WASHINGTON – Many American seniors have little or no retirement savings according to a new report from the Government Accountability Office. That was the focus of a bipartisan hearing where Senators urged action in Congress to relieve the financial stress for Americans unable to save for retirement.
The typical working household in Maine has just $3,000 saved for retirement. Roughly one in four households ages 65 to 74 in the U.S. have no retirement savings of any kind, according to the Government Accountability Office.
Sen. Susan Collins, R-Maine, chairman of the Senate Aging Committee, said the U.S. retirement system is “becoming a national crisis” for an increasing number of Americans who cannot afford to retire due to fewer traditional pensions offered outside of the public sector and fewer employer-sponsored retirement plans, forcing individuals to plan their retirement on their own.
The committee focused on the challenges presented to small businesses that cannot afford to present their employees with retirement plans. According to the Small Business Administration, 60 million Americans work for small businesses, but it has become more expensive to administer these retirement plans, called SIMPLE plans.
In response, Collins and Sen. Mark Warner, D-Va., reintroduced the SIMPLE Plan Modernization Act to provide greater access to SIMPLE plans among small businesses. The bill did not pass after it was first introduced in July 2018.
Collins and Sen. Maggie Hassan, D-N.H., also introduced the AARP-supported Retirement Security Act of 2019 Monday, which would allow more businesses to join multiple employer plans and protect members of these pension plans from losing their tax benefits. AARP, an interest group with roughly 38 million members, helps people with healthcare, employment and income security, and retirement planning needs.
This bipartisan bill, Collins said, will hopefully reduce the estimated $7.7 trillion gap between what Americans save to maintain their standard of living in retirement and what they actually have.
AARP wrote a letter in March 2018 to former Sen. Orrin Hatch, R-Utah, and Sen. Ron Wyden, D-Ore., endorsing the Retirement Enhancement and Savings Act of 2018. It would encourage employers to offer retirement plans with automatic enrollment and adequate deferral amounts, which would be “an important step to improving retirement policy.”
Congress adjourned before taking a vote on the bill, but many of its provisions are in Collins’ newly introduced Retirement Security Act of 2019 (S.321).
Since its inception, Social Security has always brought in more revenue than its costs. That came to an end in 2010, and now the program is relying on interest income to help cover expenses, according to U.S. Comptroller General Gene Dodaro.
He said Social Security is threatened by demographic trends, certain pension plans facing insolvency, and increasing individual management over retirement savings. In 2016, the bottom 20 percent of households age 65 or older relied on Social Security retirement benefits for 81 percent of their income.
“Between Social Security and Medicare combined, we are facing a $54 trillion deficit for the next 75 years,” Dodaro stated.
High healthcare costs also became a central focus for the committee. Democratic Sen. Doug Jones of Alabama shared a personal story about how his parents saw their life savings evaporate after Jones’ father was diagnosed with Alzheimer’s. “They thought they had a very good plan,” he added, but unexpected costs are a financial threat to many Americans, especially healthcare costs.
Relatively low real wage growth, accumulation of debt, rising healthcare costs, and financial illiteracy continue to pose a threat to retiring Americans, Dodaro said.
“The news is not great looking to the future,” said Sen. Richard Blumenthal, D-Conn. “Social Security is a trust fund and we have an obligation to make it solvent.”
The Retirement Security Act has been referred to the Committee on Finance.