On October 13, 2011, the Asset Building Program hosted an event focused on the retirement savings deficit and possible ways to address the ongoing problem of retirement security. Speakers included Mark Iwry, from the U.S. Department of the Treasury, Michael Calabrese from the New America Foundation, William Gale from the Retirement Security Project at Brookings Institution, Teresa Ghilarducci from the Schwartz Center for Economic Policy Analysis at The New School, and David Certner from AARP.
Mark Iwry discussed the numerous barriers that impede saving for retirement and described how some of the key features of the Auto-IRA proposal help address them. Current gaps in the savings system leave many workers ineligible for various forms of tax-advantaged savings, while workers that are eligible have low rates of participation.
Michael Calabrese introduced the key concepts from his new paper, "Facing Up to the Retirement Savings Deficit." Decreasing rates of participation in private retirement plans and over-reliance on Social Security have contributed to the need for a stronger system. However, Calabrese highlighted significant gaps in the coverage of the Auto IRA and argued that the plan needs to be strengthened and made more robust by maximizing access and adequacy of savings for retirement.
Bill Gale identified a proposal to change the current tax deduction on retirement savings to a credit, which would be more equitable and progressive in its impact on retirement savings. Gale expressed that the current incentive structure is upside down and needs attention. He also cautioned that attention to retirement savings will become even more important in the context of any efforts to reform Social Security.
Teresa Ghilarducci shared her agreement with many of the remarks of previous panelists and elaborated on the panic people across the income spectrum feel about this issue. Her proposal differs significantly from the Auto IRA and is called Guaranteed Retirement Accounts. GRAs are described in her book When I’m Sixty Four.
David Certner finished the panel by identifying many of the shortcomings in the private retirement savings system and suggested that Social Security is a highly effective tool that should be expanded in order to meet the retirement savings challenge.
The ensuing discussion and audience questions focused on a range of issues from opportunities for tax reform to the ongoing challenge of addressing realistic, attainable savings goals for low-earning people that don’t negatively affect consumption levels. Several questions focused on the recent economic recession and the challenge of balancing high risk investment options with retirement security goals. Other countries, such as the Netherlands, were referenced as possible sources of models for automatic and universal retirement savings.
Senior Advisor to the Secretary and Deputy Assistant Secretary (Retirement and Health Policy)
U.S. Department of the Treasury
Senior Research Fellow, New America Foundation
Author: From Auto IRAs to Universal 401(k)s
Director, Retirement Security Project
Director, Schwartz Center for Economic Policy Analysis
The New School
Director of Federal Affairs, AARP
Director, Asset Building Program
New America Foundation