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SAVER Summit Attendees Urged to Address 'Often Overlooked' Issues

Americans for Secure Retirement

February 28, 2006

Coalition Calls for Solutions that Help All Americans Save for Retirement - Not Just Those with Employer-Based Plans & Need for Tools to Both Save and Manage Retirement Income 

On the eve of the final SAVER Summit several national organizations are calling on Secretary of Labor Elaine Chao and Summit delegates to address the need for retirement savings programs accessible to all Americans and the need for mechanisms that not only encourage people to save more, but also provide a means of managing those savings so they last throughout retirement.

In a letter to Secretary Chao, members of Americans for Secure Retirement highlight these two issues as critical to any true public discussion about retirement security. Many of the organizations represent populations who face a higher degree of risk in retirement such as women, farmers and small business.

"People are often surprised to learn that 58 percent of the American workforce will depend solely on Social Security or their own personal savings to fund their retirement. The numbers are far more dire for farmers and other 'at risk' populations who are far less likely to have an employer-based retirement plan," said Larry Mitchell from the American Corn Growers Association. "As a nation, we simply must provide better ways for people to save for their retirement above and beyond employer-based retirement plans."

Equally troubling to the group is the fact that because people are living longer than ever, they risk exhausting their savings too early in retirement. Policymakers need to provide Americans options that help them both save and manage their retirement income so it lasts throughout retirement.

"Part of the challenge in this country is encouraging people to save enough for retirement, but an equally significant issue is giving people the tools they need to manage those savings so they last a lifetime," said Elisabeth Gehl from Business & Professional Women. "No one should live in fear that their savings will run out just when they need it most."

The group argues that part of the policy prescription must be encouraging people to invest a portion of their personal savings in an annuity with a lifetime payout. This way, they are guaranteed a "paycheck for life" to help bridge the gap between what Social Security and employer-sponsored retirement plans cover.

Americans for Secure Retirement is a coalition of 34 organizations representing a broad cross-section of interests including women's groups, Hispanic and other minority organizations, agricultural groups, small business, insurance industry groups, and consumer rights organizations united in support of legislation called The Retirement Security for Life Act (S.381, H.R.819). This bipartisan legislation would provide a strong tax incentive to encourage individuals to use lifetime annuities as a means to ensure a steady "paycheck for life." For more information on ASR, please visit http://www.paycheckforlife.org.

Letter Follows:

The Honorable Elaine L. Chao
Secretary of the Department of Labor
Frances Perkins Building
200 Constitution Ave., NW
Washington, DC 20210

Dear Secretary Chao:

As you prepare to open the final SAVER Summit, we urge you and the Summit delegates to explore policy solutions that address two often-overlooked parts of the retirement security debate: (1) the need for solutions that go beyond employer-based programs as almost half of the American workforce does not work for an employer that offers such programs; and (2) the need to not only encourage people to save more, but also better manage those savings.

Need for Solutions That Complement Employer-Based Programs

Policymakers have rightfully focused considerable attention on strengthening employer-based retirement programs as a way to help Americans attain financial security in retirement. This is a critical first step, but the fact is that of the 152.7 million Americans who were employed in 2004, only 81.2 million worked for an employer or union that sponsored a pension or retirement plan. Of those, only 63.9 million participated in the plan. That means 58 percent of the American workforce will rely solely on Social Security or their own savings to provide all of their retirement income. The situation is even more dire for "at-risk" populations such as Hispanic-Americans, African-Americans, Native-Americans, women, farmers and others who face far greater challenges in retirement and who tend to participate far less in employer-based retirement programs.

For individuals who do participate in employer-based retirement plans, the situation is compounded by the fact that those plans are increasingly defined contribution plans rather than defined benefit plans (i.e. pensions) that would guarantee a steady stream of income throughout retirement. And of course, we have all seen recent news coverage about defined-benefit plans of several of the largest companies in the U.S. being terminated or frozen, making it all the more urgent that policymakers provide mechanisms that all Americans can utilize, whether they happen to work for an employer with a retirement program or not.

Need for Mechanism to Help People Save, but also Help Manage Savings to Last a Lifetime

The second challenge we face as a nation is that managing your savings to last throughout retirement is almost as important as saving itself. The fact is that Americans are living longer than ever before. At the beginning of the 20th century, men were expected to live to age 51.5 and women to age 58.3. A century later, life expectancy is nearly 80 for men and over 84 for women. Moreover, women in particular face even greater challenges. Nearly 1/3 of retirement age women will live well into their 90s and there is a one in thirty chance they will live to age 100. All of this highlights a serious challenge, as people are faced with the prospect of living 30+ years in retirement -- trying to make their savings stretch over a much longer period of time with the increasing uncertainty about the ability of Social Security or pension income to meet their needs.

As members of the Americans for Secure Retirement Coalition, we believe one effective policy prescription is to provide incentives that encourage Americans to assure themselves a guaranteed stream of income through products such as annuities with a lifetime payout. Annuities are the only retirement vehicle that can provide a steady paycheck for life for those Americans who do not participate in employer-based retirement plans. In addition, they give people a way to not only save for retirement, but also manage the income from their savings so they will not run out just when they need it most.

We hope that you use the SAVER Summit to shine the spotlight on the need to go beyond just reforming employer-based retirement plans by providing the right level of incentives to not only encourage Americans to save more, but to also better manage the income from those savings to last a lifetime. After all, every American deserves to enjoy their "golden years." Solutions like the Retirement Security for Life Act (H.R. 819/S.381) and others like it will help provide more holistic solutions accessible to all Americans, including often forgotten "at-risk" populations like those many of us represent.

Sincerely,