Changing the Conversation: How to Solve the Retirement Crisis

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Negotiations on the Build Back Better and Secure Act 2.0 bill shed light on the challenges facing so many retirees. The pension crisis must remain at the forefront of policy making in order to provide valuable financial assistance to those in need.

People have bad conversations about retirement. It’s not just about making pension plan membership mandatory, it’s also about making sure people have the financial means to save in the first place. To fully address Americans’ concerns about retirement security, dramatic action is needed both to raise awareness of the importance of saving for long-term financial needs and, more importantly, to provide the necessary incentives for retirement. To do.

According to a survey we led to the CUNA Mutual Group over the summer, more than a third of middle-class Americans fear they will never be able to retire comfortably – and 25% express concern that their savings are depleting – retirement. This means that most people find it difficult to prepare for their future. I have worked in the investment and retirement industry for thirty years. Through this work, I saw with my own eyes that the middle class in particular struggles to accumulate enough money during their working years to support themselves and their retired families. With the uncertainty over the future of safety net programs and the length of life only getting longer, the pressure to save even more money to cover longer pensions will only increase.

While it is good for employees to be able to take advantage of employer-sponsored pension plans, having sufficient funds to invest in them is another piece of the puzzle. The financial insecurity generated by the pandemic has only made retirement savings decisions more difficult for people trying to juggle planning for the future and making sure they can pay the bills overnight. day. More than half of American workers over 40 have less than $ 50,000 in retirement savings, and the majority do not increase their savings to increase their nest egg, according to a survey of the Institute for the retirement of insured persons. During the pandemic, stimulus checks and the money saved by not traveling and eating out have allowed group savings rates to rise slightly, but the number of job losses and other economic problems. plaguing the middle class has had a much more detrimental effect on the finances of many Americans. upright.

The solution lies in offering products and services that directly address a post-2008 and post-pandemic reality: consumers are fearful and risk averse, and often focus on short-term financial needs versus longer term planning. More specifically, according to a MagnifyMoney report, many Americans do not take advantage of workplace retirement plans. Some 17% of those with access to employer accounts, such as 401 (k) plans, do not contribute.

Incentives such as better matching options, which encourage saving, instead of penalties like fines for not participating in a pension plan, will be much more effective in encouraging people to save for the long term. These may include steps such as those outlined in Secure Act 2.0 that focus on increasing accessibility for retirement rather than proposals to force participation in a 401 (k). Additionally, expanded 401 (k) eligibility, Roth matches, and increased contribution limits will allow more people to save more money for their future. In the future, these types of policy changes will be much more effective in increasing pension plan participation.

Regardless of where negotiations in Washington on Build Back Better legislation end, finding a holistic solution to the pension crisis that seeks to ensure everyone has access to a better financial future must remain at the center of the post-recovery conversation. pandemic. Without the combination of a better financial situation for the middle class along with more readily available tools to help plan and manage retirement, there will always be a significant gap in the ability of working Americans to plan for an uncertain future.

Paul chong is responsible for investments and retirement at Cuna Mutual Group.

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