Bernie Sanders leads Senate debate on retirement crisis, policy

A Senate committee agreed Wednesday that retirement security is a major crisis facing Americans, many of whom are unprepared financially.

They just disagreed on virtually every detail about the causes and potential solutions. So did their respective guests during the Health, Education, Labor and Pensions (HELP) Committee hearing, which asked the question: "What Can We Do to Expand Defined Benefit Pension Plans for Workers?"

Rachel Greszler is a senior research fellow with The Heritage Foundation, a conservative group. Older Americans are not as bad off as often reported, she said, but would be doing better if Social Security and private pensions were not woefully mismanaged.

"Older Americans' financial well being is strong by historic standards," she told the committee. "The share of older Americans with no retirement savings fell to 12% in 2022. Even after excessive inflation has eaten away at the value of American savings, retirees' real incomes are up over 30% over the past 35 years."

Greszler's statistics were refuted by Teresa Ghilarducci, professor of economics and policy analysis at The New School for Social Research. Committee Chairman Sen. Bernie Sanders, I-Vt., asked her to react to the notion that, "we're doing just great," a reference to Greszler's testimony.

"Because the rich have done so well they have brought up those averages that people who talk about average retirement wealth could point to," Ghilarducci said. "But that's because the top 10% got the benefit of retirement tax cuts. They got the benefit of the run up in the market. They didn't take money out to buy their houses."

Report: older Americans in dire shape

Sanders released a new 21-page report – with four-and-a-half pages of sources – on the state of retirement. Key findings from the report include:

• Nearly half of Americans 55 and older have no retirement savings.
• 52 percent of Americans 65 and older are living on less than $30,000 annually and one in four survive on less than $15,000 per year.
• Nearly 5.3 million Americans 65 and older live in poverty, roughly 1 in 10 seniors.
• Nearly half of all Americans are at risk of a financially insecure retirement, up from one in three workers in 1983.

"Legislation we have proposed would lift the cap on Social Security starting at $200,000," Sanders said. Doing that would make Social Security solvent for the next 75 years, while increasing benefits by $2,400 per person, he added.

"But that's not all that we have to do," Sanders said. "In my view, every corporation in America should be required to provide a retirement plan for their workers and if corporations choose not to offer retirement plan, they must give workers the option of contributing to a federal pension plan."

Not surprisingly, Sen. Bill Cassidy, R-La., had different ideas. He joined conservatives in promoting defined contribution plans giving participants control of and options for their retirement plans. Cassidy called the pension system endorsed by Sanders, "outdated and a little disconnected."

"The advantage of the defined contribution system, why many have flocked to it, is that workers own their own retirement system," Cassidy said. "No matter what happens to the worker's current or previous employer, their retirement funds are secure. Very few people now retire after 50 years at a company and get a golden watch. Most will move between employers. This allows him to do so while maintaining the retirement fund."

What to do with Social Security?

A 2022 Social Security Trustees report found that in 2034, retirees will start receiving a reduced benefit if Congress doesn’t fix funding issues for the social program. In other words, Social Security will exist after 2034, but retirees will only receive 77% of their full benefit starting then.

Greszler offered some solutions that are likely politically impossible.

"I think we ultimately have to shift towards a universal benefit system," she offered. "That's what true social insurance is. It does not make sense that we are paying the biggest benefits to the highest income earners. Over time, I think we need to bend down the benefits for the middle- and upper-income earners and actually increase them for the lower income earners."

Likewise, Congress should consider things like indexing the retirement age to life expectancy, establish a more accurate inflation index, and give workers an option to invest their money "in something that actually earns a positive rate of return and that can't just immediately be spent by Congress," she added.

Don't forget annuities

Congress address retirement savings options in recent years with the SECURE Act in 2019 and SECURE 2.0 in 2022. The bills contain dozens of provisions on everything from tax law to required minimum distributions. Some of the changes will make it easier for advisors to offer annuities in retirement plans.

Industry trade groups are hoping to keep the momentum going with a SECURE 3.0, but it remains in the early stages.

"Policies should continue to evolve to promote savings and address longevity protection by increasing access to lifetime income options, removing barriers to annuities in qualified retirement plans, with the aim to create a more financially inclusive retirement landscape and one that provides opportunities for greater retirement security," wrote Susan Neely, CEO of the American Council of Life Insurers, in a letter to the HELP Committee.

The Insured Retirement Institute also sent a letter to the committee highlighting the impact of the SECURE bills and advocating further policy proposals to increase access to lifetime income options. IR urged the committee to oppose the current version of the Department of Labor fiduciary rule, expected to be published in late spring or early summer.

The latter plea was heard by freshman Sen. Ted Budd, R-N.C.

"The DOL's current fiduciary rule ... if implemented, will further restrict access, increase costs to consumers, limit personalized financial advice and only allow consideration of very basic investment products," Budd said.

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

© Entire contents copyright 2024 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.