WASHINGTON – Experts told a Senate panel Congress should expand Social Security for the poor and encourage middle- and upper-income individuals to ramp up private savings to improve their retirement prospects.
Sens. Sherrod Brown (D-Ohio) and Patrick Toomey (R-Pa.) recently held the first of a series of hearings focused on how to enhance retirement security for Americans.
From 1979 to 2011, the number of private workers with retirement plans covered by defined benefit pension plans fell from 62 percent to 7 percent. At the same time, the percentage participating in defined contribution plans increased from 16 percent to 66 percent. This shift to defined contribution plans as the primary retirement vehicle has transferred the responsibility and risk for capital accumulation for retirement from employers to employees.
“At a time when we’re told that we are in charge of our retirement futures, only one quarter of American workers have automatic access to a defined contribution plan,” Brown said.
Both Republicans and Democrats on the panel acknowledged Social Security’s role in keeping millions of Americans out of poverty. They agreed that Social Security needs to remain in place to protect the elderly, the disabled, extended families, and children in the United States.
“Maintaining or expanding Social Security is the single most effective thing we can do to prevent poverty and economic ruin for millions of senior citizens, while promoting economic mobility for their children and grandchildren,” Brown said.
Around thirty-million Americans between the ages of 50 and 64, one half of those nearing retirement, have no retirement savings at all, according to research by the Schwartz Center for Economic Policy Analysis at the New School.
Brown said that many middle-class and low-income seniors rely on Social Security for a majority of their retirement income.
“The vast majority of economic gains in the last 25-30 years have gone to those at the very top of the income distribution in this country, obviously affecting savings and retirement,” Brown said.
He said the picture is bleaker for minorities. The median wealth of white households is 20 times that of black households, 18 times that of Hispanic households, the highest ratio since the government began publishing this data a quarter century ago.
Retirement security in the U.S. has traditionally been thought of as a “three-legged stool” consisting of Social Security, employer-provided pensions, and personal savings and investments.
Toomey said that “government policy should protect all three pillars of retirement security, recognize the strengths of the retirement system and preserve what works.”
The Pennsylvania Republican praised the various savings options available now and criticized attempts to reduce the amount Americans can save in tax-deferred accounts, such as the Obama administration’s proposal to place a $3 million cap on money accumulated in retirement accounts.
Robert Romasco, president of the AARP, said that Social Security is the only “dependable” leg, noting that traditional pensions have gone away, retirement income has shrunk, healthcare costs are increasing and 50 percent of the workforce have no employer-provided retirement plan.
He said his organization has done a study on the impact of Social Security benefits on the economy. It found that for each dollar to beneficiaries, there was $2 in spending, adding $1.4 trillion to economic output in 2012.