2015 White House Conference on Aging

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Policy Briefs

Nora Super and others at Listening Sessions 2014

13. May 2015 14:24
by WHCOA Staff

Retirement Security Policy Brief

13. May 2015 14:24 by WHCOA Staff | 55 Comments

Retirement Security

Americans are living longer than ever before. In 2012, life expectancy at birth in the United States reached a record high of 78.8 years. A 65 year-old man can expect to live another 17 years and a 65 year-old woman another 20 years. As a result, older Americans have more time to help grow the economy, enrich their communities, and enjoy their families. But longer lives can also challenge older Americans’ financial security, increasing the risk of outliving their assets.

Historically, experts have envisioned a secure financial foundation for retirement as a three-legged stool, made up of Social Security, employer-sponsored pensions, and individual savings or investments. But as traditional pensions have increasingly been replaced with defined contribution plans like 401(k) plans, retirees are taking on heightened risks in retirement, especially as longevity increases. 

The Obama administration believes that all Americans deserve to retire with dignity. That is why the President has worked to strengthen Social Security, expand the availability of retirement savings options, and protect workers’ hard-earned savings. This policy brief reviews recent activity and proposals in these three areas.

Protecting and Strengthening Social Security

As we celebrate the 80th anniversary of the enactment of the Social Security Act in 2015, protecting Social Security to help ensure that older Americans can retire with dignity has never been more important. Social Security provides an essential foundation of retirement security for older Americans and an important lifeline to families and workers who become disabled. It provides guaranteed, life-long benefits to almost 60 million Americans, including nearly nine out of ten Americans aged 65 or older and nearly 11 million disabled workers and their families. Monthly retirement benefits are modest – averaging $1,330 a month for retired workers in January 2015, or just under $16,000 a year. Similarly, monthly disability benefits averaged just $1,165 for disabled workers in January 2015, less than $14,000 per year. 

Yet Social Security continues to be the main source of income for most older Americans, especially women and minorities. Two-thirds of older beneficiaries rely on Social Security for half or more of their income; that includes one-third who count on it for nearly all (90 percent or more) of their income. Nearly half of unmarried older women, including widows, rely on Social Security for 90 percent or more of their income. Forty-six percent of older African American beneficiaries, 44 percent of Asian beneficiaries, and 53 percent of older Hispanic beneficiaries get at least 90 percent of their total income from the program, compared to 35 percent of older white beneficiaries. 

Social Security keeps nearly 15 million older adults out of poverty each year, along with more than 1 million children and 6 million adults younger than 65. Without Social Security benefits, the poverty rate for older Americans would approach 50 percent. Public opinion polls show that support for Social Security crosses both party and demographic lines, with many Americans open to contributing more in order to preserve and improve Social Security benefits.

The Obama Administration is committed to ensuring that Social Security is a rock-solid guaranteed benefit that every American can rely on, now and in the future. While the President believes that we need to work in a bipartisan fashion to strengthen Social Security, he remains committed to the following principles:

  • Any reforms should strengthen Social Security for future generations and restore long-term solvency.
  • The Administration will oppose any measures that privatize or weaken the Social Security system.
  • While all measures to strengthen solvency should be on the table, the Administration will not accept an approach that slashes benefits for future generations.
  • Current beneficiaries should not see their basic benefits reduced.
  • Reform should strengthen retirement security for the most vulnerable, including low-income older Americans.
  • Reform should maintain robust disability and survivors’ benefits.
Because Social Security is such an important source of income for older Americans, it is critical that older Americans understand what their Social Security benefits mean for their lifetime income, and how to integrate Social Security payments with other income sources. Social Security monthly benefit amounts differ substantially based on when a person decides to start receiving benefits. For example, if a person begins claiming benefits at the earliest age of 62, benefits may be $750 a month for the rest of the person’s life, but by delaying claiming benefits until age 70, the same benefit would be $1,320 a month. 

The Administration is committed to supporting public education to help inform these decisions. The Social Security Administration is collaborating with other organizations on the “Campaign for a Secure Retirement: Helping Millions of Americans Plan and Save for Retirement.” Current partners include the American Savings Education Council, the Consumer Federation of America, the Women’s Institute for a Secure Retirement, and the U.S. Department of the Treasury. This educational campaign aims to encourage retirement planning and savings, and to encourage use of the online Social Security Statement as an important retirement planning tool. Workers and retirees of all ages are encouraged to access their statement by creating a “my Social Security account” to begin tracking their earnings record and potential future benefits. SSA also offers a Retirement Estimator, which allows workers to estimate their Social Security benefits under various retirement scenarios.

Social Security is and must remain a rock-solid, guaranteed progressive benefit that every American can rely on. However, too many Americans reach retirement age with insufficient savings to supplement their Social Security and enjoy a secure retirement, even after a lifetime of hard work.

Saving challenges are especially acute for some demographic groups. For example, the median wealth of black and Hispanic households is just one-eighth that of white households. Figure 2 demonstrates the impact of decreased earnings over time on the accumulation of wealth for black and Hispanic families. 

Increasing Retirement Security and Employer-Based Retirement Savings Options

The number of traditional defined benefit pension plans in the private sector has fallen from 103,000 in 1975 to 44,000 in 2012, and the number of active participants in such plans has fallen from 27 million to 16 million – even as the workforce has continued to grow. Employers are increasingly providing defined contribution plans instead. In 2014, individual retirement accounts (IRAs) and defined contribution plans like 401(k) plans accounted for $14.2 trillion in retirement savings – more than half of Americans’ total retirement wealth.

These trends in the employer-based retirement system mean that many Americans are being left behind. Nearly a third of all workers do not have access to workplace retirement benefits. For part-time workers, more than 60 percent do not have access. For those full-time workers who have access, only 64 percent participate, while for part-time workers, only 21 percent participate. And even if they do participate, many workers lack the time and information necessary to make the often complex financial decisions to maximize the impact of their contributions over time.

The President’s retirement tax reform proposals included in his 2016 Budget would dramatically expand coverage and access to employer-based retirement savings. Specifically, the President’s 2016 Budget proposed to:

  • Automatically enroll Americans without access to a workplace retirement plan in an IRA. The Budget would make it easy and automatic for workers to save for retirement through their employer