More than 200 House Democrats are sponsoring a bill to expand Social Security benefits. This legislation will be funded by a dramatic increase in taxes. In addition, some states (California, Connecticut, Illinois, and Oregon) have established state-run retirement plans for private sector workers, which many progressives hope will supplant 401(k)s.
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In his latest piece, AEI economist Andrew Biggs, a former principal deputy commissioner of the Social Security Administration, warns that “there is no retirement crisis among either today’s retirees or tomorrow’s.”
Among his key points:
- More Americans are saving more than ever for retirement. Participation in traditional defined-benefit pensions peaked at 39% of employees in 1973. Today, the Social Security Administration finds, 61% of workers, including 80% of married couples, participate in a plan.
- Retirement-plan contributions are up. From 1975-84, total employer and employee contributions averaged 6% of employee wages; over the past decade the average has been 8.3%. Retirement savings in employer-sponsored plans and individual retirement accounts are at record levels, rising sixfold since the mid-1970s.
- Retirement incomes have risen. The median retiree household’s income grew by 56% above inflation from 1989 through 2016, versus only 4% real growth for working-age households. Incomes grew faster [for] the poorest fifth percentile retirees than at the 95th percentile of the working-age population.
Biggs concludes that while household retirement savings are growing, government retirement plans, such as Social Security and government employee pensions, are underfunded by up to $26 trillion. “[A] real retirement crisis could materialize” if policymakers “move away from the private-sector plans…in favor of government provision of retirement income…”
This article is reprinted with permission from The American Enterprise Institute.
This article was originally published on FEE.org. Read the original article.
