Should retirement savings be mandatory?
A recent study out from the National Institute on Reitrement Security has some unnerving statistics for the future of this country. Statistics show too many people won’t have nearly enough saved when they retire, and it’s something the slow economic recovery isn’t fixing on its own.
Only 42 percent of private sector workers between the ages 25 and 64 have any retirement coverage in their current job. That means roughly 38 million workers in the U.S. do not have any retirement account savings at all.
“To me, that spells worry,” says Marketplace’s economics guy Chris Farrell. “We’ve created tax incentives to get people to participate in their 401(k), we’ve reduced the number of options in a 401(k), realizing that too much choice was overwhelming… Despite all of this, we still don’t have enough people saving enough money for their retirement.”
So what should we do? Farrell advocates using a “toxic word in Washington, DC: mandatory savings.”
Farrell says countries like the U.K., Australia, and Israel already have mandatory savings plans for moderate income workers. In Australia, an employer has to set aside 9 percent of an employee’s earnings currently, and will soon have to set aside 12 percent. Employees can choose to put more money in the mandatory savings plan, and often do at around 3 percent.
In this country, “the policy elite is starting to talk about mandatory savings,” says Farrell. “You don’t like the word ‘mandatory,’ you’ve got to come up with something better. The existing system is not working.”
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