The Securing a Strong Retirement Act of 2021, also known as “SECURE” or “SECURE 2.0”, has been recently passed in the U.S. House of Representatives in a majority bipartisan vote of 414 to 5. The new bill makes various changes to workplace pension plans, including instituting automatic employee enrollment in certain plans and increasing the age at which participants must begin to receive mandatory distributions.
This is likely to help solve future problems with Americans’ generally insufficient retirement savings, but does not go far enough to address several fundamental problems according to Teresa Ghilarducci, a labor economist and retirement security expert at the New School of New York.
While praising the act of bipartisanship in the House and describing the bill as a “first step” in pension reform, Ghilarducci explains that the new legislation simply does not go far enough.
“What does anyone need a pension system for?” she asks rhetorically. “You have to save regularly; you need enough money in this plan; you need that money to be well invested at low fees; and you need money for life. SECURE 2.0 gives you none of that. But SECURE 2.0 is a first step – auto-enrollment and auto-escalation in particular, all of which saves people in the long run and for a long time.
The fear of many Americans about their ability to support themselves in retirement is well established. Ghilarducci cites several statistics that reinforce this point.
“82% of American voters think retirement security is a problem for the country according to the National Voter Poll on Retirement Security and Wealth Attitudes by the Economic Innovation Group (EIG), which also found that 91% of voters agree that all American workers should have the option of participating in a retirement savings plan,” she says. “The fear is well founded.”
According to projections, no less than 41% of households will experience financial difficulties in retirement. Data from the Employee Benefits Research Institute (EBRI), she says. On top of that, retirement security is less accessible to Americans who make less money over the course of their careers, including those without a college degree, women, and people of color, on the base of Data of the Bipartisan Policy Center (BPC).
“With the House recognizing that retirement security is an urgent national issue by passing SECURE 2.0, and the Senate likely to propose complementary legislation this summer, I urge Congress to build on this legislation with a tool that would complement both the current private pension as well as the proposed SECURE 2.0 legislative package,” she says.
She and Kevin Hassett, a former senior adviser and chairman of the Trump administration’s Council of Economic Advisers, collaborated on a plan released by the Economic Innovation Group (EIG) that “would give most people without a pension plan the access to the same professionally managed options in the federal Thrift Savings Plan (TSP) – the retirement savings plan available to government employees and members of Congress, and provide government matching for their contributions.
Ghilarducci previously outlined his views on reverse mortgage products for RMD.
Read it column at Forbes.