Harkin Statement at HELP Committee Hearing, "Pension Savings: Are Workers Saving Enough for Retirement?"
*As Prepared for Delivery*
“I want to welcome everyone to the latest in our ongoing series of hearings focusing on retirement security. Today, we are going to take a closer look at the question: How much do families need to save for retirement?
“I guess I’m about to find out what life in retirement is like, but I already know from my constituents that the dream of a secure retirement is growing fainter. Whether it is a young family struggling to pay off student loan debt, save for their kid’s education, and put something aside for their own retirement—or a 65-year-old nurse finally eligible to stop working—Americans are terrified about whether they will have enough money to live on when they stop working.
“That is why we are starting this new Congress by focusing on how we can help people save for retirement. Today we are going to hear testimony about how much people need to save, what is holding folks back, and how we can help people build a nest egg.
“As a starting point for this discussion, we need to keep in mind the bottom line: people simply are not saving enough. I have said this before, but the retirement income deficit – meaning the difference between what people have saved for retirement and what they should have saved – is estimated to be as high as $6.6 trillion. Half of Americans have less than $10,000 in savings.
“These numbers are disturbing – and frightening. People who run out of money when they get old see their living standard decline, and they lean more and more on the social safety net, squeezing governments at all levels.
“So we need to do more to help American families cope with this looming retirement crisis. Hardworking Americans deserve to be able to rest, take a vacation, and spend more time with their grandkids when they get older. But to do so, they need to have better opportunities to save prior to retirement.
“It used to be the case that families could rely on the ‘three legged stool’ of retirement security – an employer-provided pension, personal savings, and Social Security. First, Social Security provided a base to keep seniors out of poverty. Fortunately, it still does so today.
“Second, people could count on a defined-benefit pension plan that would give them a secure source of retirement income for life. Having that pension meant you could go to bed at night and sleep easy because you knew that when you retired, you would have a predictable, guaranteed source of income for as long as you lived. But today, this kind of traditional defined-benefit pension is an endangered species.
“Third, people would have their savings. But these days, stagnant wages and rising costs are making it tougher and tougher for people to save. Although many employers now offer retirement savings plans – such as the 401(k) – those plans were designed to supplement traditional pensions, not replace them. Savings rates are just too low, and very few 401(k) plans offer people an easy, cost-effective way to convert their savings into a steady stream of lifetime retirement income. I look forward to hearing about some of the innovative ways that companies like TIAA-CREF and Fidelity are helping people cope with these challenges.
“I am a true believer that we need to restore the three-legged stool, and that starts with rebuilding the pension system. After half a dozen hearings and countless discussions with stakeholders in Washington and back in Iowa, I released a report last year called ‘The Retirement Crisis and a Plan to Solve It.’ The report summarizes what I have learned through this process, and it puts some excellent policy proposals on the table to help us rebuild the pension system.
“There are a lot of employers out there that still have traditional pensions. I applaud them, and I am fully committed to taking steps to help them continue to do what is right by their employees. But we need to do something to give middle class families the opportunity to earn a pension while, at the same time, making those plans more attractive to employers.
“We have heard time and time again in this Committee that employers – especially small businesses – think that pensions are just too complex and risky. That’s why my plan would create a new type of greatly simplified, privately-run pension plan – called a USA Retirement Fund – that businesses could offer their employees to provide a secure source of retirement income for life without businesses taking on all of the investment, management and longevity risks.
“I am making pension reform a top priority in this Congress for the Committee. Fortunately, retirement security has always been an area of great bipartisan concern, so I look forward to working with my colleagues on both sides of the aisle to forge a productive way forward.”
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