TIAA is proposing a “bill of rights” aimed at growing the availability of annuities for Americans across all income levels.
The firm spotlighted its “Retirement Security Bill of Rights” in a meeting earlier this year with members of the National Council of Insurance Legislators (NCOIL), urging the lawmakers to support the approach.
The initiative puts the onus on retirement plan participants, employers, retirement plan advisors, and policymakers in creating a secure retirement. It uses four pillars to emphasize its mission: every U.S. worker has the right to save for and achieve a financially secure retirement, to have access to low-cost investment options, and to have clear information to compare savings and income options; and that public and private sectors share a responsibility in helping every workers achieve retirement income for the remainder of their lives.
While the bill aims to provide a financially secure retirement to participants, it emphasizes that retirement security is not an entitlement, but instead earned by “making the tools available to workers to allow them to do that,” said Bret Hester, executive vice president and general counsel of Strategy, Policy and Operations, Government Relations & Public Policy at TIAA, in the meeting with NCOIL.
“It’s not really a right, but it’s a principle that is a shared responsibility of workers themselves to enroll in their plans to save enough, of the private sector to make plans available to their workers that help them do this, and to policymakers to put the right policies in place to allow this to happen,” he said.
Hester projected that up to 40% of American families may retire without enough retirement savings, due to a lack of pension funding today.
However, the rise of automatic features, including auto-enrollment and auto-escalation, along with a recent surge in state-facilitated retirement plans and interest in lifetime income guaranteed options, show promising efforts by the private and public sector, Hester added.
As a next step, policymakers and plan sponsors must prioritize education benefits and advice to workers regarding the annuity options available to them, he said.
“There also are things that members of this Committee and other policymakers can do,” he said. “First, you can ask the simple question, do our laws provide language and direction to ensure appropriate contribution levels and lifetime income options? Do hybrid plans and supplemental and core defined contribution plans have enough lifetime income options embedded in them to help people not only ensure that they have enough savings but can also convert that into a guaranteed stream of income that they won’t outlive?”
Improving financial literacy and behavior around financial education is also vital to retirement success, added expert Brenda Cude, Ph.D., professor emeritus of Financial Planning, Housing and Consumer Economics at University of Georgia, during the meeting. Personal attitude and perception are key to driving retirement readiness, she said.
“If you’re in a state where you have the opportunity to influence funding, please do that.” Cude urged lawmakers. “And I also want to encourage you… to go home and find out if your state has a council on financial literacy where everyone associated with state government is coordinating what they do or look for… a council on economic education… And if you want to support and encourage financial literacy that’s a way that you can do that.”
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