What Are the Potential Benefits of Universal Access to Retirement Savings?

Executive Summary Excerpt:
Workers in the United States are being asked to take responsibility for their financial well-being in retirement now more than ever. What used to be considered the foundation for building a secure retirement — Social Security, employer-provided pensions, and personal savings — has been weakening for decades as traditional defined benefit (DB) pension plans have been replaced by a defined contribution (DC) system of savings that was originally meant to supplement, not replace, traditional pensions.

Most employers today that have retirement plans only offer DC options. This shift over time from employer-provided pensions to DC plans has put greater responsibility on workers to make complex savings and investment decisions that will affect the amount of money available in retirement. Americans who have access to retirement savings accounts often do not save enough to maintain their quality of life in retirement.

Making matters worse, while employer-sponsored retirement plans have become the primary way private sector workers build retirement savings, employers in the United States are not required to offer retirement savings plans. Today, there are an estimated 57 million private sector workers (46%) who do not have access to a plan through the workplace (see Figure ES.1). These access gaps are inequitably distributed, affecting more small businesses, and with larger gaps
among lower-income workers, younger workers, minorities, and women.

For several years, there have been discussions and proposals in the United States about how to expand access to ways to save for retirement. If we look internationally, there is usually little debate about the value of universal access to retirement savings, and several countries require employers to provide a retirement savings option for their employees. With all workers covered, differences can be found in the design of such options to achieve the levels of savings needed to boost income in retirement.

Universal access to retirement savings options would give all workers the opportunity to save, and evidence from other countries, from individual states, and from private sector plans suggests that many would begin to do so, especially when encouraged using default options, such as automatic enrollment. Workers would benefit from the increased savings and the additional income in retirement. At the same time, the economy benefits from stronger savings, investment, and economic growth, and the nation benefits from a reduction in fiscal pressures to support an aging population lacking sufficient retirement income.

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