Members of the Bipartisan Policy Center’s Personal Savings Initiative met for the first time Monday to begin developing a series of proposals designed to boost national savings and improve income security in retirement.
The BPC announced the launch of the initiative – which will be led by former Senate Budget Committee Chairman Kent Conrad, D-N.D., and former Deputy Commissioner of the Social Security Administration under President George W. Bush – in April.
The group will look for ways to improve the defined contribution retirement system through increased personal savings and enhance the effectiveness of tax-advantaged savings plans.
It also will address the finances and future of Social Security and the impact of federal policies on personal savings as well as the impact of long-term care needs, homeownership and student debt.
According to the BPC, one of the main reasons for the insufficiency of retirement savings is the shift in the workplace from defined benefit plans to DC plans. Since 1998, the number of companies providing a DB plan has plunged from 71 percent to 30 percent, and many of those plans are hybrids, meaning the employee accumulates savings rather than receiving an annuity.
In addition, there has been a sustained decline in Americans’ personal savings due to factors such as stagnant incomes and higher consumption. From 2005-07, before the Great Recession, the annual savings rate was just 3 percent. Although it nearly doubled during the crisis, averaging nearly 6 percent from 2009-2012, it has dropped again to 4 percent.
Finally, says the BPC, many of those who have DC accounts make premature withdrawals and not only pay taxes and a penalty for not returning the money, but also eat into the income that is supposed to be accumulating for retirement.
The commissioners include former politicians, financial experts, business leaders and academics.