Dozens of residents and organizations turned up at a Connecticut Senate committee hearing today to voice their support for a proposal that would set up a state-run retirement plan open to all Connecticut residents and businesses.
Senate Majority Leader Martin Looney, D-New Haven/Hamden, and House Majority Leader Joe Aresimowicz, D-Berlin/Southington, both expressed support for the measure, encouraging their colleagues in the Connecticut General Assembly to take action on behalf of aging constituents who are rapidly approaching retirement without any savings.
“Our nation and our state are currently on the brink of a retirement crisis that will not only impact retirees, but next generation workers as well,” said Aresimowicz. “Every person who has worked hard throughout their life and played by the rules should have the ability to retire at an appropriate age and live the rest of their life with some financial security. This bill gives that chance to many people who otherwise will not be afforded the opportunity.”
In Connecticut, about 740,000 residents do not participate in an employer-sponsored retirement plan, according to a Schwartz Center for Economic Policy Analysis study released last year.
“As our citizens approach retirement far too many of them rely solely on Social Security as retirement income. In truth, while Social Security has lifted many senior citizens out of abject poverty, it does not in fact provide a decent living for those with no other source of retirement income,” said Looney. “Connecticut would be well served by creating a program similar to that in California to address retirement security.
Several speakers highlighted how the changing economy has resulted in a sharp decline in the availability of employer-based retirement savings plans for low- and moderate-income residents.
“We are in a retirement crisis,”said Lindsay Farrell, executive director of Connecticut Working Families. “And Wall Street is getting rich off of our broken system. We need a program that lets every worker, not just the rich, retire securely.”
The state’s leading organizations for retired residents also testified in support of the legislation, highlighting the growing public costs of inaction in the face of the retirement crisis.
“This plan, and those considered by other states, is self-sustaining, paid for through participant fees...Connecticut can’t afford not to take action. If older adults do not have enough money for a secure retirement, they will more heavily rely on Medicaid, which is the most expensive program in the state. Connecticut spent millions of dollars for Medicaid services to residents over age 65. These are dollars that the state can spend on other essential services like education and public safety. By helping people plan for self-sufficiency in retirement, the state will ultimately save money,”said CT AARP.
Proponents of the bill touted that it would be a portable way for Connecticut workers to save for retirement. It also would offer robust rates of return and greater overall savings than many plans currently on the market, said Win Heimer, executive vice president of the Connecticut Alliance for Retirement Americans.“Those plans often charge high administrative fees that eat away at potential savings.”
Ken Floryan of West Hartford, a retired investment management professional, said that the current retirement planning market does not have effective products for individual workers and small business owners who are not classified as high net worth.
“Providers of investment services feel that the individual or small business that is not classified as ‘high net worth’ imposes a high cost of marketing and high costs of servicing. This is to say: they do not consider these customers worth their while because they cannot make a high enough margin of profit. To recover the costs of servicing individuals with average incomes or small groups, providers of investment services feel that they must impose high minimum investment amounts and high fees. The high minimums are a barrier to entry into retirement savings for many workers and small businesses,” Floryan said.