Chances are you've heard of retirement's "three-legged stool"-- Social Security, Employer-sponsored pensions, and Individual savings. But in these days of plummeting 401K balances, dismal personal savings rates, and disappearing employer-backed pensions, many Americans are now teetering on just a leg or two.
The head of one mutual-fund industry group, the Investment Company Institute
, says "this is a very dangerous moment for the future of America's retirement system". Specifically, he's worried about the future of 401K's given their dismal performance during the economic crisis and hopes to discourage lawmakers from making any radical changes to our current 401K system. But what we found especially interesting was this recent comment made at a National Press Club
news conference by ICI's President/CEO, Paul Schott Stevens
"The first step in bolstering America's retirement security is to put Social Security on a sound financial footing. Social Security is the foundation of our system for retirement income. It is important to all, and especially to those least able to save on their own. For the lowest-paid workers, Social Security benefits are projected to replace up to two-thirds of their working income...So Job One is to ensure Social Security meets its promises. I'm not here today to endorse any specific plan. But I will tell you one plan that the mutual fund industry has and will continue to oppose: We do not--I repeat, do not--advocate privatizing or personal accounts for Social Security. The system should remain what our grandparents knew it to be: a universal, employment-based, progressive safety net for all Americans."
We couldn't agree more and are encouraged to see that at least one investment industry group understands the critical role Social Security plays in the retirement of millions of Americans. Social Security continues to be the one stable retirement income seniors can count on each month regardless of what's happening on Wall Street. The program should remain the social safety net it was created to be and as Stevens correctly pointed out personal accounts are not the answer.
So what is being proposed? The Wall Street Journal
has highlighted many of the alternate retirement plans surfacing after the Wall Street crises.
"It's no wonder, that proposals are proliferating to overhaul 401(k)s. Some individuals are pushing initiatives to simplify retirement-savings plans in ways designed to appeal to small businesses -- many of which do not provide a plan. A few even go so far as to suggest that the 401(k) itself be retired or returned to the supplementary role it was intended to serve. They favor creating a new system that would cover everyone."
Some are new ideas, some have been around for years. One proposal would create a government-sponsored Universal 401(k) plan
open to all.
Another is called Super Simple
, modeled after a pension system scheduled to go into effect in the United Kingdom in 2012. Another plan is a government-sponsored Guaranteed Retirement Account
, which would provide a guaranteed rate of return of 3%, on top of inflation.
So many plans, so many proposals, so little time for those ready to retire.