WASHINGTON – Oregon’s Senator Jeff Merkley, the Chair of the Senate Subcommittee on Economic Policy, today held a hearing on the state of retirement security to explore the major challenges facing Americans in preparing financially for retirement. The hearing, titled “The State of U.S. Retirement Security: Can the Middle Class Afford to Retire?” focused on the struggles middle class workers increasingly have affording retirement and the resulting impacts on the economy, on the need to strengthen Social Security, and on the effectiveness of currently available retirement products, such as IRAs and 401(k)s, in meeting the needs of consumers.
The hearing noted that despite the fact that Social Security has become an increasingly important component of seniors’ retirement income, federal cost-of-living adjustments for the program routinely underestimate the real costs seniors face. Merkley endorsed giving retirees a modest boost in their Social Security payments in order for them to keep up. Seniors are more likely than others to spend large percentages of their income on costs that have risen faster than inflation, such as housing and medical care.
“Too many Americans are concerned they will never be able to afford to retire,” Merkley said after the hearing. “Through Social Security, we can and should put a comfortable retirement within reach of more hardworking Americans. With traditional pensions available to fewer people and ordinary families facing risks and difficulties in saving enough for retirement through 401(k)s and IRAs, the landscape of retirement is changing and we must act. It’s time to give seniors a modest raise and change cost-of-living adjustments to reflect the real costs seniors face.”
Social Security today provides nearly 40 percent of income for seniors and disabled Americans and creates a safety net for workers and their families. Among seniors who receive Social Security benefits, 23 percent of married couples and about 46 percent of single persons rely on Social Security for 90 percent or more of their income.
The witness list included Oregon Treasurer Ted Wheeler, who testified on state efforts to enhance retirement security and noted the importance of Social Security to Oregon seniors. Without Social Security, he testified, the elderly poverty rate in Oregon would be over 40 percent.
The hearing also explored the importance of a secure middle class retirement to the U.S. economy, ways to improve retirement savings plans for small businesses and their employees, and how the fee structures of private retirement plans can work for or against Americans saving for retirement. A seemingly small difference in fees can make a difference of hundreds of thousands of dollars over a lifetime of savings, and many fees are poorly disclosed or difficult for ordinary investors to understand.
The other witnesses were Dr. Monique Morrissey, Economist, Economic Policy Institute; Mr. Robert Hiltonsmith, Policy Analyst, Demos; and Ms. Kristi Mitchem, Executive Vice President, State Street Global Advisors, and Head of the Americas Institutional Client Group.