With the U.S. facing an unprecedented crisis in retirement savings and an overwhelming majority of Americans anxious about their retirement prospects, AARP wants state lawmakers to take steps that will help Nebraskans prepare for a secure retirement.
According to the National Institute on Retirement Security, the typical working-age household has only $3,000 in retirement assets, while near-retirement households have only $12,000, said Sarah Mysiewicz, AARP senior legislative representative from Washington D.C. AARP’s Public Policy Institute also reports that three out of five American families headed by a person 65 or older have no money in retirement savings accounts.
“As things stand today, Social Security will likely be the main source of retirement income for most future middle-class retirees. However, Social Security alone will not provide enough to pay the bills during our retirement years,” said Mysiewicz. She testified Dec. 10 before the Nebraska Retirement Systems Committee interim study hearing on private sector retirement savings legislation.
She warned that the state budget will be saddled with a growing burden in the future as older adults are forced to rely more and more on public safety net programs. For nearly 20 percent of Nebraskan seniors, Social Security makes up 90 percent or more of family income. Half of the state’s seniors rely on Social Security for 50 percent or more of family income.
“With a majority of workers relying on Social Security for their retirement income, we know the retirement system is not working for a large portion of the population today. It is clear that workers are not prepared for their retirement, and as baby boomers continue to retire, we will see this crisis grow unless we act now,” Mysiewicz said.
At least 40 percent of Nebraskans in the workforce do not have access to a retirement plan. Simple steps can be taken to avert the crisis, she said, noting that when people are offered the opportunity at work to save for retirement, seven out of 10 choose to participate.
“We need to explore new models for private sector retirement plans that allow workers to set aside wages through an easily accessible, safe, cost-efficient retirement savings vehicle,” she said.
One option is a “State K,” a state-sponsored retirement savings option for workers who don’t have access to a retirement plan. It would be administered by the state directly or under contract and provide workers with understandable investment choices and minimal management fees. The state would not have any obligation to fund the plans.
An AARP survey of 807 Nebraskans age 18 and older conducted from Nov. 23 to Dec. 3, 2013 found that nearly two-thirds (62 percent) are somewhat or very anxious about having enough money to live comfortably in retirement. Fifty-nine percent expressed support for a state-run retirement savings plan such as a State K.