As boomers and others retire — or are forced to retire — too many haven’t saved enough. One reason: 45 percent of Washington state workers weren’t covered by a workplace-retirement plan. Encouraging private-sector measures could help.
When people want to beat on the baby boomers, I always ask which part of my g-g-generation, as The Who would put it, are they talking about?
Remember — and this is also a useful lesson in looking at the millennials, now the largest age cohort — the boomers are not a monolith. To use a broad brush: The older ones got drugs, sex, rock ’n’ roll and pensions. Those born after the late 1950s only got disco and, for retirement, 401(k)s if they were lucky.
At the risk of adding to your crisis fatigue, a massive problem looms in America as the boomers and others retire — or are forced to retire.
Washington’s Small Business Retirement Marketplace
• Virtual marketplace where qualified financial-services firms offer affordable retirement-savings plans.
• Target customers would be businesses employing fewer than 100.
• Sole proprietors and self-employed individuals would qualify.
• Participation is voluntary for employers and employees.
• The state insurance commissioner will certify participating financial providers.
• Expected to be fully operational in 2017.
Source: State Department of Commerce
A BlackRock survey found that baby boomers aged 55 to 65 had on average $136,200 saved for retirement. That would translate into about $9,100 a year after they stop working, not including Social Security. The latter averages $1,341 a month. Yet boomers would need $1.1 million total to meet the 4 percent rule, a widely used measurement for a safe and comfortable retirement.
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Nearly 70 percent of full-time workers in metropolitan Seattle have access to employer-based retirement plans, 10th highest among metros in the United States, according to research by The Pew Charitable Trusts.
Still, 45 percent of workers statewide were not covered by a workplace-retirement plan in 2014, according to the U.S. census. For companies with fewer than 10 employees, the number climbed to more than 82 percent.
Here and nationally, many people have neither retirement plans at work nor adequate savings.
A U.S. Government Accountability Office study last year found that half of American households with adults 55 and older had no retirement savings.
Some will see a simple morality play here, that these people have been improvident. There’s surely some of that in a capitalist system that emphasizes consumerism over everything else. But much more is at work.
The “Greatest Generation” and others who worked primarily in the 1950s, ’60s and ’70s enjoyed a rising economy, where the benefits of rising productivity were widely shared. Economic mobility was improving while jobs, at least until the 1980s, were secure. Stable pensions were abundant. Many of these happy trends continued in the 1990s.
In recent years, most Americans have seen stagnant incomes, increasing inequality and middle-wage jobs lost. They have suffered through the Great Recession, among numerous economic dislocations. For many, “gigs“ have replaced stable jobs.
All this has crippled their ability to amass savings and prepare for retirement. Even those who invested aggressively in 401(k)s were often staggered by stock-market pullbacks.
J. Mark Iwry, senior adviser to the U.S. Treasury secretary, was here last week to keynote a conference at the Museum of Flight on expanding retirement coverage for working families. Among the things discussed was Washington state’s new Small Business Retirement Marketplace.
“There’s a need for more retirement savings and security for so many in our country,” he told me. “Tens of millions are without access to plans in the workplace. This is driving efforts in Washington (state) and a variety of other states, as well as at the federal level, to make saving easier and bring about a breakthrough in coverage.”
While pensions have been declining and 401(k)s expanding, retirement coverage overall has been largely stagnant for the past four decades as a percentage of the working population.
Lack of adequate savings for retirement “is a top bipartisan issue and concern, especially as working families are increasingly exposed to, and left to manage, financial and economic risks,” said Iwry.
Maintaining Social Security as the “bedrock, foundational program we have” is critical. But more must be done to supplement retirement security, including through greater savings — a goal that should appeal to conservatives as well as progressives.
Iwry suggests “using reasonable, private-sector-oriented measures so we don’t need to expand public-assistance programs in the future, especially for people who rely on Social Security alone.”
Iwry (pronounced “Ee-vree) is a prominent expert in retirement policy. A 2010 Wall Street Journal profile called him the “scholar of savings.” At the Brookings Institution, he worked with David John of the conservative Heritage Foundation to develop the automatic individual retirement account, or auto-IRA.
Since joining the Obama administration, he’s been trying to sell it in a politically polarized town.
The auto-IRA would require firms with more than 10 workers but without retirement plans to automatically withhold a portion of an employee’s wages and deposit it in an IRA. Workers could opt out.
So far, the plan is stuck in Congress. In addition to antipathy to President Obama, congressional opponents are listening to business critics, who worry about a new federal mandate. Progressives, on the other hand, say the plan is too incremental.
The Treasury has implemented a “starter plan” for those who need a safe savings plan. Called My-RA, it allows people to invest in Treasury bonds and has no fees. But the limit is $15,000.
Washington’s plan is similarly modest and mostly in the planning stages. Focused on employees of small companies that don’t offer retirement plans, it is expected to be fully operational in 2017.
To be sure, many people will be working after the “traditional” retirement age of 65. Some will do so by choice, others by necessity.
Americans are living longer than their forebears. But these older workers, willing or not, will face age discrimination and perhaps rusty skills. They will also confront a workplace being roiled and diminished by a new surge of advanced automation.
So the retirement crisis won’t go away, nor will it be confined to those darned baby boomers.