A lifetime dedicated to hard work deserves a dignified retirement. That’s why the Labor Department and the Obama Administration are doing everything we can to make sure working families have the information, tools and resources to make the most of their retirement investments. Yesterday at a forum of the Brookings Institution’s Hamilton Project, I gave a speech about steps we can take to enhance retirement security.
A few decades ago, we had a pretty solid three-legged retirement stool. Social Security and personal savings combined with traditional pensions led to good middle-class retirements for millions. But today’s stool is a little too wobbly to support this and coming generations of workers and retirees. The Great Recession showed all of us just how vulnerable 401(k) type plans and IRAs can be, and with savings rates dangerously low, the need to strengthen the system across the board is clear.
Today, workers are largely responsible for their own retirement investments. The days of a defined benefit pension that you couldn’t outlive are a thing of the past. Today, we have to take greater ownership for starting our savings, managing and then figuring out how much to draw in retirement.
Most workers – this one included – need advice on how to invest their 401(k) and IRA savings. Too often, that advice is not delivered in the customer’s best interest. The Labor Department has a proposal to fix this. We’re working hard with the financial services industry, consumer groups and Members of Congress to come up with a plan that protects retirement savings from financial conflicts of interest, while giving flexibility to the many good retirement advisers who are out there now. When you consult a doctor or a lawyer, you know they are obligated to act in your best interest; the same should hold true for your financial adviser.
Before workers can even begin to tackle investment management, they need the opportunity to begin saving for retirement in the first place. At the federal level, the President took an important step forward with the establishment in 2014 of the myRA program to help the 60 percent of people who have no job-based retirement savings vehicle at all. myRA’s help Americans kickstart their savings in a way that’s simple, safe and affordable. If you enroll, money is automatically put into your myRA account, as long as your employer uses payroll direct deposit. It’s portable from job to job. The investment is backed by the U.S. Treasury. And it costs nothing to open an account. The president wants to go further with this idea. His 2016 budget proposal includes a plan to automatically enroll Americans without workplace retirement plans in an IRA, and he has proposed tax cuts for small employers who offer the auto-IRA.
Several states are also launching efforts to help workers whose employers don’t sponsor a retirement plan. I’m excited about these state-level efforts, and I want to do more to encourage and facilitate them, removing barriers preventing them from flourishing while preserving critical consumer protections.
Finally, workers and retirees can still count on the Social Security system. It persevered through the recession and the resurgent economy is putting the program on sounder footing. Just about everything I do as Labor Secretary — improving job training programs so people can advance their careers; fighting for a minimum wage increase; advancing the economic interests of women by working to close the pay and participation gaps —have the benefit of funneling more money into the Social Security system. A strong economy in which everyone is participating naturally benefits Social Security. This is just another way in which, as the president often says, America is strongest when we field a full team.
The challenges are clear, but also the solutions are at hand. If we work together – the Obama Administration, Congress, the investment industry, and workers and employers – we can create a dynamic retirement system that can weather financial storms and meets the needs of today’s huge wave of retirees.