WASHINGTON (CN) – Federal retirement experts painted a dire picture of the status of American workers’ retirement savings at a Senate hearing, saying 27 percent of workers have virtually no savings, and that the number has increased in the past year.
“It’s hard to get people to save,” said Ross Eisenbrey, vice president of the Economic Policy Institute, told members of the Senate Health, Education, Labor and Pensions Committee. “It’s hard to get people to plan 40 years in advance.”
“It’s hard to ask people to save when they can barely pay their bills,” Sen. Bernie Sanders, I-Vt., added at the Thursday hearing.
The hearing, titled “The Wobbly Stool: Retirement (In) Security in America,” dealt with the three-legged stool of social security, personal savings and employer provider plans that make up Americans’ retirement income.
According to the Employee Benefit Research Institute, 27 percent of workers say they have less than $1,000 in savings or investments, and 54 percent of workers say the total value of their household savings is less than $25,000.
The amount of workers with virtually no savings has increased over the past year, said Jack VanDerhei, research director at the institute.
VanDerhei said people tend to underestimate the amount they need to save for a comfortable retirement.
Eisenbrey said 401ks were the “heart of the problem.”
Phyllis Borzi, assistant secretary at the Employee Benefits Security Administration, said that because of the increase in employers offering 401k plans, workers are now assuming most of the risk for retirement security.
The 2008 financial collapse slashed the value of many IRAs and 401ks, putting workers’ retirement security in jeopardy.
And because 401ks are structured as savings plans, Borzi said, people often dip into them for unexpected expenses like medical costs are car repairs, facing penalties.
Eisenbrey, a strong advocate for Social Security, called the government program the “long, sturdy leg,” of the three-legged stool. He said more than half of retirees get 55 percent of their income from Social Security, and a quarter get more than 90 percent.
The panelists discussed raising the retirement age to 70 to bring down the cost of Social Security.
Sanders said he was doubtful that many employers would be willing to hire a 68 year-old construction worker. “How are they going to survive?” he asked.
“I wish I could give you a good answer,” Borzi said, saying her brother has been a victim of age discrimination in seeking a job.
“I guess it’s a good idea for Wall Street billionaires to come up with,” Sanders said.
Eisenbrey said raising the income cap for those paying into Social Security would make the program solvent for another 70 to 75 years.
Currently, workers taking home middle-class salaries pay into Social Security for every dollar they make while upper income earners only pay for a portion of their salaries.
Senators suggested placing people’s projected income next to their 401k account balances to encourage them to save for retirement.
VanDerhei warned against it, saying there were so many factors going into an individual’s projected long-term financial needs — annuity, longterm care, healthcare costs, life span — that any estimate would be misleading. Giving them an average, he added, meant “dooming them to having less than they need 50 percent of the time.”
A retiree takes in an average of $14,000 in yearly Social Security benefits, which is less than minimum wage.
“I doubt that anyone on that will be living in a gated community,” said Sen. Tom Harkin, D-Iowa.
Shareen Miller, a personal care assistant from a Washington, D.C., suburb, said she earns $12 an hour and has no health care or retirement benefits.
“I’m used to living hand-to-mouth,” she said. She worries about when she will be able to retire and says she has “no idea” how she can live off $17,000 a year, which are her estimated Social Security benefits. She said she expects she will be a burden to her kids.