Testimony By Jim Scheibel, AARP Volunteer Board Member
Before the House Committee on Jobs
On the Minnesota MN Secure Choice Plan
Wednesday, March 5, 2014
Mr. Chairman, Members of the committee, my name is Jim Scheibel. I am here today as a volunteer member of AARP Minnesota’s Executive Council. On behalf of our more than 650,000 Minnesota members, AARP appreciates the opportunity to testify on this very important issue of retirement security for Minnesota workers and their families. We would also like to thank Representative Fritz for her leadership in sponsoring House File 2419, the Minnesota Secure Choice Plan.
The Minnesota Secure choice Plan is a new model for private sector retirement plans that allow workers to set aside wages through an easily accessible, cost efficient retirement savings vehicle.
Our nation and its working families face an unprecedented crisis: a vast retirement savings deficit, estimated to be as much as $6.6 trillion, or about $57,000 per household. According to the National Institute on Retirement Security, an overwhelming majority of Americans are anxious about their retirement prospects, with some 84 percent being concerned that current economic conditions are impacting their ability to achieve a secure retirement.
To give you an idea how dire the situation is, let me share with you a few more statistics:
· Currently, one in seven seniors in Minnesota lives in poverty. Over half of these are elderly women. (47,103)
· Three out of five families headed by a person 65 or older have no money in retirement savings accounts, and
· 28% of Minnesota residents 65 plus, rely on Social Security for all of their income.
It is clear that workers are not prepared for retirement, and as baby boomers continue to retire, we will see this crisis grow unless we act now.
As this committee knows, Social Security provides an essential baseline of income for retirees. However Social Security was never supposed to be the sole source of income for retirees. It was intended to be one leg of a three-legged approach to retirement savings. Employer sponsored retirement plans and individual savings were envisioned as the other critical components.
With a decline in employer sponsored retirement plans, we need to remove the barriers to retirement planning and financing and make it easy and cost-effective to save for retirement.
Minnesota is not alone in considering a state facilitated retirement plan. AARP has worked with nearly a dozen state legislatures in consideration of a wide array of approaches to this crisis, involving: Auto IRA, Secure Choice, and other savings models.
The good news is that we can get ahead of this crisis. When offered the opportunity at work to save for retirement; seven out of ten people choose to participate. By helping people plan for self-sufficiency in retirement, the state will ultimately save money in reduced safety-net spending.
The Minnesota Secure Choice plan is a convenient way for people to save on the job and to continue to save even when they change jobs. The plan would be voluntary and available to private sector workers who do not participate in any other type of employer sponsored retirement plan. Creating economies of scale through the State Investment Board will keep costs low, while generating new business for the private sector.
Rebuilding the promise of financial security in retirement must include modern, expanded options. AARP believes that we all have a right to live with self-reliance and dignity in retirement. Thank you again for the opportunity to speak with you today.