FYI: If we could reinvent retirement-saving plans from scratch, how would they differ from the rigid and often paltry 401(k)s that workers have today?
In all sorts of ways.
The reimagined plan, for one thing, would blend the stable income for life of old-fashioned defined-benefit pension plans with the favorable tax treatment of the contemporary 401(k). But unlike those plans, this one would follow participants wherever they work and be universally available, while accommodating the needs of different kinds of savers and protecting participants from their own worst impulses.
None of this is impossible to accomplish, although many of the best ideas for improvement will require new laws, regulations or technological innovations. But there’s little question that the 401(k) as we know it just isn’t getting the job done. With lifespans lengthening, health-care costs rising, and stocks and bonds alike expected to deliver lower future returns, the need to augment retirement savings is greater than ever.
Consider: One-quarter of working Americans say they have no pension or retirement savings at all, according to a 2017 survey by the Federal Reserve; among those who are 60 or older, 13% say they have nothing saved for retirement, leaving them to rely largely on Social Security, which often won’t pay enough to sustain their standards of living.
So now is the time to imagine a new future—one that offers retirees the best chance at avoiding the hardships that threaten so many of them today. Here are the suggestions of retirement-industry leaders and academic researchers on how to get there.