Planning for the road ahead can lead to retirement security

Rob Portman
With over 14 million Americans still out of work, there is no more urgent priority than spurring job creation in Ohio and across the country.  The federal government doesn’t create private-sector jobs, but it can and must create the right climate for entrepreneurs and small businesses to do what they do best — invest, grow, and begin hiring again.  

At the same time, we must work to ensure that today’s economic woes — from high unemployment, to depressed home values — do not translate into long-term financial instability for American families.  One of the less-noted, painful effects of the current economic crisis is that it has left many Americans understandably worried about their retirements.  In fact, studies have shown that most baby boomers have not saved nearly enough for their retirement years. Turning that around will require robust policies to help workers plan for financially secure golden years, by incentivizing private savings and sustaining a strong Social Security system. 

Part of the solution begins with encouraging employers and savers to take advantage of important retirement planning tools available today. 

Over a decade ago, as members of the U.S. House of Representatives, Senator Ben Cardin (D-MD) and I joined together to craft legislation focused on helping Americans establish and grow their retirement nest eggs.

Our bill, which became known as Portman-Cardin, was forged on a bipartisan basis and attracted support from across the political spectrum.

The bill was signed into law in June 2001.  What we found was that the importance of retirement savings was one area where liberals, moderates, and conservatives could, if they worked at it, all find common ground. 

Portman-Cardin did not attempt to create a one-size-fits-all approach to retirement savings.  Instead, it took important steps to simplify and improve the retirement savings policies already in place.  For individuals, IRA and 401(k) contribution limits were increased and a new catch-up contribution was allowed to help those age 50 and older add to their savings each year.

The bill made it easier for workers moving from job to job to take their savings with them, and it simplified the process for workers to consolidate their savings when it made sense to do so.

For employers who could not afford to set up a retirement plan for their employees, Portman-Cardin made it simpler, easier and less costly to do so.  For those who already had plans, the legislation simplified many of the onerous rules and regulations that discouraged business from keeping plans.

Over the past 10 years, we’ve seen many more Americans participate in IRAs and 401(k) plans and others taking advantage of the new rules to save more in existing plans. However, we still have a long way to go.

We are facing the hard truth that many Americans are still not saving enough to meet their retirement needs.  In March 2011, the Employee Benefit Research Institute (EBRI) published their 21st Retirement Confidence Survey.   The EBRI found that 56 percent of workers report the total value of their savings and investments is less than $25,000, and 29 percent of workers have less than $1,000 in savings.

One important innovation that many employers have taken advantage of is the change in law to establish automatic enrollment of employees in their workplace retirement plans.

Under this approach, a portion of an employee’s pay automatically goes into the savings plan, unless that worker opts out.  Automatic enrollment has proven quite successful in helping lower-income and younger workers start to save – two groups that historically have not participated in a retirement savings plan.  Surveys show that auto-enrollment boosts employee participation by nearly 30 percent compared to plans without that option.  We need to continue to promote automatic enrollment by making it easier for more employers to move to this model of retirement plan.

We also need to address the serious problem of cumbersome and confusing regulations in the retirement area.  I have proposed legislation that would require government agencies to seek input from the public and fully consider economic burdens before proceeding with any new regulation.  And just last month, I urged the current Administration to withdraw a costly new regulation proposed by the Department of Labor — the so-called “fiduciary” rule — that could effectively limit access to investment guidance for middle-income savers and make it harder for small businesses to set up retirement plans.

As we move forward, existing policies must be reexamined to eliminate rules that discourage small businesses from setting up retirement plans.

With the uncertainty of the stock market, historically low interest rates, and high unemployment rates, American families are worried about their financial security – only 13 percent of workers are confident in their capacity to live comfortably throughout their retirement years, according to the EBRI study.  Our work on retirement security has been helped to alleviate those concerns in the past, but there is clearly more that can and should be done in a bipartisan way to incentivize the savings and investment education needed to ensure a secure retirement and peace of mind in our golden years.

Rob Portman is a United States Senator from Ohio.