Bipartisan Policy Committee's Report on Retirement Security

The Bipartisan Policy Center's (BPC) Commission on Retirement Security and Personal Savings, of which I am a member, today released its comprehensive report on retirement security.

Today's recommendations are both a recognition of an awaiting crisis and a sign of hope for a better future.

Without changes to our failed system, a growing number of Americans will ride a wave of insufficient savings to deprivation in their old age. More than half of American households who are near retirement have less than $12,000 saved. The number of 65-year-olds per year who are poor or near poor between 2013 and 2022 will increase by 146%.

This report takes the first steps toward reform by recognizing the principles necessary to create effective retirement savings vehicles. The Commission's call for Retirement Security Plans to pool resources and decrease administrative burdens supports the need for economies of scale and universal access. The call to expand myRA and create a nationwide minimum-coverage standard supports the need for mandated participation and a shared responsibility between employers and employees. The call for a lifelong income plan supports the need for annuities to ensure seniors don't outlive their savings.

state innovation graphicGrowing inequality has made retirement increasingly available to only a few. We need a federal plan that serves everyone. With 27 states actively pursuing retirement reform, these leaders have made it clear that the political will for change exists. Historically, we have relied on state innovation to spur federal action. As with Social Security and healthcare (see image), this report recognizes that federal legislation is necessary to provide employers and employees consistency and portability across states.

The Commission recognizes the failure of our current system and sets us on the right path to reform. However, it does not claim these recommendations, even if fully implemented, will solve the retirement crisis. I look forward to taking the next steps toward comprehensive reform through supporting Guaranteed Retirement Accounts (GRAs). A joint policy proposal issued with Hamilton "Tony" James of Blackstone (from the diverse backgrounds of academia and investment banking), GRAs would provide savings accounts that advance the same principles in the Commission's report. By creating individual accounts on top of Social Security with mandated contributions from both employers and employees, these accounts would pool investments, guarantee a return, and provide lifelong annuity payments.

The report also put forward reform measures for Social Security. I made a joint statement with my fellow commissioner Alan Reuther on Huffington Post, "A Better Way to Fix to Social Security," to discuss our disagreement with some of the recommended policies. 

I thank the Bipartisan Policy Center for their hard work supporting the commissioners throughout the two-year effort that created today's report by the Commission on Retirement Security and Personal Savings. I also express my gratitude and appreciation to my fellow commissioners for their tireless efforts on behalf of American's retirees, present and future.

 

Tax Breaks for Retirement Savings: Problems & Solutions

I have been working with Christian Weller from the Center for American Progress (CAP) on how to improve the federal government’s system of retirement savings incentives. On October 30th, we published a paper on The Inefficiencies of Existing Retirement Savings Incentives and hosted an event with academic and political experts to discuss the issue in depth. On November 18th, we released another paper on Laying the Groundwork For More Efficient Retirement Savings Incentives that contains proposals for reform.

The federal government’s current policy to encourage retirement savings in the tax code is both inequitable and inefficient. The wealthy have higher marginal tax rates and therefore benefit more from tax deductions than the poor and middle class. Furthermore, research has shown that wealthy households would save anyways, and the tax deductions just encourage them to shift their savings into retirement accounts to lower their tax bill.

We suggest a simple set of reforms to make the federal government’s retirement savings incentives more fair and effective. First, the tax code should prioritize refundable tax credits over tax deductions. Second, the Saver’s Credit should be made fully available to low income households. Third, there should be a universally available, simple, low-cost, and low-risk vehicle for people to save for retirement outside of employer sponsored retirement accounts.