America has a retirement savings crisis.
Nearly half of working-age households can’t continue their current standard of living in retirement, according to data from the U.S. Federal Reserve’s Survey of Consumer Finances. People are living longer, and traditional pension plans are vanishing, hurting the chances for people to save enough to live comfortably in retirement.
What’s more, employer-sponsored 401(k) plans are falling short in helping people save for retirement. According to The Pew Charitable Trusts, more than a third of private-sector workers don’t have access to an employer-sponsored retirement plan. Of those, only about half take advantage of it. And many of those who do take advantage of a 401(k) plan fall victim to high fees, confusing fund lineups and lack of clarity around what the impact of their investment decisions will be in the long run.
The powers that be in Washington must take action to prevent the retirement crisis from getting even worse.
Sadly, sweeping retirement regulation changes may not be realistic. We saw this recently with the Department of Labor’s fiduciary rule. That rule required retirement-plan advisors to act in investors’ best interests, and it was struck down by the courts. Many in the retirement industry fight for policy changes like the fiduciary rule, but when revenue is at stake for companies that don’t benefit from regulatory changes, their lobbying and political support arms win.
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Today’s political climate is riddled with disagreement — and if retirement policy is not absolutely crucial for a politician’s platform, the issue will be passed on to someone else, and the snowball effect makes the crisis larger by the day. America’s ability to save for retirement shouldn’t suffer the consequences.
Rather than focusing on systemic retirement policy changes that will take a long time to enact — if they ever become law — those inside the Beltway, industry players and lobbyists should look for small wins that address changes that can make an impact right now.
So what changes will be the most effective?
Treating retirement information like medical records. Americans are entitled to access all of their medical records; the same should apply to retirement. The Department of the Treasury should provide people access to their entire IRS history, including information such as income taxes. The Treasury should also be allowed to grant access to financial advisors who can use that data to provide more actionable, precise guidance on how much to save each year.