GFOR speakers urge action to fix savings shortfall

Too few Americans are adequately saving for retirement, speakers agreed at Pensions & Investments' third-annual Global Future of Retirement conference in Washington.

And they have some ideas on ways to fix that.

See a chart comparing four proposals for improving retirement security

In talks throughout the three-day event that ended June 14, speakers outlined details of plans to solve what they described as a national retirement crisis that's been fueled by increasing longevity, better health care and a general lack of financial literacy.

“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,” said Thomas R. Harkin, retired U.S. senator and senior adviser at the Harkin Institute for Public Policy and Citizen Engagement in his opening keynote address.

Mr. Harkin noted that 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. People are worried about their retirement, he said, and they're right to be.

“If we don't change course, the retirement crisis is going to get worse and worse.”

Mr. Harkin also warned that Social Security can't be relied upon to fill the retirement gap, a thought echoed by other speakers.

Watch Mr. Harkin's full keynote speech

Multiple speakers told attendees that people are simply not saving enough for retirement in the U.S., and that something needs to be done about this immediately. In fact, two keynote speakers — The Blackstone Group LP's Hamilton E. “Tony” James and State Street Global Advisors' Ronald O'Hanley — presented options for national retirement savings programs.

Current and former U.S. policymakers have spent more than two years working on a bipartisan approach to improve retirement security through tax incentives, easier access for employers and other ideas inspired by other countries.

One of four new initiatives discussed at GFOR, the Bipartisan Policy Center's 12-point proposal could increase retirement savings rates by 50% and “represents a very doable set of proposals,” co-Chairman James B. Lockhart III said on the conference's final day. “We need to do something, and we need to do something now. It will take people of goodwill to make it happen.”

Watch Messrs. Conrad and Lockhart III's full keynote speech

In the closing keynote discussion on June 13, Mr. James — Blackstone's president and chief operating officer — told attendees: “The system we have isn't working.”

Mr. James presented the case for a new system devised by himself and Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at The New School, New York, whereby the equivalent of 3% of employees' earnings would be put into guaranteed retirement savings accounts from which the employees couldn't withdraw before retirement under any circumstances.

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. He added that, through his plan, 401(k) contributions would no longer be tax deferred, but that higher income earners have other ways to lessen the tax bite.

Upon retirement, 100% of the balance would be converted to a federal government annuity.

Watch Mr. James' full keynote speech

Then on June 14, Mr. O'Hanley, SSgA's president and CEO, presented his plan for a national retirement framework.

Although Mr. O'Hanley praised the proposal Mr. James presented the day before, he expressed concern that the ambition and scope of Mr. James and Ms. Ghilarducci's plan could “struggle to attract the broad political support we need (in Washington) to make changes.”

Mr. O'Hanley suggested that his plan is intended to get the ball rolling immediately, and unlike Mr. James and Ms. Ghilarducci's proposal, wouldn't take as much to get through Congress.

“Time is not on our side,” Mr. O'Hanley said. “The time has come to enact a plan that will quickly and comprehensively expand access to retirement savings programs for all American workers.”

Mr. O'Hanley's proposed framework includes implementing auto enrollment and auto escalation; providing tax credits for small businesses; and eliminating barriers to multiple-employer plans.

SSgA's CEO praised Mr. James and Ms. Ghilarducci's guaranteed retirement account program, and suggested his proposed framework was a first call to address a growing national problem. “Let's not let perfect be the enemy of good,” Mr. O'Hanley added.

Watch Mr. O'Hanley's full keynote speech

Messrs. Harkin, James and O'Hanley all said at GFOR that they hoped the government would get involved in solving this crisis of Americans not saving enough for retirement. Indeed, Messrs. James and O'Hanley's plans call for Congress to establish some type of national solution to address the retirement savings gap. Mr. Harkin praised states like California, Illinois, Maryland and Oregon that have passed legislation providing retirement plans for employees who would otherwise not be covered, but he said states alone cannot solve this crisis.

“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,” Mr. Harkin said, adding 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.”

See a chart comparing four proposals for improving retirement security