The economy is strong - but Americans are still anxious about retirement

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The economy is strong - but Americans are still anxious about retirement

Social Security

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  • Despite a strong economy, Americans remain anxious about retirement security.
  • The system does not provide enough income to allow Americans to maintain their standard of living into old age.
  • Transforming the retirement system will require innovative thinking, public and private sector leadership, and bipartisanship.

Despite an expanding national economy, rising stock market, and historically low unemployment rate, Americans remain anxious about their finances. This unease is especially acute in one crucial area: retirement security. While Social Security remains an indispensable foundation, it does not provide enough income to allow Americans to fully maintain their standard of living into old age. Many in the previous generation also had corporate defined benefit (DB) pensions to rely on. But the responsibility to supplement Social Security now falls largely on families themselves, usually through employer-sponsored defined contribution (DC) accounts like 401(k)s or individual retirement accounts (IRA).

The results of this "risk shift" have been mixed. For those who have access to a workplace plan and steady and ample income, the DC system can be effective. For example, roughly half of plan participants surveyed in 2018 by J.P. Morgan feel they will be able to retire when they want, with savings to last throughout their golden years, up from 30 percent in 2012. But nearly half of workers have no access to workplace retirement plans, and the proliferation of "gig economy" and other contingent workers has the potential to leave even fewer Americans with traditional workplace benefits. Roughly 40 percent of American workers report having less than $10,000 saved for retirement. About half of households led by workers approaching retirement age have no money at all in a 401(k) or IRA.

Even those with plans may have difficulty finding the funds to set aside. Despite low unemployment, wage growth remains slow. Income swings from month-to-month are common, and that volatility often goes hand in hand with higher debt and greater difficulty planning for the future. How can policymakers and businesses address these challenges and the financial anxiety they produce? Our three organizations believe that the nation's retirement system must be both more inclusive - giving all Americans the chance to save in a workplace retirement plan - and
more holistic - recognizing that, in addition to funding a nest egg, families today need help building emergency savings, smoothing month-to-month consumption, and paying back student loans.

In many ways, these multiple aims are complementary. Workers struggling to weather financial shocks or meet their short-term obligations are unlikely to be steady retirement savers. And, in fact, research shows that those without ready access to $400 are 2.6 times more likely to make a premature withdrawal from a retirement account. Achieving a more inclusive and holistic retirement system will require innovative thinking, public and private sector leadership, and a spirit of bipartisanship. On the innovation front, there is reason for optimism. Incumbents and startups alike are using technology to lower costs and expand offerings, with some experimenting with exciting new
initiatives like rainy-day savings accounts, pay advance, and student loan repayment.

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Transforming the retirement system will also require fearless leaders, which is why our organizations joined forces to launch the Aspen Leadership Forum on Retirement Savings. The Forum is an annual gathering of senior officials from industry, government, academia, and advocacy, designed to conceive breakthrough solutions to the retirement savings gap and build the leadership capacity necessary to advance them. The Forum allows leaders from a diverse
range of organizations to build trust and work together to produce results. Our second annual meeting was held in April, and today we're releasing a report summarizing the proceedings. The "CliffsNotes" version: participants were united in the urgent belief that we must close the workplace retirement plan coverage gap, expand access to short-term savings, and embrace increasing longevity by spurring the inclusion of guaranteed and non-guaranteed lifetime income options to manage asset drawdown. Building consensus on specific next steps will take time, but planning for the 2019 Forum is well underway, and we intend to stay the course and build levels of leadership and trust until retirement security for all is achieved.

Finally, the elephant in the room: bipartisanship. Our country's politics today are of course highly polarized, and we don't pretend to have a magic elixir to fix that. But historically, retirement legislation - from the Employee Retirement Income Security Act of 1974 to the Pension Protection Act of 2006 - has been crafted by leaders in both parties working across ideological lines. Even in the current environment, numerous bills that would make substantial improvements to the system - for example, the Retirement Enhancement and Savings Act and the Strengthening Financial Security Through Short-Term Savings Accounts Act - have strong bipartisan support.


At the state level, leaders in both parties have championed retirement programs for employees without workplace savings options, which will extend access to millions of workers. These and other innovative programs will provide critical insight into effective plan design as we seek to increase access while maintaining a commitment to workplace savings. Additionally, we are encouraged that President Trump recently added his voice to those calling
for expanded access to workplace retirement accounts, issuing an Executive Order that directs his administration to consider regulatory changes that would make it easier for small businesses to offer plans. Building financial security for Americans won't be easy - indeed, it's a generational challenge inextricably linked to wage stagnation, income inequality, and slow growth. But we need to start somewhere, and our organizations are confident that, even in these contentious times, consensus-building and action-taking for the good of the American people is still possible.

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