By Sally Greenberg, NCL Executive Director
Consumer organizations do so much great work in the financial services area — working against predatory loans, fighting outrageous fees and surcharges on credit cards, demanding truth in lending and transparency in credit scores. But often our attention is focused on the here and now. What about working to ensure that consumers have a secure and adequate retirement?
NCL was invited to a meeting last week with leaders of the Retirement USA, a group formed by the Economic Policy Institute, the Pension Rights Center, the National Committee to Preserve Social Security and Medicare, and the Service Employees International Union, which holds a seat on the NCL Board. Retirement USA’s goal is to get widespread agreement on a series of principles that move Americans toward a far more sound retirement system than what exists today.
The facts about Americans entering retirement are grim:
- Only half of full-time private-sector employees participate in a retirement system. The participation rate drops to 45 percent if part-time employees are included.
- Only 20 percent of American private-sector workers participate in traditional pension plans that provide guaranteed, lifetime benefits.
- 30 percent of American private-sector workers rely entirely on 401(k) plans to supplement Social Security.
- 2/3 of 401(k) plan investments are in stocks, and stocks have lost more than half their value since 2007.
- Half of all workers with 401(k)-type plans had less than $25,000 in their accounts – before the stock market meltdown – and the median 401(k) balance for workers over the age of 55 was only $40,000.
- 64 percent of older Americans depend on Social Security for more than half of their income, and one of five receives all of their income from Social Security.
- Social Security benefits for the average retiree are now $13,863, just barely more than the minimum wage.
- Half of people age 65 and older receive income of less than $17,382 a year from all sources.
Retirement USA has laid out a series of important principles that would – if adopted – help to secure adequate retirement for all workers:
- Universal coverage – every worker should be covered by a retirement plan in addition to Social Security.
- Secure retirement – retirement shouldn’t be a gamble; workers should be able to count on a steady lifetime stream of retirement income to supplement Social Security.
- Adequate Income – everyone should have an adequate retirement income after a lifetime of work.
- Shared responsibility – employers, employees, and the government should share this responsibility.
- Required contributions – employees and employers should be required to contribute a specified percent of pay; government should subsidize lower income workers.
- Contributions to the system should be pooled and professionally managed to minimize risk.
- Payouts should only be permitted before retirement except for permanent disability.
- Benefits should be paid out over the lifetime of retirees and not given in a lump sum.
- Benefits should be portable when workers change jobs.
- Voluntary contributions should be permitted.
- Efficient and transparent administration of benefits by a government agency or a private nonprofit.
- There ought to be effective oversight of the new system by a single government regulator dedicated solely to promoting retirement security.
The National Consumers League supports these principles, especially in light of the dire economic reality most American workers face when they retire. The League’s early leaders were strong supporters of Social Security, which is a lifeline to older Americans, but was never intended to be their sole support. Retirement USA has laid out the blueprint for reform. Now it is time for consumer groups, unions. and others to make that blueprint a reality.