Washington, D.C. - 03/01/2005 - In a twist on the familiar saying, it was demonstrated today that retirement security can make for strange bedfellows. The Retirement Security Project (RSP), a new, national initiative, was launched today with the support of members of both political parties, business leaders, academics, and nonprofits. The project is dedicated to improving retirement savings prospects, particularly among middle- and lower-income Americans.
“Today, we bring together leaders from policy, business and academia to launch a group that turns common sense reforms into real world results,” said Peter Orszag, Ph.D., RSP Director. “These nonpartisan solutions will provide a significant, tangible benefit for people working toward retirement. These reforms will increase our net national savings rate and promote retirement security for millions of Americans.”
Though Congressional scheduling prevented Senate Finance Committee Chairman Charles Grassley (R-IA) and Ranking Member Max Baucus (D-MT) from joining the event, each released statements supportive of the goals of The Retirement Security Project. “The key to achieving a secure retirement is to save steadily during one's working years. And we all know that Americans are not saving enough, so efforts to encourage more personal savings for retirement and more options for saving are important,” said Grassley. “As a policy maker, I value the contribution of efforts to help Americans plan ahead for their retirement. In Congress, increasing opportunities for personal savings will take support from Republicans, Democrats and Independents.”
Ranking Member Baucus added, “The Retirement Security Project promises to be an invaluable resource for our efforts to increase personal savings in America, especially savings by lower-and middle-income households. In their new enterprise, Peter Orszag, Bill Gale, and Mark Iwry will continue their tradition of quality contributions to our nation's governance. I expect that the Project will stand at the forefront of efforts to provide constructive ideas to address the critical need to increase personal savings in America.”
RSP released new policy studies on the automatic 401(k) and the Saver's Credit as the first of a series of evidence-based, nonpartisan solutions aimed at increasing retirement savings.
In discussing the automatic 401(k), Bill Gale, Ph.D., a Senior Fellow at the Brookings Institution, noted that changing the defaults on 401(k) participation to make enrollment and other features of 401(k)s automatic unless a worker opts-out, can substantially boost participation and contributions. Under the automatic 401(k), workers would be enrolled in the plan and invested in a diversified fund with increasing contributions as they received raises, unless they actively choose otherwise. In most 401(k)s, workers are not included unless they actively choose to sign up.
Mark Iwry, Senior Adviser to the Project and a Nonresident Senior Fellow at Brookings, discussed potential expansion of the Saver's Credit, which helps to level the playing field for retirement savings incentives and was used by over 5 million households in 2003. Without this tax credit, he noted, middle- and lower-income workers receive little or no tax benefit for contributing to a 401(k) or IRA
The Retirement Security Project's leaders were joined at the National Press Club by Douglas Holtz-Eakin, Director of the Congressional Budget Office; Rebecca W. Rimel, President and CEO of The Pew Charitable Trusts; and Steve Moore, conservative policy analyst and President of the Free Enterprise Fund.
Rimel spoke about the impact such changes can have on the daily lives of millions of Americans in older age. “This project has the potential to give literally millions of Americans a more secure and comfortable retirement. Very rarely does the opportunity to do so much for so many come along – especially in a way that so many agree is just common sense.”
Moore noted the need for increasing the net national savings rate and the benefit such increases have on both the short- and long-term financial stability of the country. “Currently, we have one of the lowest national savings rates of any industrialized country. Whatever we can do to improve that standing is helpful because it means we are more independent and less beholden, both as individuals, and as a country, to others.”
Holtz-Eakin discussed a recent CBO report indicating that a significant share of the American public was not saving enough to maintain their current standard of living in retirement. “If current trends continue, many baby boomers are likely to face a lower standard of living in retirement.”
The Retirement Security Project is supported by The Pew Charitable Trusts in partnership with Georgetown University's Public Policy Institute and the Brookings Institution. It is directed by Peter Orszag, Ph.D., a Senior Fellow in Economics at the Brookings Institution. The Project's Advisory Board members include former Clinton Treasury Secretary Robert Rubin; former Bush Deputy Assistant Treasury Secretary for Economic Policy Bruce Bartlett; Harvard Law Professor Daniel Halperin; Nancy Killefer, Director, McKinsey and Company; John Shoven, Director of the Stanford University Institute for Economic Policy Research; Michael Graetz, Bush Deputy Assistant Treasury Secretary for Tax Policy; and Eugene Steuerle, Deputy Assistant Treasury Secretary for Tax Analysis during the Reagan Administration.
Pew is no longer active in this line of work, but for more information visit the Retirement Security Project on PewHealth.org.