Today, Senator Tom Harkin (D-IA), Chairman of the Senate Committee on Health, Education, Labor and Pensions, released a new report examining the retirement crisis in America and laying out a bold proposal to rebuild the private pension system. The report comes after a series of HELP Committee hearings on retirement security that Harkin has convened over the last two years.
"After a lifetime of hard work, people deserve the opportunity to live out their golden years with dignity and financial independence. But for most of the middle class, the dream of a secure retirement is slipping out of reach. We are facing a retirement crisis," Harkin wrote. "I intend for this report to be the starting place in an evolving discussion about retirement security. Over the coming months, I plan to bring together business and labor leaders, policy experts, advocates, and my fellow lawmakers to implement necessary reforms. The retirement crisis is simply too big to ignore, and it is time for us to roll up our sleeves and get to work."
The findings of the report include:
The difference between the amount of savings working-age Americans have accumulated for retirement and the amount they should have already saved is $6.6 trillion.
Half of all Americans have less than $10,000 in savings.
Just one in five working Americans will receive pension income during retirement.
In 2010, nearly 6 million Americans over the age of 65 were living in poverty, and that number is expected to continue to grow in the coming years unless action is taken to strengthen retirement security.
To address the retirement crisis, Harkin proposes to rebuild the private pension system by creating a new type of privately-run retirement plan -- "Universal, Secure and Adaptable (USA) Retirement Funds." USA Retirement Funds combine the advantages of traditional pensions -- e.g., lifetime income benefits and pooled, professional management -- with the portability and ease for employers of a 401(k). That will give middle class families the opportunity to earn secure retirement benefit that they take with them as they change jobs and that they cannot outlive. Importantly, USA Retirement Funds also make it simple for employers to offer a benefit without having to take on all of the risk and administrative burden.
USA Retirement Funds will be especially beneficial to small businesses. "When I travel around Iowa and meet with small business owners, it is clear to me that they care about their employees and their communities," Harkin said. "Small business owners think of their employees like family, and they want their employees to be able retire. But for most, setting up a pension is just too complicated or time consuming. USA Retirement Funds make it possible for them to give their employees the chance to earn a retirement benefit without all of the headaches."
Harkin's plan would also ensure that the 75 million Americans without access to a workplace retirement plan are able to prepare for retirement by participating in a USA Retirement Fund. Workers without a pension or a 401(k) would be able to utilize existing payroll withholding systems to make automatic contributions toward their retirement. That would involve little, if any, additional administrative burden, and employers would receive a credit to help off-set the cost. This approach builds on the automatic features in some 401(k) plans, which have proven to drastically increase retirement preparedness.
Harkin's proposal to solve the retirement crisis draws on aspects of the current system that have a proven track record of success and is similar to one that will be included in a forthcoming report by the Center for American Progress. It is intended to start a discussion, so people with ideas, suggestions, or stories to share should contact Chairman Harkin by:
Sending emails to: Retirement_Security@help.senate.gov
Sending letters to: Retirement Security Project
Senate Committee on Health, Education, Labor, and Pensions
428 Senate Dirksen Office Building
Washington, DC 20510