As a society we must look forward. Having failed to plan for a few decades now, we the people face a retirement crisis. Nothing is in place today to stop the disease from attacking our young.
At the heart of our problem is antiquated government regulation. Old regs are oblivious to the characteristics of today’s job market (e.g., the gig economy, at-will employment), businesses’ cost/competition dilemma, and the challenges of a disappearing middle class. Middle class has the allure of not living paycheck to paycheck. Middle class means the satisfaction of paying your bills plus having something left over each month. For many working people, the goal is independence and self-sufficiency. Here’s a middle class calculator from CNN Money. Depending where you live—which is potentially where you must live for your type of work—you may easily drop out of middle class.
American Savings Act
In July 2018, Senator Jeff Merkley (D-Ore.) reintroduced the American Savings Act (originally introduced in 2016). The senator reports that 55 million Americans (17% of the U.S. population) do not have any access to a retirement savings plan. But add to that the group of those who are out of full-time work for extended periods of time and who fall behind in savings/retirement contributions. And add to that those with serious medical issues that consume the household budget and make expensive plans not worth the effort and cost.
The American Savings Act would provide every worker without access to a company retirement plan a universally accessible, retirement savings account unchained from any one employer. Features would include auto enrollment, low fees with low-cost investment choices, web access, the ability to roll in an existing individual retirement account (and perhaps pay less), and options for insurance annuities. Small businesses benefit from no administrative costs. The account is modeled after federal workers’ Thrift Savings Plans. Thrift plans have been around for ages, so why not capitalize on the existing framework?
Most people are happy to provide for themselves when they have the levers to maneuver their ship. This act is only the first step toward getting those tools in their hands. Perhaps it is also a precursor to correcting the fact that small businesses and their employees with a plan are often significantly overcharged for a retirement plan. There’s so much that could be done to make life in the U.S. healthier, more productive, and a source of pride in self-sufficiency.