By Sandy K. Johnson
There is no one-size-fits-all national retirement savings plan that could be instituted in the United States, or any other country. Instead, there is a patchwork quilt of programs, some of which work and some that don’t.
David C. John, senior strategic policy adviser at AARP’s Public Policy Institute, gave National Press Foundation fellows a global tour of international pension plans. “No one has solved it all. Every single country is based on its own experience. We can learn,” he said.
A few examples. Japan has a social security (small “s”) system that it can no longer afford, given that life expectancy is pushing 90. Australia has means testing for its government pensions, an idea that is anathema in the U.S. Chile requires every worker to contribute 10 percent to their retirement savings.
John praised the United Kingdom’s automatic enrollment reforms: “Virtually everyone in the U.K. is saving for retirement,” he said. Few U.S. companies automatically enroll workers in retirement plans.
How does U.S. Social Security, a system created in 1935 as a social insurance program to provide a small continuing income for retired workers over 65, stack up? John said Social Security is not terribly generous, especially compared with Canada and some European nations; the average Social Security benefit, for example, is $16,000, not enough to live on for most. And as Americans age and the system pays out longer with fewer workers paying in, Social Security inevitably has run into financial problems.
In addition, roughly half the U.S. workforce does not have access to 401(k) or IRAs through their employers. John identified five groups that typically lose out on employer-backed retirement savings: younger workers, women, minorities, small business workers and part-timers.
He is optimistic about a five-year pilot project on automatic portability of retirement savings, whereby a worker’s savings would automatically move to a new employer’s plan. It’s important, John said, because Americans now average 11 employers in their lifetimes. The Department of Labor has issued regulations that are now in the comment phase.