The retirement crisis is upon us

There used to be an agreement between employers and employees: that if you worked hard, your employer would match your dedication to the company with a commitment to provide you a pension after a lifetime’s worth of work. That pension, combined with Social Security and some personal savings would be enough to get by and maybe, if you really saved, spoil the grandkids.

That’s no longer the case.

According to a study conducted by the Schwartz Center for Economic Analysis on retirement readiness of Connecticut workers, over a quarter (27 percent) of seniors are living in poverty or close to it. Not surprisingly, these retirees rely heavily on Social Security and other public assistance to meet basic expenses. Scarily, the number of residents relying on these programs is expected to increase.

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It’s clear that this is the result in part of persistent downward trend in employer-coverage and employee participation in retirement plans. In Connecticut, there was a 7 percent drop in employer-sponsorship from 2000 to 2010. Those most likely to lose access to a plan were in smaller companies and lower-wage workers. Interestingly, both 25-44 year olds and 55-64 year olds saw at double-digit drop (13 percent and 15 percent respectively) in employer-sponsorship.

The federal government knows there is a looming problem. President Obama unveiled a public retirement savings account called “myRA” earlier this year to help employer help workers buy treasury bonds. But the president can't go far enough without Congress. This step is symbolic, it importantly, acknowledges the problem of coverage, but more must be done.

Several states are leading the way. This year, Connecticut took bold action by dedicating $400,000 to establish the Connecticut Retirement Security Board. Housed in the Office of the Comptroller, the Board will conduct a market feasibility study and develop an implementation plan for the creation of a Public Retirement Plan for the over 740,000 Connecticut private-sector employees who do not participate in a retirement plan at work. The Board is required to present the Governor and Legislature their findings by April 2016.

In addition to improving the individual outlook for residents that choose to participate, the plan under consideration will not cost Connecticut taxpayers or employers. Participants will voluntarily contribute to the plan through payroll deduction, a small portion of which will cover the administrative costs of the program. Small business owners will now be able to hire and retain talented employees, and save for their own retirements, without having to try to negotiate with much larger insurance companies for low-fee retirement offerings.

Connecticut legislators smartly recognize that without adequate retirement savings older citizens are forced to depend on public assistance to survive. Money spent to help low-income elderly stay in their homes, afford food and medicine has increased significantly over the past decade. These are important programs and services, but just as retirement has become a gamble for individuals too old to continue in the workforce, we must recognize that it has also become a gamble for society as a whole.

We are only in the beginnings of a much-needed movement to address the national retirement crisis. States including California, Minnesota, and Maryland are currently studying and crafting similar programs to Connecticut’s.

These considerations are nothing if they don’t translate into swift action. It’s already too late for millions of Americans nationwide. We owe it to the next generation to do better. We need to develop solutions that will not leave their parents and grandparents destitute, and consign hardworking Americans to live out their retirement years in poverty.

Ghilarducci is director of the New School's Schwartz Center for Economic Policy Analysis. Luciano is executive director of Council 4 AFSCME, Connecticut's largest public sector labor union. 

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