Feeling a little concerned that the average American - folks who probably aren’t your clients - has, on average, less than $10,000 in savings, retirement or otherwise? Do you suspect that the promise of a healthy and economically stable, state-funded retirement for American workers is indeed a thing of the past?
The retirement crisis in America is indeed tangible, enough so that the Senate Committee on Health, Education, Labor and Pensions has waded into the fray with its own take on the issue – and a new move that mimics retirement alternatives in other nations.
Sen. Tom Harkin, committee chair, recently floated the notion of creating an all-new, privately run retirement plan closer to a pension system than any mixture of current 401(k)-styled models. It’s got a fancy name, too: Universal, Secure and Adaptable Retirement Funds. Like, USA Funds. It has a nice ring to it.
That new, centralized system, which would allow workers portability with their retirement investments, would also be mandatory – a notion that we have seen, during some recent talk about health care or some such topic, generates so much warm and genuine appeal from the American public.
Harkin’s plan would see those funds pooled and professionally managed through a board of employee, retiree and employee representatives – and employers would be off the hook for fiduciary responsibility, which would be shifted to the system itself.
And investment and longevity risk, the plan suggests, would be spread across such a broad spectrum (ie. the entire U.S. working population) so as to minimize the disincentives that keep most small employers from getting involved in pension plans at present.
Those who do have pensions through their employers would be allowed to keep them.
The proposal also calls for rejiggering Social Security to change the replacement factor formula to boost benefits by about $60 a month. Paid, for the most part, by phasing out the payroll tax wage cap and taking Social Security taxes from even those making more than $110,100.
All of which sounds like a wonderful idea but … I’m kind of wondering if Tom is aware that a hugely divisive election is just a few months away, and the idea of more mandatory, government-initiated safety nets funded by taxing the rich just doesn’t seem like a popular solution at this point.