In our opinion: This is the making of a retirement crisis

Last year, 14 states had populations composed of at least 15 percent retirees collecting Social Security, according to a Bloomberg.com report. This trend, easily predicted years in advance based on simple demographics, has put a strain on both the program itself and on the many retirees (62 percent, according to government figures) who rely on Social Security for at least half their income.

From the beginning, Social Security was meant to be only a supplement to other income, not the primary source of income for retirees. But today many people rely on it to stay one step ahead of destitution. And, with few companies offering pensions and with a recent Charles Schwab study finding that 62 percent of millennials are living paycheck to paycheck, a retirement crisis may be in the making.

Washington needs to take this seriously, finding ways to make it easier, and more advantageous, for young people to set aside money so they eventually can spend their golden years with adequate shelter, food and health care. If these workers fail to prepare, the burden on taxpayers could become enormous.

The House took a step toward helping this situation Thursday by overwhelmingly (417-3) passing a bill making it easier for employers to give their workers savings plans and annuities. It would allow people to contribute to individual retirement accounts beyond the age of 70 and would change the age at which they must begin withdrawing from a 401(k) or IRA from 70 to 72.

Perhaps more importantly, it would allow businesses to join together to offer employees 401(k)-type plans, an incentive that might allow smaller companies to do so.

The bipartisan support for this bill is a good sign. The Senate already has passed its own version and may quickly reconcile the differences in the bill to get a final version to the president for his signature.

Meanwhile, according to The Wall Street Journal, other bills are in the works, including one that would raise the minimum default contribution rate under automatic enrollment plans from 3 percent to 6 percent. Another bill would require most businesses to offer a retirement plan that automatically enrolls workers.

These ideas would push young people to begin saving for their golden years, which is a big step beyond merely encouraging them to do so. The earlier a person begins saving, the less painful it is in the long run for him or her to accumulate sums large enough to provide for a comfortable retirement.

Congress also may want to consider a plan proposed this week by MarketWatch.com, which is to create a hybrid Social Security system. Part of this system would remain as it currently is, with payroll taxes funding a traditional Social Security plan. A second part, however, would operate similarly to a 401(k), with voluntary payroll deductions building up large sums affiliated with various investment instruments, including shares in equities.

Critics always will complain about the risks involved in these plans. Someone could retire just as the market takes a turn for the worst, they will say.

This is true, but even under such a scenario, retirees would be better off than if they had done nothing to prepare for retirement, which is a course being set by too many workers.

These plans, it must be noted, do nothing to divert Social Security from its current course toward an eventual crisis, when its reserves run dry and it must rely solely on yearly tax collections to survive. When that happens, Congress must either raise taxes or reduce benefits, unless it takes less drastic action today.

But that is a separate topic. Ultimately, spurring Americans to save enough so they don’t need Social Security to be their primary source of income would do more to ensure a more stable future for an aging country.

CREDIT: Deseret News editorial board