Challenges Facing the US Retirement System

A: We started as just two people. Now, we have roughly 22 employees, and we’re a recognized, credible name that is trusted to not be left- or right-leaning. We created the National Retirement Risk Index, which measures how many working-age households are at risk of not maintaining their preretirement standard of living once they’re in retirement, and we publish authoritative, first-class research that ends up in economic journals. One of our major contributions is making complex economic concepts that have big policy implications understandable and accessible.

Q: What types of concepts do you help clarify?

A: Take something like Social Security. There is a ton of panicky news about the program going bankrupt, but that’s not what is happening. There’s a gap between outlays and revenues, and the U.S. is filling that gap with money from a trust fund, which will become exhausted in 2033 if policymakers don’t act to shore it up. Even if that trust fund is depleted, money from payroll taxes will cover almost 80% of benefits. So Social Security is not going to disappear, and defining that gap for people is really important.

Q: How does the Center for Retirement Research’s work translate into actual policy changes?

A: We’ve done a lot related to 401(k) plans. We emphasize how much of a burden it is for individuals to decide whether to join a plan, figure out how to invest that money, know what to do when they change jobs and more. Alongside similar organizations, our research helped bring about changes to the system — including through automatic enrollment of employees in 401(k) plans, automatic escalation of the percentage of salary contributed to the plans over time, and use of target-date funds — that have made it easier for people to save.

Q: What is the biggest challenge facing Americans who want to save for a comfortable retirement?

A: Other than the financing issues with Social Security, it’s access to retirement savings plans. If you take a snapshot of the private-sector workforce at any moment in time, only about 50% of people are working for an employer that offers a retirement plan, and those retirement plans are the only way most people save.

Q: What changes do you hope to see for the retirement system?

A: Before 2033, when retirement benefits would have to be cut by 21%, I’d like to see Social Security fixed. I’d also like to see more access to workplace retirement savings plans. We have a number of experiments at the state level that would require employers that don’t offer a retirement plan to automatically enroll their employees in an IRA and put contributions from employees’ earnings into that account (employees can opt out if they wish). Those programs are in their nascent stage but becoming increasingly popular. At the federal level, Congressman Richard Neal (D-Mass.) has introduced the Automatic IRA Act of 2024, which would require employers that don’t offer a retirement plan and have 10 or more employees to enroll workers in an IRA or similar retirement plan.

Q: Is there anything else that should be done now to get more Americans to save?

A: I think that lecturing people to save more is not helpful. We need a system where the appropriate portion of your income is put aside for you. People are busy — parents have jobs, and they need to get their kid to soccer, put meals on the table, figure out their finances and have some fun. Asking them to manage their savings is asking a lot, so making contributions automatic and easy is absolutely necessary.

Mallika Mitra is a contributing writer at Kiplinger Personal Finance magazine. For more on this and similar money topics, visit Kiplinger.com.

©2024 The Kiplinger Washington Editors, Inc. Distributed by Tribune Content Agency, LLC.

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