Saving for Retirement — Without the Government

Amy Payne /

We can all agree that it’s good for Americans to save for retirement. But should the government expand from providing old-age entitlement benefits to controlling personal retirement investments as well?

Whether you want to or not, we’re forced to pay into Social Security and Medicare. But today’s working Americans don’t have the guarantee that these programs will be there to carry us through retirement. Why? The taxes we’re paying now are supporting today’s retirees – not tomorrow’s. And Congress may change the benefits, especially since these programs are significantly underfunded.

Ideally, we would have the option to save our own money in the way we want – and government programs would be the safety net they were supposed to be, to protect America’s vulnerable from poverty.

Sen. Marco Rubio (R-Fla.) is speaking out on this critical issue of financial security. He is spot on that our entitlement programs, namely Social Security and Medicare, cannot continue as they are. They won’t last for another generation at the benefit levels people have become accustomed to.

He suggested last week that for those who don’t have a retirement plan offered through their employers, perhaps they should be able to join the retirement plan that federal workers (including members of Congress) have.

It’s called the Thrift Savings Plan, and millions of Americans in Congress, the federal workforce and the military invest through it. It is an attractive investment because its massive size and government subsidies keep its fees low. As Heritage expert Romina Boccia explains, “the costs of employee education, administrative processing and collecting are borne by the taxpayer.”

The Thrift Savings Plan is the right type of plan for retirement investing – but Boccia says another government-controlled plan isn’t the place to put the millions of American workers who don’t have their own employer-sponsored retirement accounts. Heritage has advocated an Auto-IRA (individual retirement account) that would help get more people saving.

“Unlike a [Thrift Savings Plan] expansion, the Auto-IRA is structured to promote competition with more, not fewer, employer plans,” says Boccia, the Grover M. Hermann Fellow. “This would give Americans more options – and better options – for retirement savings.”

Heritage experts have said that it would be helpful to extend automatic-enrollment IRAs to those who don’t have this kind of option at work right now.

“Automatic enrollment is a key part of the Automatic IRA because it especially helps those groups who are most likely to undersave: women, minorities, younger workers, and low- to moderate-income workers,” wrote retirement security expert David John. Plans could be “structured so that they can be combined and rolled over from one employment situation to another as the saver progresses through his or her career.”

This would be a win-win for workers. And it would move retirement savings back into our pockets and away from government-managed programs.

Learn more about Heritage solutions for retirement savings.

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