Data & Research December 10, 2012

ICI: Retirement System Is a Success

The U.S. retirement system successfully provided adequate retirement resources and successive generations of retirees have been better off, ICI research found.
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Most households maintain their standard of living when they retire and, on average, more recent retirees have higher levels of resources to draw on in retirement than previous generations, according to “The Success of the U.S. Retirement System,” the Investment Company Institute (ICI) paper. The U.S. retirement system has become better at providing resources, ICI found.

Adjusted for inflation and the number of households, assets earmarked for retirement were nearly three times larger in mid-2012 than in 1985. Furthermore, poverty among people ages 65 or older has fallen from nearly 30% in the mid-1960s to 9% in 2011, the report notes.

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“The future presents us with many challenges, such as an underfunded Social Security system and rising health care costs,” said Paul Schott Stevens, ICI president and chief executive. “As policymakers respond to these challenges, it is critical that they have research like this that analyzes the entire system. ICI believes we must preserve the best attributes of the system, including tax deferral and portability, and build on the system’s success by strengthening Social Security for the long term, expanding coverage, and continuing to allow innovation in plan design.”

The paper also illustrates that households save for a variety of reasons throughout their lives. Households’ focus on savings change as they age, with the emphasis shifting to retirement over time. For instance, in 2010, only 14% of households younger than 35 reported that retirement was a primary savings goal, compared with nearly half of households ages 50 to 64. Also, younger households typically are focused on other goals: 32% of households younger than 35 reported that saving for education, homes, or other large purchases was their primary saving goal.

The paper is available here.

Compliance December 10, 2012

Senators Support Savings Tax Incentives

 

A group of senators introduced a resolution recognizing the importance of current incentives for retirement savings.

 

 

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The resolution states, “That it is the sense of Congress that (1) tax incentives for retirement savings play an important role in encouraging employers to sponsor and maintain retirement plans and encouraging participants to contribute to such plans; existing tax incentives have increased the number of Americans who are covered by a retirement plan; and a reformed and simplified tax code should include properly structured tax incentives to maintain and contribute to such plans and to strengthen the retirement security for all Americans.”

The resolution was introduced by Senators Richard Blumenthal (D-Connecticut) and Johnny Isakson (R-Georgia), who were joined by nine other senators in co-sponsoring the resolution. It has been referred to the Senate Committee on Finance.  

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The Coalition to Protect Retirement, which represents groups that sponsor and manage retirement plans, praised the resolution as a strong reaffirmation of the importance of the private-sector retirement plan system and the role it plays in assuring the financial security of Americans when their working days are over.  

“Actions taken to reduce the national debt and reform the tax code should not be done at the expense of workers and retirees. Tens of millions of Baby Boomers will reach retirement age in the coming years. Government policy should focus on helping them achieve financial security and independence in retirement. The incentives in the current tax code are an investment in the future, helping assure that retirees will not suffer from financial need and look to the government for help,” the Coalition said.  

The Coalition consists of: the American Benefits Council, American Council of Life Insurers, American Society of Pension Professionals and Actuaries, ERISA Industry Committee, ESOP Association, Insured Retirement Institute, Plan Sponsor Council of America, Securities Industry and Financial Markets Association, and the Society for Human Resource Management.

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