*As Prepared for Delivery*
I want to welcome everyone to the latest in our series of hearings focusing on retirement security. Today, we are going to take a close look at the important role pensions can play in building a strong, vibrant middle class, both in terms of the economic security they provide to retired Americans and because of the role they play in growing our nation’s economy and creating jobs. After a lifetime of hard work, every American deserves to feel secure and independent in retirement so they can enjoy their golden years.
This hearing is called “The Power of Pensions” because traditional pensions – defined benefit pensions – really are powerful. They have the power to afford millions of middle class families the opportunity to feel secure in retirement and to enjoy their golden years without being subject to whims and gyrations of the stock market. Retired Americans need to know that they are going to get a check every month, no matter how long they live. That’s real retirement security – the kind people want and need.
Plus, studies show that people with a pension are much less likely to wind up living in poverty. That’s good for the person with the pension, but it’s good for everyone else, too, because it reduces the costs on the social safety net.
Pensions are a powerful economic tool for employers, too. They have been proven to significantly increase retention. That reduces costs, improves productivity, and leads to higher returns. Employers can also use pensions to give people a much cheaper retirement benefit than a 401(k). That’s because pensions typically have a better return on their investments and can take advantage of economies of scale to bring down management fees. In short, pensions are a better bang for the buck.
The most overlooked power of pensions is the power to grow our economy. There is somewhere between $6 to $9 trillion dollars in the pension system – that’s trillion with a ‘t.’ And all of those dollars get invested back in the economy. They go toward developing new technology, building roads and bridges, and providing the money new businesses need to get off the ground. That fuels innovation and job creation. Pensions really are the grease that keeps our economic engine humming.
But despite all of the economic benefits of pensions, fewer and fewer people are earning a new benefit every year. Now, most people don’t have any retirement plan at all – let alone a pension – and millions of Americans are seeing the dream of retirement slip through their fingers.
Consider this: Over a quarter of workers do not have any meaningful retirement savings at all – none. And nearly half of the oldest Baby Boomers – who started turning 65 this year – are at risk of not having sufficient retirement resources to pay for basic retirement expenditures and uninsured healthcare costs. In September, this Committee heard testimony that the gap between what people need for retirement and what they actually have is somewhere between $4.6 and $6.6 trillion. Those are some scary numbers.
But it doesn’t have to be like that. We can put a retirement system in place that offers a promise – if you work hard and play by the rules, you’ll have an opportunity to enjoy your golden years and live with dignity and financial independence. That would go a long way to rebuilding our middle class.
That’s why this committee has been holding hearings on retirement security. We are taking a hard look at the private retirement system and trying to figure out how we can make it better – how we can make it work for every American.
I’ll be the first to admit that it’s not going to be easy, and quite frankly, I don’t have all of the answers. But it’s clear that we’re going to need to make some bold changes. And I think that means taking the best of what both 401(k)s and pensions have to offer. Earlier this year, the Committee heard testimony about some of the things from 401(k)s that have worked, like automatic enrollment, simplification, and transparency.
Well, today we’re going to hear about some of what has worked so well for defined benefit plans – giving people certainty that they’re going to get a check in the mail every month in retirement and making sure that people's retirement dollars are being prudently and professionally managed.
We have an excellent panel of witnesses, and I’m looking forward to their testimony. But we’re really only scratching the surface today. There is so much more we need to learn about this important topic, and I hope those in the academic and research communities will continue to look at the economic benefits of pension plans so that lawmakers here in Washington and in capitols all over this country have the information they need to make smart policy decisions.
I’m also looking forward to working with my colleagues on this committee in my search for a way to solve the retirement crisis. Retirement issues have always been an area of great bipartisan interest, so there is a real opportunity to work together to improve retirement security for families all across America. I am confident that the hearing today will give us all a lot to think about. Thank you all for being here today.