An Idea For Fixing America's Retirement System

Feb 13, 2018

For many Americans a comfortable retirement is but a dream.
Credit Wikimedia Commons

NEW YORK - For far too many Americans, the prospect of a secure retirement is dim. A retirement expert says this crisis is a problem the nation can solve - and a disaster if it doesn't.

Teresa Ghilarducci, an economics professor at The New School for Social Research, says too many people rely on Social Security alone to fund their retirement, with payments that aren't enough to provide retirement security. Ghilarducci calls America's present retirement system "a failure." "The system only works for very few people, so it's not a failure to the upper income, higher educated, lucky people," she states. "But when I say it's a failure, it's a failure for 95 percent of the people - and in that book, it's an utter failure."

Ghilarducci has co-written a book on how to change the retirement system, "Rescuing Retirement." She and her co-author, Blackstone Financial CEO Tony James, say they're seeing some bipartisan interest for their idea of a national, mandatory savings account. Ghilarducci says the concept of people voluntarily saving for retirement as soon as they begin their work life, and never touching the savings, is counter to observed human behavior.

She says it just doesn't work. "So we are proposing a mandatory savings account on top of Social Security, so that when you retire and you draw out Social Security, your pension benefit is a lot bigger," she explains. "It's Social Security and your annuity on top of that."

She says the plan would be a nationwide system that allows all workers to save enough for retirement. According to Ghilarducci, 25 million retired Americans will face poverty or near poverty in retirement by the year 2050 if changes aren't made. She says too many people have nothing other than Social Security when they retire - and 401k plans have not turned out to be a remedy. "It surprised all of the experts that the 401k system, despite people saying it's popular, didn't expand coverage," she states. "Over the past 40 years, when we got rid of traditional pensions and adopted the 401k, fewer workers are covered than they had before."

She adds fewer than half of all private sector workers don't have retirement savings plans through their employers.