WASHINGTON, DC-Nationally, one in four retired Americans has no source of income beyond Social Security- in Maine, that number is one in three. In addition, according to a recent survey conducted by PBS, 92 percent of respondents believe there is a retirement crisis in our nation. The Senate Special Committee on Aging, led by Chairman Susan Collins and Ranking Member Claire McCaskill, today held a hearing to examine how prepared Americans are for retirement.
The hearing was titled, “Bridging the Gap: How Prepared are Americans for Retirement?” Witnesses included Maine Savings FCU official Rob Carmichael and Jean Chatzky, financial journalist and financial editor for NBC’s Today Show
Senator Collins said, “The issue of retirement security is of great importance not only to those in or nearing retirement, but also to all Americans who hope to enjoy their retirement years without fearing they will run out of money and fall into poverty.”
During the hearing, Dr. Alicia Munnell of Boston College, who also served as a witness, said that the estimated gap between the savings American households need to maintain their standard of living in retirement and what they have actually saved is an astounding $7.7 trillion.
Witnesses discussed the many reasons for decline in retirement security, which include rising health care costs, the need for long-term care, the fact that Americans nearing retirement have more debt than those of previous generations, and the simple fact that Americans are living longer. Another contributing factor is that employees of small businesses are much less likely to have the option of participation in employer-based retirement plans.
Along with Senator Bill Nelson, Senator Collins has authored the “Retirement Security Act,” to reduce the cost and complexity of retirement plans, especially for small businesses, and to encourage individuals to save for their retirement.
Rob Carmichael described Maine Savings FCU’s efforts to help their employees prepare for retirement though a 401 (k) plan the company offers. “We see on a daily basis, the struggles our employees and members encounter as they try to make ends meet and deal with the day to day events of their lives….As with many Americans, some of our employees struggle with significant credit card debt, thereby reducing the disposable income available for investing in their retirement.” Carmichael said that the company has seen success and a high participation rate with their plan, in which employees are automatically enrolled, with the option of opting out.
He said that the regulatory environment is an impediment that prevents small businesses from offering retirement savings plans.
Jean Chatzky said that, according to the Federal Reserve’s Survey of Consumer Finances, a typical working family in the pre-retirement years has about $104,000 in retirement savings. For more than half, that will not be enough, even when combined with Social Security and pensions.
Witnesses as well as Senator Collins discussed the fact that many seniors may be taking their Social Security benefits early, at age 62, without knowing the financial benefits of waiting until age 66 or 70. Taking benefits early, which results in a reduce monthly benefit for the rest of a beneficiary’s life, is another factor leading to the fact that far too many Americans do not have enough financial resources to maintain their standard of living in retirement.
Senator Collins urged the Social Security Administration to provide seniors with detailed information about the benefits of retiring later, when that option is available to them.
Retirement security is among Senator Collins’ top priorities as Chairman of the Senate Special Committee on Aging.