Ask the Experts: Policy Changes for a Brighter Retirement

Experts Share Retirement Policy Ideas

We’ve all heard there’s something of a perfect storm brewing on the retirement front, what with the U.S. population aging rapidly, Congress preoccupied with partisan politics, and the Great Recession wreaking havoc on our net worth.  But do those of us who aren’t facing imminent retirement really care?

Probably not, especially in a non-election year.  We simply have too many other, more immediate (and perhaps less boring) issues to deal with – from how to find a job in a down economy to vacation affordability to whether or not Robert Griffin III will start Week 1.

Assessing the Current State of Financial Planning

That should come as no surprise either, given our overall lack of financial literacy and apparent aversion to strategic planning.  For example, only two in five adults keep a budget and more than a quarter of us don’t pay our bills on time, according to the National Foundation for Credit Counseling.  How, then, can we even begin to worry about retirement?

To be fair, most of us could stand for a bit of improvement in a variety of different aspects of money management.  Just consider the fact that we emerged from the recession with plastic in hand, racking up more than $82 billion in credit card debt over the past two years and putting ourselves on pace to add nearly $47 billion more this year.  But, as a number of leading financial planning experts recently told CardHub, procrastination and a lack of specific spending/saving plans are the enemies of a secure retirement.

Social Security in Jeopardy

A sizable segment of folks – 38%, according to a 2011 Yahoo Finance poll – merely “plan” to live off Social Security in retirement.  And therein lies the rub.  Social Security is running out of money.  In 2010 the program operated at a deficit for the first time in decades, and while it was able to leverage trust funds to meet its $49 billion shortfall, Social Security’s reserves are due to run out by 2033 (or even sooner, depending on whom you ask).

Social Security is funded primarily through payroll taxes, and while there were roughly 16 workers paying for each retiree’s benefits in 1950, that number shrank to 3.3 workers per retiree in 2010 and is expected to fall to a 2.4 – 1 ratio by 2025, according to government statistics.  In other words, the math doesn’t quite add up for future generations.  We aren’t saving enough on our own, the government is cash-strapped, and many folks won’t even fully realize their predicament until they find themselves continuing to work into their 70s or 80s, rather than on a beach somewhere.

The good news is that while the average person may worry very little about the fate of federal retirement benefits, there are a number of very smart people who get paid to do so.  We at CardHub reached out to a number of them for ideas about the types of policy changes Congress can implement in order to improve our retirement outlook.

So, check out what the following experts had to say and maybe even drop a line to one of your representatives if you like any of their ideas.

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Keith Fevurly

Professor of Finance at the Metropolitan State University of Denver

If you could make one policy change to improve the retirement outlook for the average American, what would it be?

If I could make one policy change to improve the retirement outlook, it would be to increase the amounts that may be contributed and deducted to both traditional deductible and Roth IRAs. I would also remove the AGI [Adjusted Gross Income] limits for deducting traditional IRA contributions.

Beyond that, and aside from overall economic improvement, what needs to happen for our aging population to enjoy a secure retirement?

We have succeeded in forcing employees to move from a defined benefit plan to defined contribution plans (where the employee bears the risk of investment performance). What we have done a lousy job of is in educating employees about what they should be investing in for retirement planning purposes. This situation has only been made worse by the laws implemented to protect the employer/sponsor of retirement plans from any liability for investment performance. I am not saying we should hold employers liable only that we should be doing more to educate employees (at the employer level) about investments and investment choices offered under the plan.
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Karen Holden

Professor Emeritus of Public Affairs and Consumer Science at the University of Wisconsin-Madison

If you could make one policy change to improve the retirement outlook for the average American, what would it be?

Universal health care coverage. Lack of retiree health insurance, which is diminishing in incidence, and medical debt is an increasing deterrent to retirement and retirement well-being. Medicare provides universal coverage at age 65, but medical care costs or the concern about potential costs reduces the ability to save for retirement including in tax-deferred accounts that would be inaccessible to cover medical care costs.

Beyond that, and aside from overall economic improvement, what needs to happen for our aging population to enjoy a secure retirement?

See my answer above! The budget should not be the focus, but policies that increase economic growth. Jobs are clearly critical for retirement savings–one can’t save without a well-paying job. In terms of single-retirement specific policies would be increasing the flexibility allowed in retirement plans. Mandated default participation, allowed distributions that permit partial annuitization of accumulations.
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Andrew Samwick

Professor of Economics at Dartmouth College

If you could make one policy change to improve the retirement outlook for the average American, what would it be?

I would change the Social Security benefit formula, in an actuarially fair manner, so that initial benefits were lower but benefits grew with age in real terms. Elderly poverty is concentrated among older households and, in particular, widows. Without spending more or less on average, we could do more to keep elderly out of poverty in their retirement years.

Beyond that, and aside from overall economic improvement, what needs to happen for our aging population to enjoy a secure retirement?

It is not complicated. To consume more in retirement, consume less while working or retire later. People should be thinking about which of those options suits them better and looking for ways to save and ways to extend the productive part of their working lives.
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Ron Rhoades

Chair of the Financial Planning Program at the Alfred State SUNY College of Technology

If you could make one policy change to improve the retirement outlook for the average American, what would it be?

I would have the DOL [Department of Labor] issue, and then quickly finalize, its new ‘Definition of Fiduciary’ rule, which will finally apply fiduciary status to all providers of investment advice to retirement plan sponsors, retirement plan participants, and IRA account owners. This will be a ‘game-changer.’

Why? Fiduciaries’ compensation must be reasonable, and they must ensure that the total fees and costs paid by investors are reasonable. This will likely reduce the average total fees and costs paid by investors by 1% a year. Academic research reveals a direct correlation – higher fees and costs associated with investments result in lower returns, on average, over time. For a person accumulating funds for a future retirement, with annual contributions over 40 years, just a 1% difference in fees is likely to lead to a 21% increase in the amount of the retirement nest egg accumulated. In addition, during retirement the nest egg will last a lot longer.

There will be some disruption in the financial services industry should this occur. A transition period for financial advisors will be needed. But the industry will adjust, and investors both big and small will be able to access financial advice when they desire, for reasonable fees.

Beyond that, and aside from overall economic improvement, what needs to happen for our aging population to enjoy a secure retirement?

Auto-escalation of retirement plan contributions needs to be adopted by all retirement plans. Currently about 50% of retirement plans have same. This important feature dramatically assists workers in increasing their savings rate.

The ability to take loans from qualified retirement plans needs to be restricted. Far too many retirement plan participants take loans from accounts to finance non-essential financial needs. Often plan participants take out loans several times a year – i.e., as soon as funds accumulate in the account, they take a loan out. Loans should only be permitted upon proof of adverse circumstances – similar to the tests needed to take an early distribution for purposes of disability, but with added reasons (such as interruption in employment, etc.).

As to other government actions, the federal government should explore a mandated contribution to retirement accounts by every worker – perhaps 8% or more of wages – similar to programs existing in some other countries. With the decline of defined benefit plans, workers need to step up the plate and save a lot more. Many advisors suggest savings rates of 11% to 18% during all working years (assuming the worker starts savings early); however, some savings occurs through equity accumulation in a home (i.e., paying down principal on a mortgage); so a mandate of more than 8% might not be feasible.
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Steven Weisman

Senior Lecturer of Law, Taxation, and Financial Planning at Bentley University

What does the future hold for retirement planning and policy?

It is unlikely that government will provide for greater retirement benefits. What they may do, however, is provide greater incentives, as they have in the past for people to use IRAs and 401(k)s to provide for themselves. Financially educated investors will be able to use these incentives to their benefit.

My prognosis for the future is that there will be a great market in financial education and for advisors to help people meet these compelling needs.
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Theodore Anagnoson

Professor Emeritus of Political Science at California State University, Los Angeles and a Visiting Professor at UC, Santa Barbara

What does the future hold for retirement planning and policy?

We should alter retirement policy, but the likelihood of starting any new society-wide program is low with the present distribution of Republicans and Democrats. The idea I like the most is a supplemental savings plan that would be required for everyone, with the saver being able to choose various savings levels ranging from $100 or $200 a month on up. The managers of the plan, who could be in the private sector, would manage the plan according to people’s life expectancy, and while the return would not be spectacular as you might get with an IRA bought in 2009 and invested exclusively in growth stocks, it would be a good way to supplement Social Security, increasingly what half or more of the population are heavily dependent on in retirement, and that is with an average Social Security monthly benefit of around $1,200.
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Douglas Hershey

Director of Oklahoma State University’s Retirement Planning Lab

What does the future hold for retirement planning and policy?

The problem of financial security for retirees isn’t one that will come suddenly; rather, it is a storm that has been brewing on the horizon for a number of decades. We’ve already seen some policy changes in the Social Security program and efforts to forge legislation designed to stimulate savings practices. Undoubtedly, more efforts in these directions will only be helpful. But there is no policy-based silver bullet that will solve the problems of future generations of retirees. Individual responsibility for amassing personal savings is (and will always be) key, and sound investing strategies will be central to individuals achieving their long-range financial goals. …

My feeling is that we haven’t done enough in previous decades to ensure that working adults have the necessary tools to invest wisely for the future. Here in the U.S., over the past couple of decades the burden of responsibility for managing one’s retirement finances has been shifted squarely onto the shoulders of the worker. But there hasn’t been a corresponding emphasis on educating individuals to understand to how navigate the pitfalls and opportunities associated with long-term investing. The prognosis for future generations could be bright, but any such scenario would involve starting to educate Americans about planning and saving at a very early age. Indeed, psychological studies have shown that attitudes toward planning and saving are malleable, and lessons learned in childhood have a measurable impact on financial responsibility decades down the road.
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Eileen St. Pierre

Author of “The Everyday Financial Planner” website and a former Personal Finance State Specialist at Oklahoma State University

What does the future hold for retirement planning and policy?

As a financial educator, I am not surprised to see this [retirement security] problem happen. You just can’t expect regular people to take over planning for retirement when their parents’ employers used to do it for them via a pension. One major step forward in retirement policy was using life cycle or target date funds as the default investment in defined contribution plans. While some may argue that many of these funds expose investors to too much equity risk (particularly those nearing retirement as we saw during the recession), at least these portfolios are growing and beating inflation (as opposed to the prior default investment – money market funds). Many retirement plan providers offer automatic portfolio re-balancing but investors need to be educated on how this process works. I would like to see retirement plan participation mandatory just like paying Social Security taxes.

Another problem waiting to happen is how to withdraw money in retirement. I would like to see plan providers be required to offer an annuity option. I know there are some who don’t like annuities because of the fees and surrender charges, but in principle this option would make drawing down retirement portfolios a lot simpler for the general public. …

I’m more worried about future generations. Young people just don’t see the need to save for retirement. Job opportunities that lead to upward mobility and increased salaries that enable them save are getting harder to find.

I try to show them the power of compounding. Many of the younger generations don’t remember how the markets did before the recession – they just remember how the stock market tanked when the housing market collapsed. So I show them using numbers that if they start saving early, they will not have to take on as much risk as someone, say a Gen Xer, who starting saving much later. But they will have a larger retirement portfolio than the Gen Xer simply because of the time factor. The trick is finding a creative way to get this message across. Putting the numbers on a PPT slide just is not going to be enough anymore.
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Ellen Bruce

Director of the University of Massachusetts Boston’s Gerontology Institute

What does the future hold for retirement planning and policy?

Most studies … indicate that we have a problem with future generations being prepared for retirement including the early baby boomers. The problem is one of increasing numbers of retirees living in hardship because they do not have enough income and/or wealth to maintain a reasonable life style. I say “increasing number of retirees” because even today many retirees have a hard time paying all their bills, especially if they have long-term care needs.

[We therefore need to]: 1) Shore up Social Security so that it can pay the same benefits into the future. (e.g. benefits are not cut for current or future beneficiaries); and 2) Expand employer-based pension benefits (e.g. encourage employers to establish plans that don’t require a match, encourage 401(k) money be rolled over to the next plan or an IRA, discourage use of retirement money prior to retirement). Future generations will work longer which will help increase their retirement security.
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David Littell

Director of the New York Life Center for Retirement Income at The American College of Financial Services

What does the future hold for retirement planning and policy?

Retirement plan coverage is a key component of retirement readiness, and only 54% of workers are covered by a retirement plan. The percentage is higher for public employers and larger employers and much lower for small employers.

One answer is to make retirement plans, specifically plans that provide for lifetime income available universally available. There are a number of proposals for a universally available defined benefit plan that works through payroll deduction and possibly employer contributions

One regulatory proposal that is actually on the horizon is a requirement to show on defined contribution plan (including 401(k)) benefit statements both the account balance and how much income can be provided from the account balance. This would be a good way to show retirees how far their money will go in retirement. …

It’s certainly hard to see planning for retirement getting any easier for future generations. We have to work both with individuals to educate them on the simple steps they need to take to prepare, as well as on policy issues—shoring up the funding issues facing Social Security, Medicare and Medicaid, looking for ways to allow more universal retirement plan coverage.
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Alan Gustman

Professor of Economics at Dartmouth College

If you could make one policy change to improve the retirement outlook for the average American, what would it be?

Mandate that all DC pensions offer a fair annuity as a default option.

Beyond that, and aside from overall economic improvement, what needs to happen for our aging population to enjoy a secure retirement?

Make the hard decision to adjust benefits and taxes to fully fund Social Security, both reducing benefits in light of increasing life expectancy and financial reality and increasing taxes. I would limit the tax and benefit changes so that Social Security remained an insurance scheme with a redistributive bent rather than an income based transfer. Medicare is even harder to place on firm financial footing, but that must be done very soon.

What, if anything, will actually happen in the next 5-10 years?

We are getting closer to an obvious financial train wreck. But it is not clear there is political will to solve these problems. In the absence of action, in a few years we will be borrowing to finance Social Security (the bonds owned by Social Security require higher taxes or increased borrowing to fund them). Too bad in the last couple of years we didn’t treat the Great Recession by balancing Social Security and Medicare finances through adjustments to be realized in a few years, while allowing the current budget to go into greater deficit. That way the long run deficit problem would have been addressed, while short run fiscal policy would have been expansionary.
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Norman Stein

Drexel University

If you could make one policy change to improve the retirement outlook for the average American, what would it be?

Have a system similar to that in other countries, where people have a portion of their compensation set aside for retirement (with the employer and employee each making contributions); where the contributions are pooled in professionally managed accounts; and where benefits are paid as an annuity (and only as an annuity, preferably indexed to increases in the cost of living) to the employee and spouse (or domestic partner). Or you could simply improve Social Security.

Beyond that, and aside from overall economic improvement, what needs to happen for our aging population to enjoy a secure retirement?

Much stronger age-discrimination rules since many older people will have to remain as part of the workforce for a longer period of time. (Revising retirement plans as I suggested will help only marginally those who are now approaching retirement.) And if monetary policy is going to keep interest rates artificially low, the government must have some type of ameliorating policy to ensure that older individuals can invest safely and have a reasonable rate of return, with protection against inflation risk. This will not be inexpensive, but it can be done and should be done. But of course it isn’t being talked about and won’t be done.

Making the new health law work and taking other steps to reduce health care costs is also important–reducing health care costs in the aggregate helps everyone.

And one of the most governmental undertakings is trying to create meaningful fiduciary standards for those who give investment advice; right now, conflicts of interest can result in bad investment advice, costing retirees billions while enriching the people who are giving the poor advice. The idea that people who give investment advice to people saving for retirement or living in retirement–many of whom are utterly dependent on that advice and have no good way to evaluate whether the advice is good, whether it is conflicted, who don’t understand the importance of fees or risk or diversification or asset allocation–can have these incredible conflicts of interest is absurd. But this will be hard: parts of the investment industry want to remain subject to the weakest type of regulation and they are employing teams of lobbyists to fight back. And the good guys here have probably less than 1% of the financial resources that the industry commands. But no battle under current retirement law is more important at the moment.

What, if anything, will actually happen in the next 5-10 years?

In my most optimistic mood, I say things improving a bit at the margins. But in my most hopeful mood, I see a world in which social security benefits are adequate and in which the private retirement system which provides reasonable benefits to all retired Americans rather than large benefit to a few. In my least hopeful mood, well I don’t want to talk about that.
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Jon Moen

Ole Miss

If you could make one policy change to improve the retirement outlook for the average American, what would it be?

Make saving for retirement tax free

Beyond that, and aside from overall economic improvement, what needs to happen for our aging population to enjoy a secure retirement?

Allow part-time work with no Social Security penalty for older workers (65 and older, for example). As most jobs no longer require physical stamina as in factory work of the past, complete withdrawal from the labor force is not obvious in the future.

What, if anything, will actually happen in the next 5-10 years?

I doubt much will change in the next 5-10 years, apart from slightly higher SS taxes.
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Laurence Kotlikoff

Boston University

If you could make one policy change to improve the retirement outlook for the average American, what would it be?

I would adopt the Purple Social Security Plan. This will fix Social Security, which is 32 percent underfunded, giving today’s workers a transparent, reliable, safe, and fully funded retirement saving system.

Beyond that, and aside from overall economic improvement, what needs to happen for our aging population to enjoy a secure retirement?

Our country is completely broke. A $222 trillion gap separates the present value of all projected government expenditures (including servicing the outstanding debt) and all projected government receipts. This fiscal gap grew by $11 trillion between 2011 and 2012. We need to radically reform our fiscal institutions and banking system to return to fiscal solvency and prevent another financial collapse. No one will be secure, either during their working years or their retirement years, if Uncle Sam is desperately broke, looking for what he can take in taxes, either direct ones or hidden ones arising from inflation.

What, if anything, will actually happen in the next 5-10 years?

Unless we start facing our problems like grownups via the Purple Plans or something similar, inflation will start taking off, interest rates will skyrocket, the bond market will crash, official deficits will explode, and we’ll continue to head down the path of Argentina. If you look around the world, countries with responsible governments, be they Canada, Australia, New Zealand, Chile, etc. come up with adult policies and secure their futures. In our country, we have a Social Security system that is 32 percent underfinanced, a Medicare system that is going broke, a Medicaid system that is going broke, a new health exchange system that will go broke, an employer-based healthcare system that is draining tax revenues and driving us broke, a tax system that could not be more arcane or poorly designed, a banking system that’s unsafe at any speed, environmental policy that’s a moral disgrace, and an education system that doesn’t deserve the title. So there is a lot that needs to be fixed and fixing these things will protect everyone from a terrible working life as well as a terrible retirement.
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Jeffrey Brown

University of Illinois

If you could make one policy change to improve the retirement outlook for the average American, what would it be?

I know you are only asking for one policy change, but I think we need three. First, we need to expand access to retirement plans to a greater share of the population – although I am a fan of employer-based retirement plans, there are too many people working for employers who do not provide savings opportunities. We either need to get more employers to offer them, or we need something like the ‘automatic IRA’ to provide such opportunities. Second, we should increase the ‘default savings rate’ for automatic enrollment in plans so that people are saving a higher fraction of their income. Third, we need to provide more opportunities to convert accumulated wealth into retirement income (e.g., annuities).

Beyond that, and aside from overall economic improvement, what needs to happen for our aging population to enjoy a secure retirement?

We need to change the entire conversation – including policy, products, communication, etc. – away from one that focuses on wealth accumulation as the end goal, and instead focuses on having a secure source of retirement income. This simple idea has many implications, such as: o Revising minimum distribution rules so that they encourage sustainable lifetime income provision o Getting annuities into 401(k) plans o Communicating in terms of monthly income rather than account balances o And much more. And, yes, we also need to restore Social Security to sound fiscal footing, which is going to require political leadership and will.

What, if anything, will actually happen in the next 5-10 years?

I am actually optimistic that the industry is moving in a direction that will put retirement income front and center. I am less optimistic that we will reform Social Security, as the current political environment is currently too dysfunctional.
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James Swan

University of North Texas

If you could make one policy change to improve the retirement outlook for the average American, what would it be?

Believe it or not, I would significantly LOWER the age of eligibility for Social Security. The issue is that there is not an average American, certainly not an average older American. Many of us continue to work after age 65, but people differ, and some need to retire earlier. Of course, to financially sustain this we would need to do what needs doing anyway for Social Security: eliminate the income cap for FICA taxes. And that WOULD improve the retirement outlook for all.

The ill-conceived ‘reform’ during the Reagan administration whereby the eligibility age is being raised to 67 (the reason I had to wait to age 66 to file for and start deferring my own Social Security) was supposed to fix the financial outlook for Social Security for the foreseeable future. What was not foreseen was the changes in the income structure of this country, with its shift of income upward in recent decades. That upward shift exempted more and more income from FICA taxes because the income flowed to those with incomes already at above the income cap. That needs to be fixed anyway; but eliminating the cap could allow the lowering of the age for benefits – e.g., at minimum back to 65 for full benefits and to 60 for early retirement (after all, the same year that Medicare passed, the Older Americans Act was passed, setting its age of eligibility to age 60).

Beyond that, and aside from overall economic improvement, what needs to happen for our aging population to enjoy a secure retirement?

Some of it is old hat – e.g., re-expand home- and community-based services. Improve housing services for the severely impaired, coordinating with programs like Money Follows the Person and Home by Choice that attempt to get some nursing facility residents back to living in the community. Increase funding (which has instead been severely cut, especially under the sequester) for a vast array of aging services, particularly home- and community-based care, Meals on Wheels and so on. Expand funding for programs, including higher-education programs, that educate and train those who will serve the elderly. Revisit the idea of allowing those aged 55-64 to pay a premium to enroll in Medicare.

What, if anything, will actually happen in the next 5-10 years?

Judging by the past 5 years, nothing. Or things will get worse. Part of the issue is that of successful Tea Party and other Libertarian attacks on the prior limited social contracts that existed in this country with regard to the aged, the disabled, the poor, and for that matter wage workers and the middle class generally.
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Janet Henning

North Central Texas Council of Governments

If you could make one policy change to improve the retirement outlook for the average American, what would it be?

Research has shown that many diseases and conditions can be prevented or successfully treated if caught in the early stages. An important policy change would be to put more emphasis on low- or no-cost health screenings across a person’s entire lifespan.

Beyond that, and aside from overall economic improvement, what needs to happen for our aging population to enjoy a secure retirement?

Consumer habit adjustment is key. Americans need to become more health-minded and more savings-minded at an earlier age. Research shows that many American pre-retirees lack knowledge of the health care coverage they will have in retirement and do not know how much it will cost them to maintain their health during their older years.

What, if anything, will actually happen in the next 5-10 years?

Many people could improve their retirement outlook by setting aside money regularly throughout their working career. However, without mandated change, people will continue to spend that money on short-term needs.
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Sewin Chan

NYU

If you could make one policy change to improve the retirement outlook for the average American, what would it be?

My one policy change would be a long term strategy to improve financial literacy and financial management skills among Americans, starting in grade school and beyond. While this may be of limited help for those currently in or near retirement, it would improve the retirement outlook for future generations of retirees. Besides directly affecting retirement saving decisions, improved financial literacy would lead to better decision-making regarding other important choices such as how much to borrow for homes and which mortgage product to use, how to finance college, whether to buy or lease a car, which type of health insurance plan to choose, etc. These other financial choices will affect the resources that an individual has to save for retirement.

Beyond that, and aside from overall economic improvement, what needs to happen for our aging population to enjoy a secure retirement?

All of the above need to happen. And, there needs to be more resources devoted to older workers who lose their jobs, in terms of retraining and income support for those who cannot find work.

What, if anything, will actually happen in the next 5-10 years?

Unfortunately, I suspect that not much will change in the next few years, and thus the main determinant of retirement security will be the overall economic environment.
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Brigitte Madrian

Harvard University

If you could make one policy change to improve the retirement outlook for the average American, what would it be?

We know that the single biggest driver of retirement wealth accumulation is participating in a retirement savings plan. It follows, then, that the one policy change to improve the retirement outlook for the average American is to encourage participation in a retirement savings plan. We need to increase the availability of employment-based retirement savings plan and encourage automatic enrollment into such plans at a savings rate high enough to ensure accumulations for retirement.

Beyond that, and aside from overall economic improvement, what needs to happen for our aging population to enjoy a secure retirement?

- Meaningful Social Security reform that makes the program financially sustainable so that individuals know what type of social security benefit they can count on in retirement.

- The biggest drivers of financial uncertainty facing older Americans are health care costs, long-term care, and longevity risk. We need to reduce health care cost growth, encourage long-term care insurance for middle income families, and encourage at least partial annuitization of retirement wealth.

- Simplification and harmonization of the myriad different tax favored savings vehicles out there (e.g. IRA, 401(k), 403(b), 357, KEOUGH, HSA). Individuals face a veritable alphabet soup of acronyms when it comes to how they can save their money. Standardize the rules so that, to the extent possible, they apply uniformly. This will make it less costly to administer a retirement savings plan, and less complicated for individuals to figure out to save optimally.

- We need to reduce leakage from the retirement savings system, particular leakage that occurs when individuals cash out their savings plan balances when they change jobs. In some countries, individual cannot take money out of a defined contribution savings plan at all until they reach retirement age. A less draconian approach would be to restrict access to employer match balances until individuals reach retirement age, or to limit leakage to a pre-set fraction of savings plan balances (e.g., one-third). To the ext that there is leaking from the system, we need to increase the money going into the system. That is, if individuals are going to use retirement savings plan to fund current consumption, then contributions to the plans need to be higher than they would other need to be if they were only being used to fund retirement.

- We need better oversight of savings in IRAs which now comprise over half of the defined contribution retirement wealth as individuals roll more and more of their 401(k) balances into IRAs. In an IRA, individuals face thousands of investment options and typically pay higher fees. Individuals do not benefit from the fiduciary oversight of a plan sponsor who is monitoring fees and winnowing the investment menu down to a set of reasonable investment options.

- Eliminate (or limit) employer stock in the investment menu of 401(k) savings plans.

What, if anything, will actually happen in the next 5-10 years?

At the federal level, I am pessimistic that anything substantive will happen in the next few years. Retirement security does not seem to be high on the policy agenda for the Obama administration, the Republicans and Democrats seem unable to compromise on almost anything of substance (although some policy reforms in this area are not particularly partisan, so I am perhaps being too pessimistic), and it would take a bold president indeed to tackle these issues in a first term following the end of Obama’s presidency.
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Ricardo Ulivi

CSU, Dominguez Hills

If you could make one policy change to improve the retirement outlook for the average American, what would it be?

Force or motivate people to save more and/or spend less. In our consumer driven, status oriented society, that will not happen—unfortunately.

Beyond that, and aside from overall economic improvement, what needs to happen for our aging population to enjoy a secure retirement?

Reduce divorce rates; it creates financial havoc.

What, if anything, will actually happen in the next 5-10 years?

Medicare will go broke taking care of all the overweight people we have in this country. The medical-hospital industry complex will do whatever needs to be done to keep people alive—as long as Medicare keeps paying the bill.

There really should be a price on death. That is, after so much is spent, one should be left to die. If you think abortion is a tough topic, try putting a cap on how much Medicare will pay!

 
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