Few things should unite Americans across generations like the fear of having too little in retirement.
Longer lives, changing workplaces, and the rising costs of necessities such as housing and health care, as well as the damaging effects of the Great Recession, have made it difficult for many Americans to save for retirement. And that’s true whether they are in the last few years of their working lives, or just getting started.
One-third of baby boomers have saved nothing for retirement, and only a quarter of Americans nearing retirement will have enough to do so comfortably.
Meanwhile, a 2016 poll found just 7 percent of Americans ages 18 to 30 had access to a pension, while the number that offered employer-based retirement plans has fallen steeply in recent decades as well. Personal savings rates have fallen for that generation too.
It’s a “looming crisis,” as U.S. Sen. Susan Collins, R-Maine, said in a recent op-ed.
Along with U.S. Sen. Maggie Hassan, D-New Hampshire, Collins has introduced the Retirement Security Act, which would make it easier for small businesses to join together to offer employer-based retirement plans. It would also improve the employer matches in those plans.
Collins has also introduced the SIMPLE Plan Modernization Act with Sen. Mark Warner, a Virginia Democrat. The bill would make one specific type of retirement savings plan more attractive to employers and workers.
Both aim at strengthening one leg of the three-legged retirement savings stool, which has grown wobbly during the working lives of the boomers.
Social Security benefits only cover of portion of what a typical American needs for retirement, and those benefits may be cut by as much as 25 percent starting in 2035.
Personal savings, the second leg, has dropped on average to worrying levels.
Certainly, defined-benefit plans such as pensions, which offered the security of certain payouts and used to be popular, are uncommon today. And, as we mentioned above, other employer-based retirement plans are getting harder to find too — according to Sen. Collins, 46 percent of Mainers don’t have access to one.
Still, many small businesses want to offer employer-based plans, and employees would be more likely to save if they had such a plan.
Collins’ bills would make it less costly for businesses to offer and contribute to retirement plans, and more convenient for employees to save.
There are other avenues for tackling the problem. California is putting in place a state-run retirement system that residents will be automatically enrolled in, and which is free for employers. Other states are following suit.
The price of inaction could be steep. We’ll see it first with the baby boomers — many of those unprepared for retirement will end up living in poverty or near poverty, reliant on a retreating social safety net that will not be big enough to catch them all.
And if nothing happens, it will affect one generation after the next.
Sen. Collins is right to call it a looming crisis, and we’d all be better off it was treated that way.
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