Re-thinking retirement with new legislation

An aging population heavily dependent on Social Security is spurring calls for retirement reform, says Angela Antonelli, executive director at Georgetown University Center for Retirement Initiatives.

Video Transcript


- OK, a lot of us plan for the future, and planning for retirement is very important. So let's bring in Angela Antonelli, the executive director of Georgetown University's Center for Retirement Initiatives. It's good to have you here. And we should point out this is part of our retirement series brought to you by Fidelity Investments. One of the things the CRI front and center on the page right now is that citizens of the United States, Americans, their view of state facilitated retirement programs is improving.

Can you help us understand why that's important and what that really looks like because there's a lot that has yet to take place on the legislative front to make it much easier to plan for your retirement?

ANGELA ANTONELLI: Yes, thanks so much for having me. So it's great to see the closing of the stock market today. And it's closing and recovering from the concerns about COVID. And with that, some retirement funds will benefit from that. The challenge that we face is that far too many Americans, millions of American workers today, go to work every day and they don't actually have access to a way to save for retirement.

And they're not saving for retirement. So they don't get to benefit from what we see with the stock market that-- what we see with the stock market activity. And the state facilitated retirement savings plans that have significant bipartisan support and the survey that you're referring to is an effort to address this large access gap that we see with private sector workers today in the United States.

Our estimates at Georgetown is that about a half of today's private sector workforce goes to work every day and does not have access to an employer sponsored retirement savings plan. So for that reason, with 57 million workers who don't have a way to easily save for retirement, state leaders over the past few years have stepped up and said, we need to address this issue because unfortunately, too many Americans, our population is aging rapidly over the next 20 years.

The number of Americans over age 65 will grow by 32%. We already have one in five American households, elderly households, heavily reliant on Social Security for 90% of their income. If we have an aging population with insufficient retirement income, there are huge budgetary and economic consequences to that. So the states recognize this early on and began to develop programs that essentially help to connect private sector workers who-- and employers, and to help employers who do not offer a plan to take the burden off of the employers and allow a mechanism that connects workers to an individual retirement account, auto enrolls them into that individual retirement account, and allows them to begin to save for retirement.

There are state savings programs like college savings programs that already exist. So states have experience with these types of savings programs. And what we're finding is, today, 14 states have adopted these programs with the potential to reach almost 20 million of that 57 million. And with the launch of some of these programs, if anything, they were already had a lot of bipartisan support and are popular.

And over time, we're only seeing that popularity increase, and they're being highly effective. We have 400,000 new savers, retirement savers, $400 million in assets, and that's only three of the 14 programs being off the ground. So it's a huge development that states have really pushed forward, the debate on our US Retirement System and making sure that more American workers have access to a way to save and to build financial security.

EMILY MCCORMICK: Right, right, and you talked about that stat of 14 states talking about these auto enrollment programs here. Only a number of those, though, actually off the ground. What do you think has been either causing the slowdown in adoption in the remaining states or what do you want to see change there in order to get these off the ground?

ANGELA ANTONELLI: Well, every year, more than 20 states will consider proposals to adopt these types of programs. And I fully expect that as we look to the future, we had a number of-- we had three states this year adopt new programs. Next year, we'll have other states adopt programs. Success breeds success. And I think, as other states continue to see these three programs, but we also will have at least three other programs launched by the end of this year and early 2022 and can continue to see the significant growth in the number of people who are saving who were not saving before and the growth in those retirement savings.

It's not-- I mean, it's significant to see the amount that workers are able to put away. When they are auto enrolled, they stay auto enrolled. 70% of them stay and continue to save through these programs. So we've only seen the momentum with these programs pick up over time. And I fully expect that we'll continue to see other programs from the states come on board as we look to the future.

But at the same time, the Fed-- the federal government and Congress this year was seeing the success of the states also contemplating a more universal access requirement at the National level that hasn't been able to advance. And it was dropped from budget reconciliation to Build Back Better. But it's certainly something we're getting. There's been growing support.

- I got it. And you only have about 40 seconds left. There was a Social Security Administration study which concluded that retirement income from sources other than Social Security to be significantly under-reported, and you had talked about at the start of this that 90-- that for many social security recipients, that check represents 90% of their income. Again, only now about 30 seconds. I apologize.

Why can't we get on board with the right data so that we can then make the right decisions going forward?

ANGELA ANTONELLI: Oh, that's a good question. I mean, I think maybe with the financial industry and the regulators working together, they really do need to solve that issue because the data is poor but clearly not enough. The median savings for those near retirement is only $84,000, which generates an additional $300 to supplement social security, and then, again, as I said, millions who aren't even saving for retirement.

So this is a significant problem state leadership has been driving change. We'll see more states adopt these new savings programs. And it's also driving additional reform and private sector innovation, and also, the expansion. Because of that innovation by the private sector, more employers also adopting retirement plans. So we're making significant progress to accelerate the coverage of more and more American workers having access to ways to save.

- Angela Antonelli is the executive director of Georgetown University's Center for Retirement Initiatives. We look forward to you coming back.