Philadelphia, PA -
12/10/2004 - As millions of Americans approach retirement without adequate financial resources, The Pew Charitable Trusts today announced a new initiative to encourage policies to help Americans increase their personal retirement savings.
The Trusts’ $3.8 million, two-year investment will promote policies that can gain broad public and private-sector support to raise participation rates in 401(k)-type plans, strengthen retirement savings tax incentives and create new avenues for savings. The Retirement Security Project is a partnership with Georgetown University’s Public Policy Institute and directed by Peter Orszag, Ph.D., senior fellow at the Brookings Institution. Its bipartisan advisory board includes former officials in the Nixon, Carter, Reagan, George H.W. Bush and Clinton administrations.
“Most Americans say they are worried about not having enough money for retirement – and for good reason,” said Rebecca W. Rimel, President and Chief Executive Officer of The Pew Charitable Trusts. “America’s baby boom generation will soon begin retiring and the vast majority has little or no ‘nest egg.’ While Medicare and Social Security reform is hotly debated, there is broad consensus that Americans simply don’t have enough personal savings to ensure safe and healthy retirements. The Trusts and our partners will work to move forward on bipartisan solutions, focusing on ways to help moderate-income Americans, who are already financially stretched and less likely to be adequately prepared for retirement.”
Experts estimate that a couple earning $45,000 per year will need nearly $200,000 in savings in addition to Social Security to maintain their standard of living in retirement. Yet half of American households nearing retirement age have $10,000 or less in an employment-based 401(k)-type plan or IRA, and Social Security benefits now average only slightly more than $10,000 per year.
“America has one of the lowest personal savings rates in the industrialized world,” said Dr. Orszag. “We know enough based on previous studies that we can significantly increase the personal savings rate by reducing barriers to saving and by strengthening incentives. We can help millions of Americans prepare for retirement through the commonsense, achievable reforms the Retirement Security Project will advance."
The policy options on which the Retirement Security Project will focus include:
- Encouraging automatic enrollment in 401(k)-type plans, which dramatically increases participation in these retirement savings vehicles.
- Enabling a portion of tax refunds to be deposited directly into retirement savings accounts.
- Calling attention to the potential impact of strengthening the "Saver's Credit," enacted in 2001 and currently scheduled to expire in 2006.
- Promoting low-cost IRAs, which have low contribution requirements and administrative fees to give modest-income Americans an affordable, tax-preferred way to save.
The project’s advisory board includes respected economists, policy experts and legal scholars, including Bruce Bartlett, senior fellow at the National Center for Policy Analysis and a former official in the Reagan White House and the Treasury Department in the George H.W. Bush Administration; Michael J. Graetz, Yale Law School professor and former Treasury official in the Nixon and George H.W. Bush Administrations; Dan Halperin, Harvard Law School professor and former Treasury official during the Carter Administration; Robert E. Rubin, director of Citigroup and former Secretary of the Treasury in the Clinton Administration; John Shoven, senior fellow at the Hoover Institution and economics professor at Stanford University; and C. Eugene Steuerle, senior fellow at the Urban Institute and former Treasury Department official in the Reagan Administration.
The project will also collaborate with organizations that represent working Americans, including senior, minority and women’s organizations. Business groups will be key partners, as many retirement programs, like 401(k)s, are administered in employment settings.
The Pew Charitable Trusts launched the retirement security initiative following an initial one-year effort to assess the state of research and policy on the subject and the opportunities for meaningful, bipartisan reforms. “A strategic investment at this time could create momentum in the policy arena and help the nation achieve a crucial, common-sense goal – encouraging millions of Americans to save for retirement,” said Maureen K. Byrnes, director of the Trusts’ Health and Human Services program, which initiated the project. “There is a growing body of research showing that improving incentives can help moderate-income people save. We look forward to working with leaders in the field to build on recent bipartisan policy accomplishments to improve retirement security.”Pew is no longer active in this line of work, but for more information visit the Retirement Security Project on PewHealth.org.