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Retirement Can’t Wait

Filed in DOL, Retirement, Secretary Perez By on June 24, 2015

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.

Follow Secretary Perez on Twitter and Instagram as @LaborSec.

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Comments (9)

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  1. Roland Lamontagne says:

    I think this is a great idea! However, many small businesses, including my employer, do not have direct deposit accounts for employees. In our case we have employees that work at the convenience of the employer and are employed by multiple businesses, and work in multiple States, which is typical in our industry.

    For MyRA to succeed, as an option, let employees make deposits on their own, as I do with my IRA account – that is managed by Fidelity. I submit x amount of dollars as my family expenses permit and in doing so I now have a small buffer for retirement. The Country just needs to avoid another manager recession. The last four recessions each dropped my IRA value by better than 50% as they did for many Americans.

    • S says:

      Agree. I don’t know why we are forced to take our our own IRA monies when we don’t need them. Why is the government mandating such actions? It just doesn’t make any sense at all.

  2. Nancy Shepard says:

    I agree completely with this article but you need to take one further step. I’m 70 and still work, therefore, I have to take money out of my IRA and pay a high tax rate because I’m still working and should be still contributing to my retirement IRA. I shouldn’t have to take payouts from my IRA until I retire. This is hurting my retirement security. This needs to be fixed.

    • S. says:

      Completely agree. WHY is there a mandate to take the money that WE SAVED at 70 1/2??? Why is it the government’s business at all?

  3. Donna R. Holloway says:

    As a 65 year old woman, widowed, and looking toward retirement, I am concerned about how to do it when I still have a daughter & grandchildren living in my house and I am taking care of my 85 year old mother. I am still working at this time. Many younger people resent that we are still taking up a position in the workplace, but how can we retire? I am only one of many baby boomers who would like to retire but who is supporting parents and children. I do not begrudge taking care of my mother; however, when your children get into their late twenties and early thirties…and it seems to have become socially acceptable…and still are not out on their own, something is wrong.

  4. Sherri says:

    I would love to see a Roth Account that I could contribute to for my grandchildren that college would not affect. We use to have savings accounts when we were young but now the interest isn’t worth investing in. The government is concerned about social security so why not invent a savings for young children that they could not access until retirement and have it be just for retirement for them. Age does not permit this now as you must have income to invest in a Roth. Think how helpful it would be to put away birthday money and other income into something that would grown for a lifetime for retirement to help give our grandchildren a start for the future. Just saying!

  5. Lee Ann Schumacher says:

    Maintaining the spending power of a dollar should be a paramount goal and a key element for making retirement comfortable. Cost of living increases to SS benefits are helpful, but there aren’t any for my 401k or savings. I am horrified by the proposed increases to the minimum wage. They are only a temporary help to the poorest workers and drive the cost of goods to increase. I remember back when I worked at Burger King in the 70’s, a Whopper Meal was $1.08. The minimum wage increased to $2.00 during my tenure there and so did the prices. Help the poor with housing subsidies and food stamps and education, but don’t raise the minimum wage!

  6. Tom Castleman says:

    Mr Perez,
    I find your comment “The days of a Defined Benefit Pension that you couldn’t outlive are a thing of the past” somewhat contradictory to your praising of the Social Security System which is a “Defined Benefit Plan” in itself. Your comment could then be predicting doom for Social Security also…

  7. Todd says:

    I understand the need for investor education and how financial advisers need to act in a fiduciary capacity, which is in the best interest of the client. HOWEVER, this piece is nothing but propaganda from the DOL which paints advisers as the bad guys which should be avoided because of “backdoor payments” from fund companies. Backdoor payments???? Really guys??? This is how we’re going to educate investors? This just shows how little the DOL knows about the industry and what they’re real intention is, which is to attack advisers as greedy how they do nothing but take advantage of their clients. The DOL knows that this messaging appeals to those who are uneducated when it comes to investing. How about an adult conversation with some REAL education which addresses how investors can avoid fees by doing everything themselves or they can pay an adviser for their services, which can be either a commission or a management fees. Then they can make their own decision based on knowledge and information rather than propaganda about “backdoor payments”. By the way……do you think the DOL will ever identify what those are??? Of course not because if people ever figured out what they were talking about, they would discover this fraud for just what it is. Hey DOL…..maybe your next video can be titled “5 SECRETS that your Advisor Doesn’t Want You to Know”.