PSNC 2010: Retirement Plan Reform: A New Proposal

 Teresa Guilarducci, Bernard and Irene Schwartz Chair of Economic Policy Analysis at the New School for Social Research, noted that the new “normal” for retirement now includes more people planning to work in their retirement years, as well as more people wanting the government to guarantee retirement income and care. She pointed out that the amount the government currently spends to incent retirement savings is greater than the savings by Americans.  

Guilarducci also noted that 6% of all taxpayers get 50% of the savings subsidies or credits offered by the government.  

A pending proposal to supplement social security would guarantee retirement income to all Americans, Guilarducci contends. Under the proposal, 5% of each worker’s pay, split evenly between the employee and his or her employer, would be deferred and every saver would get a $600 tax credit (adjusted annually for inflation).  

Guilarducci said a professional board would invest the money in a sovereign wealth fund. No distributions would be allowed before retirement and the program would provide a guaranteed payment in retirement.  

Each account would be guaranteed a 3% return, and whatever the fund earned in excess of that 3% would be used to cover the fund’s obligation in bad years.  

Guilarducci says this proposal would take care of three problems with the current retirement system: not enough deferrals from employees, too much use of savings before retirement, and the lack of a guaranteed income in retirement.