Thomas R. Harkin, retired U.S. senator and senior adviser at Harkin Institute for Public Policy and Citizen Engagement, said the next president and Congress would be remiss if they did not address the retirement crisis head on in a keynote speech Monday at the Pensions & Investments' Global Future of Retirement Conference in Washington.
Mr. Harkin addressed what he called the “most underreported crisis of our time,” the necessity to strengthen the three legs of the retirement stool: Social Security, private pensions and savings. With people living longer and not able to save adequately for retirement, “if we don't change course, the retirement crisis is going to get worse and worse.”
Mr. Harkin said half of Americans have less than $10,000 in savings, and among Americans between the ages of 40 and 55, the average retirement account balance is only $14,500.
“We need to turn our attention sooner rather than later to solving this retirement crisis, and the sooner we start, the better it's going to be for us all,” Mr. Harkin said.
Among the proposals that could potentially address inadequate savings among Americans is an expansion of Social Security, which he noted provides more than 90% of the income for one out of every three retirees in the U.S.
“That can be done in a fiscally responsible way and fully paid for,” Mr. Harkin said. One way, he said, to further fund the Social Security trust would be to “redefine” earned income, and one way to do that would be to add a small Social Security tax to capital gains.
Mr. Harkin did note that while expansion is a common-sense solution, “we just can't rely on Social Security to fill this gap in the future.”
He noted his own Universal, Secure and Adaptable Retirement Funds legislation before he retired, in which employers that do not offer defined benefit plans or 401(k) plans to their employees would be required to enroll in privately run plans.
He praised several states like California, Illinois, Maryland and Oregon, which have passed their own Secure Choice plans that would provide retirement plans for employees who would otherwise not be covered.
Mr. Harkin noted, however, that he believes this is not a crisis that can be addressed only by states.
“I would hasten to add,” he said, “this requires a federal, national commitment. Most investment firms would not want to be looking at 50 different plans and how you would invest in 50 scattered plans around the country.”
He said he hopes more states passing this kind of legislation will “push the federal government to act and do something to make sort of a national type of system.”