While heralding the bipartisan effort and innovation of active states, ReLab's new report, "State Retirement Reform: Lifting Up Best Practices," seeks to broaden options for future legislation by raising up best practices from the movement's early leaders.

This report demonstrates:

  • State-level retirement reform efforts continue to emerge at a breathtaking pace, with 22 states introducing legislation since Trump’s inauguration.
  • State policymakers are modeling legislation on bills moving forward in other states, following four policy vehicles.
  • The comprehensive hybrid model that combines marketplaces, open MEPs, and auto-IRAs provides the best option to increase access to coverage.
  • State-level programs point toward comprehensive reform in Guaranteed Retirement Accounts.

Due to lack of coverage and a systemic reliance on defined contribution plans, workers do not have enough saved for retirement.

ReLab’s policy note, Inadequate Retirement Savings for Workers Nearing Retirement, documents that the median retirement savings account balance for those nearing retirement is $15,000. 

Employer-sponsored retirement plans are intended to bridge the gap between Social Security and targeted retirement income. Unfortunately, in 2014, 35% of those nearing retirement did not have access to retirement plan, a share that has increased over the last 30 years.
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 In the 1980’s, 401(k) plans - or defined contribution (DC) plans - became widespread. For most workers in the private sector, they replaced rather than supplemented traditional pension plans, or defined benefit (DB) plans.  In theory, DC plans could enable participants to accumulate adequate wealth by the time they retire. But in practice, account balances fall short, reflecting spotty eligibility histories, non-participation, inadequate contributions and employer matches, pre-retirement withdrawals, high fees, and subpar investment returns. These faults are inherent to the DC system and cannot be fixed by regulation.

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 These low savings balances will not be enough to allow retirees to maintain their standard of living, a fact that is true at all income levels. 

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 The combined effects of cuts to Social Security benefits and the consequences of a broken DC-centric savings system has created a retirement crisis. Few workers without workplace retirement plans save for retirement. Without significant reform to the retirement system, many workers who reach retirement age will be forced to choose between working longer and suffering severe drops in their living standards in retirement. But many older workers cannot work longer due to physical or mental impairment, and those that are capable of working face a labor market unfriendly to older workers.

Rather than worsening the retirement crisis by cutting Social Security benefits, policymakers should both strengthen Social Security and expand retirement plan coverage. Guaranteed Retirement Accounts (GRAs) are individual accounts requiring employers and employees to contribute with a fair and effective refundable tax credit provided by the government. GRAs provide a safe, effective vehicle for workers to accumulate personal retirement savings over their working lives.

November 2017 Unemployment Report for Workers Over 55

The Bureau of Labor Statistics today reported a 3.1% unemployment rate for workers age 55 and older in November, a rate unchanged from October. This low aggregate number hides the prevalence of low-paying jobs among older workers, especially women.

Almost half (48%) of older working women without a college degree are working in low-paying jobs - earning less than $15 an hour - compared to 29% of similarly situated men.1 Older women without a college degree earn a median hourly wage of $15.50 compared to $18.75 for men.  

One reason older women work for low wages is that they lack bargaining power. Without a financial cushion (39% of older women have no retirement savings), people will likely tolerate poor working conditions and low pay. In her book, Nomadland, Jessica Bruder describes a group of people, mostly women, living in RVs and chasing seasonal workincluding Linda. Bruder writes, "Her options for work would dwindle with age, rather than broadening to reflect her years of experience. There seemed to be no way off the treadmill of low-wage jobs. How would she ever afford to stop working?" Many of her subjects lost their jobs and savings in the Great Recession of 2007-2009.

Though many of Bruder’s subjects do not have college degrees, more education does not protect women from a gender wage gap that makes them more likely to work in low-paying jobs. In fact, older working women with college degrees are twice as likely as college-educated men to be in low-paying jobs (22% to 11%). 

To ensure all workers have a secure retirement, Congress needs to not only raise the minimum wage, but also enact Guaranteed Retirement Accounts (GRAs). GRAs provide retirement savings accounts to all workers as a supplement to an expanded Social Security program. The GRA’s $600 refundable tax credit and employer contribution ensure that even low-paid workers, a majority of whom are women, can afford to save for retirement.


1 SCEPA calculations using SIPP 2014 data

October 2017 Unemployment Report for Workers Over 55

The Bureau of Labor Statistics today reported a 3.2% unemployment rate for workers age 55 and older in October, a rate unchanged from September. While this aggregate number is low, the reality is that many older workers have low-paying jobs that don’t provide retirement savings coverage. Older women are especially likely to be in low-paying jobs, in part due to the unequal division of household work.

Both men and women ages 55-64 spend the same amount of time working each week – 47.9 hours a week for men and 48 hours a week for women - including both paid work in the labor market and unpaid household work.  But of this total, men spend more time in paid work than women - 30.1 hours for men vs 21.8 hours for women.  Women spend more time on unpaid household work such as food preparation, cleaning, care giving, etc.  Not only do older women get paid for a smaller share of their working time, in the labor market they are more likely than men to be in low-paid jobs – 38% of older women make less than $15 an hour vs 28% of men.1

While older men and women have about the same low rates of access to a retirement plan at work (45% for men and 45% for women), women’s ability to save for retirement is further hurt by the combination of low hourly pay and crowd out of paid work by unpaid work. Older women have a median balance of $90,000 in their retirement accounts, compared to $125,000 for men.

To ensure all workers have a secure retirement, Congress needs to not only raise the minimum wage, but also enact Guaranteed Retirement Accounts (GRAs).  GRAs provide retirement savings accounts to all workers as a supplement to an expanded Social Security program.  The GRA’s $600 refundable tax credit and employer contribution ensure that even low-paid workers, a majority of whom are women, can afford to save for retirement.


1 SCEPA calculations based on 2017 Current Population Survey ASEC, U,S. Census Bureau, Washington D.C.

September 2017 Unemployment Report for Workers Over 55

The Bureau of Labor Statistics today reported a 3.2% unemployment rate for workers age 55 and older in September, a rate unchanged from August. While this aggregate number is low, the reality is that many older workers have low-paying jobs that don’t provide retirement savings coverage.

It’s no surprise that older workers have little retirement savings ($12,000 on average). This is despite the $180 billion a year in tax breaks meant to encourage people to save for retirement. That’s because these tax breaks are highly regressive, giving 66% of the benefits to those in the top 20% of the income distribution – who are likely to save without incentives – while the 35% of near-retirees without retirement plans get nothing.

Rather than address the unfairness and inefficiency of retirement savings tax breaks, the majority party in Congress announced a tax reform plan designed to generate revenue to pay for tax breaks for the wealthy. Reports suggest the needed revenue could come from taxing 401(k) dollars on contribution rather than at withdrawal in retirement, funding current tax breaks by shifting retirement subsidies to the future.

Tax incentives are a key driver of retirement plan coverage and adequacy. In the midst of a retirement crisis, changing the timing of retirement tax breaks does nothing to increase coverage or make the distribution of incentives more equitable.

To encourage retirement savings, Congress needs to give all workers access to coverage and provide fair and effective tax incentives. Guaranteed Retirement Accounts (GRAs) do both. GRAs provide accounts to all workers as a supplement to an expanded Social Security program and replace regressive retirement subsidies with universal tax credits of $600 a year. This ensures that even low earners benefit from federal tax incentives to save for retirement. 

August 2017 Unemployment Report for Workers Over 55

Today the Bureau of Labor Statistics reported a 3.2% unemployment rate for workers ages 55 and older in August, no change from July. While the headline unemployment rate for near retirees is low, it doesn't indicate the economic fragility faced by workers aged 55-64. 

Low-, middle-, and high-income near retirees are almost one-third short of the savings they need to maintain their standard of living in retirement.   ReLab's new report using just-released government data documents that the median level of retirement savings in IRAs and 401(k)-type plans among workers ages 55-64 is $15,000. When workers who do not have any retirement savings are excluded, the median is just $92,000 - a sum that would replace only about $400 per month for the rest of a person's life.

Even with generous assumptions,1 workers in the bottom half of the earnings distribution (earning less than $40,000) are 28 percentage points below the median replacement rate -- the ratio of retirement income to preretirement income. Workers in the middle 40% are 31 percentage points short. And even workers in the top 10% (earning above $115,000 a year) face a shortfall of 29 percentage points short. One third of workers without retirement accounts will only have Social Security.


Regardless of income, many older workers face an unpalatable choice between delaying retirement or downward mobility in retirement. If forced to stay in the labor market, jobs for older workers are often low-paid and lacking retirement coverage. For many, delaying retirement is not an option due to physical and mental limitations and employer distaste for older workers.

In the short term, older workers need well-paying jobs that provide pensions. In the long term, every worker needs an advanced-funded supplement to an expanded Social Security system. Guaranteed Retirement Accounts (GRAs) are proposed as individual accounts on top of Social Security funded by contributions from employees, employers, and government throughout a worker's career. GRAs provide workers with a lifetime, consistent savings vehicle, ensuring workers can retire when they need or chose.
 
1 Using recently released data from the 2014 Survey of Income and Program Participation (SIPP), we compared the projected post-retirement incomes of low-, middle-, and high-income workers with retirement accounts with replacement rate targets (ratio of retirement income to preretirement income) that will permit them to maintain their preretirement standard of living.  Assumptions include retiring at age 65, continued employee contributions of 6% and employer contributions of 3%, and a 4.5% real investment return.
 
August Jobs Report
 

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July 2017 Unemployment Report for Workers Over 55  

The Bureau of Labor Statistics (BLS) today reported a 3.2% unemployment rate for workers age 55 and older in July, no change from June. While the low unemployment rate may indicate a healthy labor market for older workers, it doesn’t tell us about job quality.

Only 76% of older workers obtain health insurance through their or their spouse’s job. Tweet: One of four older workers lack employer provided health insurance #JobsReport @tghilarducci http://bit.ly/2fd31hM pic.twitter.com/GCFLges2fN </a>/a>; The remaining 24% fall into three groups; those who purchase private health insurance, often at higher prices or with less coverage and higher deductibles than employer coverage, those eligible for means-tested Medicaid, and those who remain uninsured, typically because they earn too much to qualify for Medicaid but too little to qualify for private health insurance.

High insurance premiums and out-of-pocket costs reduce the amount workers can afford to save for retirement, while the uninsured or underinsured risk catastrophic medical costs that can rapidly deplete their retirement savings.

Access to both health coverage and retirement plans protects older workers’ ability to save for retirement. Policymakers should strengthen the Affordable Care Act and provide a path to a secure retirement by expanding Social Security and implementing Guaranteed Retirement Accounts (GRAs). GRAs are individual accounts on top of Social Security that require contributions from employees, employers, and government throughout a worker’s career.

*Arrows reflect the change from the previous month's data for the U-3 and U-7 unemployment rate and the last quarter's data for the median real weekly earnings and low-paying jobs.

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#U3


Low-Paying jobs


#low 


  #weekly


  #LFP


 Percent without Pensions