In the late 1930s, when Social Security first started, roughly half of the U.S. population lived to be at least 67 years old. Today, more than 80 percent live to be at least 67, and half the population will reach the age of 82. As America continues to age, promoting prudent retirement saving and ensuring a fiscally sustainable Social Security safety net become ever more essential public policy goals.

 

Stable and predictable policies that promote retirement security and economic growth are essential to ensure a reasonable standard of living for most Americans in retirement and to make the United States a more attractive place for skilled workers and businesses. While the primary responsibility for ensuring a secure and comfortable retirement lies with the individual, employers and government also play key supporting roles through Social Security and employment-based retirement plans and in informing Americans about their retirement options.

 

 

Social Security has provided a reliable level of retirement security for decades, but demographic changes mean that the system is not sustainable in its current form. Social Security reform is needed so that it can remain the bedrock of Americans’ retirement security. Reforms that bring Social Security into long-term financial balance should be made as soon as possible to minimize disruption and allow time to plan.

 

Although Social Security must meet its promises to current retirees and those nearing retirement, long-term benefit promises must be based on demographic and economic realities. In particular, further increases in payroll taxes are not a panacea; they would increase costs of employment and should be viewed through the lens of potential job loss and slower economic growth.

 

 

Robust employment-based defined benefit and defined contribution retirement plans are an indispensible component of America’s national retirement savings strategy. The success of those plans is predicated on tax rules that create incentives for employers to contribute to retirement plans and that encourage workers to save. In the past, retirement tax policy has sometimes been changed based on short-sighted focus on immediate budgetary savings, without consideration of the potential long-term economic and social damage caused by such changes. That approach is counterproductive. Policies that promote long-term savings and investment offer the best path to sustainable economic growth and ensure greater retirement security.

 

At the same time, complex and burdensome new regulations, along with a growing threat of unjustified legal actions, continue to increase costs and discourage employers from establishing and maintaining retirement plans. To compete in a global marketplace, employers must have flexibility to implement retirement plans that attract and retain qualified employees. In particular, the current funding rules inadvertently impose volatile and unpredictable contribution requirements on employers, which is contributing to slowing the economic recovery and hampering job creation.

 

 

To achieve financial security in retirement, most Americans will need to make regular additions to savings. They also will need to make responsible decisions about when to retire and how to spend down their retirement savings prudently. Current policies can create disincentives to continued work, impose barriers to phasing into retirement and discourage employers from educating workers about retirement issues.