The New State Retirement Plans, Will They Be Enough to Resolve the Retirement Crisis?

By James W. Russell
Huffington Post, September 29, 2015

Responding to the retirement income crisis, half the states are in various stages of developing plans for employees without workplace plans beyond Social Security. Will these plans be a “game-changer” as claimed by Angela Antonelli, executive director of the Center for Retirement Initiatives at Georgetown University’s McCourt School of Public Policy? Or will they deliver more the illusion than reality of future retirement security?

I serve on the board of one of these—Connecticut. I am also a critic of the type of approach that the plans share—relying on individual invested savings to provide enough income during retirement.

The common idea of the plans is that employers would deduct 3% of employee pay to be placed in retirement investment accounts. Employers would not contribute. Essentially these would be state government-sponsored Individual Retirement Accounts.

There are a lot of questions to be settled.  Who will administer the accounts?  Will individuals direct the investments or will professional investors?  Will the states act as mere pass throughs, facilitating the collection of employee savings that will then be managed and profited from by the private financial services industry?  Or will states attempt to set up true public nonprofit retirement savings options that compete favorably with what the for-profit private sector has to offer?

The biggest question is, will the plans work?  Will they resolve the retirement crisis by providing enough future income to ensure retirement security?

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