Thought Leadership Thursday
The Time Is Now To Tackle Retirement Security
Thought Leadership Thursday Article
As financial leaders, we know so much in the financial world is about planning. But in March of 2020, something no one could have planned for happened - a global pandemic. Now a year since its onset, COVID-19 has shined a spotlight on the financial fragility far too many people face on a daily basis. We need real solutions to ensure people are more financially secure, including when it’s time to retire. Because we know it’s not if but when another significant economic event will occur.
In the United States, the average working-age household only has $3,000 in retirement account assets and near-retirement households only have $12,000 saved. Since COVID-19, almost 60% of Americans borrowed or withdrew money from their IRA or 401(k). Financial security in retirement is not a reality for many families.
As Chair of the Retirement Security Task Force here in Wisconsin, I worked with a diverse coalition of legislators, business owners, retirement experts, and workers to develop bipartisan, cost-effective, and innovative solutions to help tackle financial insecurity during retirement. Drawing upon the best practices and lessons learned from our fellow states, we published a menu of solutions in our recent report.
Our solutions are shaped by the stories we heard from workers, retirees, and small businesses across the state during listening sessions. We heard stories of struggling families having to shift what little they had in retirement savings to use as emergency funds to contend with the economic fallout of the pandemic. We heard from parents of middle-aged children who expressed concern because their children have nothing saved for retirement. We heard from small business owners who want to offer retirement but have been unable to identify simple, cost-effective options. While these stories illuminated the urgency of the retirement crisis, they also inspired discussions about solutions that offer us faith that change is possible.
The recommendations detailed in this report offer policy solutions to help Wisconsinites of all ages build their financial wellbeing, save for both short-term and long-term needs, and retire with dignity. With these recommendations, we offer a range of tools and policies that we are now working on implementing to make this a reality for more Wisconsinites:
· WisconsinSaves is a simple, plug-and-play auto-IRA enrollment program for Wisconsin businesses of all sizes, which would utilize best practices to extend access to retirement savings to nearly 1 million Wisconsinites who do not currently have access.
· 401(K)IDS sets our future generations up for success by providing every child born in Wisconsin with a target-date investment account to build long-term wealth and provide meaningful financial education. Nearly 60,000 kids born each year would access the benefits of compound interest and a life-long savings tool they could use to build wealth, buy their first home, pay for education, and save for retirement.
· Emergency Savings structure that ensures Wisconsin workers have rainy day funds and don’t need to tap into retirement savings when the unexpected happens.
· Incentivize Participation in Workplace Plans to encourage Wisconsin employers who currently offer retirement plans for employees to utilize auto-enrollment to maximize participation.
· Interactive E-Commerce Portal would serve as a centralized, trusted source of information for retirement savings and other financial needs.
Here in Wisconsin, we have a long tradition of retirement security. The father of Social Security, Edwin E. Witte, was born and raised in the Dairy State and went on to develop the legislation that became the Social Security Act of 1935. As we continue this work in Wisconsin, I look forward to partnering with all of you as we take on this challenge to improve financial security for our constituents.
Forward, (The Wisconsin Motto)
Sarah Godlewski, State Treasurer