Blackstone Group's Hamilton “Tony” James made the case for a guaranteed retirement account to address the current retirement savings crisis.
“The system we have isn't working,” said Mr. James, president and chief operating officer, in Monday night's closing keynote discussion at Pensions & Investments' Global Future of Retirement conference in Washington.
He added that the current system can't be fixed by investing in index funds, implementing auto enrollment or some other solution.
So, Mr. James, and Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis, are proposing a new system altogether.
The proposed guaranteed retirement accounts would put the equivalent of 3% of employees' earnings into savings accounts that the employees couldn't withdraw from before retirement under any circumstances.
The new plan would be managed by professional money managers that would run sophisticated, diversified portfolios, generating significantly higher returns than ones directed by participants.
It would be “invested like a pension plan, not like a 401(k),” Mr. James explained, noting beneficiaries should not be the ones making investment decisions.
Upon retirement, 100% of the balance would be converted to a federal government annuity.
He said the crisis is much more obvious now than previously, which could enable national retirement reforms to actually happen. After all, even comedian John Oliver is now talking about it. (Mr. Oliver made retirement savings the top story on his show, “Last Week Tonight,” on Sunday before the conference.)
“We've come a long way,” Mr. James added.
Mr. James noted that the losers in the guaranteed retirement account scenario would be the advisers who give poor advice to individuals.
The full proposal is available on the Schwartz Center's website.