It’s a retirement plan call to arms. Transamerica Center for Retirement Studies (TCRS) lists five steps to better retirement security that should have happened by now. None are necessarily new or groundbreaking, but all are vitally important in adding to access and successful participant outcomes.
“Today’s workers have saved $50,000 (estimated median) in all household retirement accounts, but savings vary dramatically across demographic segments,” the report notes.
Workers with an annual household income (HHI) of $100,000 or more have saved $222,000 in all household retirement accounts, compared with $47,000 among those earning $50,000 to $99,999.
Among those earning less than $50,000, total retirement savings is significantly less—just $3,000.
College graduates have saved $160,000, compared with $23,000 among non-graduates. Men have saved $76,000, compared with $23,000 among women.
“Many U.S. workers are continually at risk for not achieving a financially secure retirement,” Catherine Collinson, CEO and president of Transamerica Institute and TCRS, said in a statement. “Policymakers are taking action to strengthen our retirement system, by expanding access to employer-sponsored workplace savings plans and making it easier for workers to plan and save. It is also imperative that policymakers begin devoting attention to addressing Social Security’s projected funding shortfall.”
Five specific opportunities include:
Expand access to workplace retirement plans
Only 65 percent of workers are offered a 401k or similar plan, including 71 percent of full-time workers and just 45 percent of part-time workers. Expanding coverage among both full-time and part-time workers can increase retirement savings rates and provide access to tax-advantaged savings, institutional investments, and the tools and resources that are included with employer-sponsored retirement plans.
Encourage wider adoption of automatic enrollment
Among those currently offered a 401k or similar plan by their employer, plan participation rates are lowest among part-time workers (58 percent) and workers with HHI of less than $50,000 (59 percent). Automatic enrollment is a plan feature that can increase participation by eliminating the decision-making and action steps usually necessary for employees to enroll in and start contributing to the plan.
Discourage ‘leakage’ from retirement accounts
Almost one in three workers (29 percent) have taken a loan and/or early withdrawal from retirement accounts. Generation X (32 percent), full-time workers (31 percent), and workers with HHI of $50,000 to $99,999 (31 percent) are slightly more likely to have done so.
Raise awareness of the IRS Saver’s Credit
It’s a tax credit that is available for low- and moderate-income workers who save for retirement in a 401k or similar plan or IRA. Paradoxically, awareness of the Saver’s Credit is lowest among those more likely to meet its income eligibility limits. Only 29 percent of workers with HHI of less than $50,000 and 29 percent of women workers are aware of the credit.
Implement reforms to Social Security
More than one in four workers (28 percent) expect to rely on Social Security as their primary source of income in retirement, including Baby Boomers (42 percent), those with HHI of less than $50,000 (40 percent), noncollege graduates (35 percent), and women (32 percent).
“By addressing demographic disparities, policymakers in collaboration with employers, industry, nonprofits, and academics can help bridge inequalities and improve retirement security among all,” Collinson concluded. “Collective actions taken today can lead to better outcomes tomorrow.”