feature on The Ladder, the Asset Building Program blog, designed to help readers keep up with news and developments in the asset building field. This week's topics include financial security, housing, gender equality, the safety net, and workforce and consumer protection.

As we’ve been saying for many years, America faces a retirement savings crisis. We think Congress has a good opportunity to address the crisis, which is why we recently sent comments to the House Ways and Means Committee recommending ways to fix the nation’s retirement system. However, we’ll freely admit that there’s more than one way to skin a cat.

Today, the Asset Building Program is releasing a new issue brief about an innovative, state-level response to the retirement savings crisis – the California Secure Choice Retirement Savings Program. Currently, over six million private sector workers in California lack access to a retirement savings account through their employers; nationwide, only about half the private workforce has access to such accounts, and low-income workers have particularly low rates of access. California Secure Choice (“CSC”) would automatically create an account for all private sector workers in the state who lack coverage through their workplace, thus enabling a much broader swath of the population to accumulate essential savings to supplement their Social Security benefits. Below are some key features of the program:

Editor's note: This post was originally published on Zócalo Public Square. In Washington, President Obama is expected to present his plans for changes in entitlements, including Social Security. Congress is taking up the debate. But when Social Security is discussed these days, it’s often in the context of the budget–even though the program’s purpose is to provide retirement security. So we asked: Given the country’s fiscal realities, is there a better way to enhance Americans’ retirement security? Below are two ideas.

Executive Summary
The conventional wisdom about Social Security is profoundly misguided. According to today’s mistaken consensus, the U.S. as a society cannot afford to allocate the money to pay for the present level of Social Security benefits for retirees in future generations. The solution, it is widely argued, is to cut benefits – either directly by means-testing or indirectly by raising the retirement age or allowing inflation to erode their real value over time. In this narrative, tax-favored private savings vehicles like 401(k)s and IRAs should be expanded in order to compensate for the allegedly necessary cuts in Social Security.

Anne Kim, Senior Policy Strategist at CFED, has a piece today in the Washington Monthly that looks at the flaws in our current retirement savings landscape. In short, our current system just isn't meeting the needs of many Americans, who have a variety of short, medium and long term savings needs. Our current "toolbox" of retirement savings options simply isn't meeting this diverse range of needs, as evidenced by recent reports that over a quarter of Americans have made withdrawals from their work-based retirement accounts for non-retirement needs. As Kim explains, "For many people, employer-sponsored retirement plans are the only mechanism “forcing” them to save. Yet the retirement-only focus of the current system isn’t versatile enough to meet people’s real needs—especially to cope with emergencies such as a job loss or a horrifically expensive car repair."