by Leticia Miranda, Senior Policy Advisor, Economic Security Policy
There was big news in the retirement security arena this week. After years of no action, both Congress and the White House are proposing new ways to provide a more secure retirement for millions of Americans. In addition to Social Security, the main way Americans save for retirement is through workplace payroll deductions into retirement plans. Half of all American workers—and two-thirds of Latinos—are employed by companies that do not offer any type of retirement plan. These tend to be smaller private companies that cannot afford to manage a 401(k) plan. Since most Latinos lack access to a workplace retirement plan, they depend more on Social Security as their sole source of income in retirement than any other racial or ethnic group, yet Social Security benefits are typically inadequate to cover all living expenses. That is why Latinos have so much at stake when it comes to finding solutions to stop the growing retirement crisis.
This week, President Obama signed an executive order establishing a voluntary pilot program called MyRA, an individual retirement account (IRA) that first-time savers may use as a way to save for retirement. That announcement was quickly followed by more promising news—Senator Collins (R–ME) and Senator Nelson (D–FL) worked across party lines to create the “Retirement Security Act of 2014” to make it easier and cheaper for companies to band together to offer retirement savings plans to their employees. To close out the week, Senator Tom Harkin (D–IA), Chairman of the Senate Committee on Health, Education, Labor, and Pensions, introduced the “Universal, Secure, and Adaptable (USA) Retirement Funds Act of 2014,” legislation that would give 75 million workers the ability to earn a safe and secure pension benefit for the first time.
We are pleased to see our nation’s leaders offering solutions that can help generations of Americans have greater economic security in old age. Although the MyRA plan put forward by President Obama is a good first step, his plan is limited because it is an executive order. Congress must also act to pass legislation. The bills by Senators Collins, Nelson, and Harkin address a key barrier in the system by making it easier for companies to band together to pool resources and risks and lower costs.
All of these proposals represent positive steps forward to ensure that 75 million American workers—including 16 million Latinos—who lack access to a workplace retirement plan are able to save for retirement in a safe and secure manner. These proposals would also make our retirement system more inclusive by ensuring that workers who earn lower incomes and work for small companies are part of the new system. As one of the fastest-growing segments of the workforce, Latinos will play an important role in the future of this nation. We must ensure that we create a better framework that helps all workers save today in order to have a more secure retirement tomorrow. Lastly, we must ensure that Social Security, the foundation of our retirement system, remains strong for future generations.