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S. HRG. 115–19 

THE CURRENT STATE OF RETIREMENT SECURITY 

IN THE UNITED STATES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

ECONOMIC POLICY 

OF THE

COMMITTEE ON 

BANKING, HOUSING, AND URBAN AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

ON 

EXAMINING THE STATE OF RETIREMENT SECURITY IN THE UNITED 

STATES 

APRIL 5, 2017 

Printed for the use of the Committee on Banking, Housing, and Urban Affairs 

( 

Available at: http://www.fdsys.gov/ 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS 

MIKE CRAPO, Idaho, Chairman 

RICHARD C. SHELBY, Alabama 

BOB CORKER, Tennessee 

PATRICK J. TOOMEY, Pennsylvania 

DEAN HELLER, Nevada 

TIM SCOTT, South Carolina 

BEN SASSE, Nebraska 

TOM COTTON, Arkansas 

MIKE ROUNDS, South Dakota 

DAVID PERDUE, Georgia 

THOM TILLIS, North Carolina 

JOHN KENNEDY, Louisiana 

SHERROD BROWN, Ohio 

JACK REED, Rhode Island 

ROBERT MENENDEZ, New Jersey 

JON TESTER, Montana 

MARK R. WARNER, Virginia 

ELIZABETH WARREN, Massachusetts 

HEIDI HEITKAMP, North Dakota 

JOE DONNELLY, Indiana 

BRIAN SCHATZ, Hawaii 

CHRIS VAN HOLLEN, Maryland 

CATHERINE CORTEZ MASTO, Nevada 

GREGG RICHARD, Staff Director 

MARK POWDEN, Democratic Staff Director 

DAWN RATLIFF, Chief Clerk 

CAMERON RICKER, Hearing Clerk 

SHELVIN SIMMONS, IT Director 

JIM CROWELL, Editor 

SUBCOMMITTEE ON ECONOMIC POLICY

TOM COTTON, Arkansas, Chairman 

HEIDI HEITKAMP, North Dakota, Ranking Democratic Member 

PATRICK J. TOOMEY, Pennsylvania 

DAVID PERDUE, Georgia 

THOM TILLIS, North Carolina 

JOHN KENNEDY, Louisiana 

ROBERT MENENDEZ, New Jersey 

ELIZABETH WARREN, Massachusetts 

JOE DONNELLY, Indiana 

BRIAN COLAS, Subcommittee Staff Director 

CRAIG RATLIFF, Democratic Subcommittee Staff Director 

(II)

C O N T E N T S 

WEDNESDAY, APRIL 5, 2017 

Page 

Opening statement of Chairman Cotton ................................................................ 1 

Opening statements, comments, or prepared statements of: 

Senator Heitkamp ............................................................................................ 2 

WITNESSES 

Kent Conrad, former Senator from the State of North Dakota, and Co-Chair, 

Bipartisan Policy Center’s Commission on Retirement Security and Personal Savings ........................................................................................................ 4 

Prepared statement .......................................................................................... 24 

Walter Russell Mead, Distinguished Scholar in American Strategy, Hudson 

Institute, and Chace Professor of Foreign Affairs, Bard College ..................... 7 

Prepared statement .......................................................................................... 34 

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

Bipartisan Policy Center’s June 2016 report, ‘‘Securing Our Financial Future: 

Report of the Commission on Retirement Security and Personal Savings,’’ 

submitted by former Senator Kent Conrad ........................................................ 42 

Illustrations presented by Senator Heitkamp during hearing ............................. 190 

Prepared statement of J. Spencer Williams, President & CEO, Retirement 

Clearinghouse, LLC ............................................................................................. 193 

Prepared statement of the American Council of Life Insurers ............................ 223 

Prepared statement of Catherine Weatherford, President & CEO, Insured 

Retirement Institute ............................................................................................ 228 

Prepared statement of the Save Our Savings Coalition ....................................... 240 

Prepared statement of the Strengthen Social Security Coalition ........................ 242 

(III)

(1) 

THE CURRENT STATE OF RETIREMENT 

SECURITY IN THE UNITED STATES 

WEDNESDAY, APRIL 5, 2017 

U.S. SENATE, SUBCOMMITTEE ON ECONOMIC POLICY, 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, 

Washington, DC. 

The Subcommittee met at 3:08 p.m., in room SD–538, Dirksen 

Senate Office Building, Hon. Tom Cotton, Chairman of the Subcommittee, presiding. 

OPENING STATEMENT OF CHAIRMAN TOM COTTON 

Chairman COTTON. The hearing will come to order. 

I want to welcome you all to today’s hearing. As you know, this 

is the first hearing of the Subcommittee on Economic Policy in the 

115th Congress. I look forward to working with our Ranking Member, Senator Heitkamp, and all of our Members as we use this 

Committee to highlight the needs of working families and what 

Congress can do to help them. 

In my own State, more than half of Arkansans are living paycheck to paycheck. But perhaps it might be more accurate to say 

many are living on the edge. About one in five do not have enough 

savings to pay for a routine visit from an electrician, which would 

cost only $100. 

It is even worse for more significant expenses. The vast majority, 

about three in four, could not afford 6 months of unemployment. 

The numbers look similar in other States. In other words, most 

Americans are making just enough to get by and nowhere near 

enough to get ahead. 

It is precisely because of this that a growing number of Americans are looking increasingly vulnerable as they reach their retirement years, which is the subject of our hearing today. 

It is hard to overstate just how alarming the situation is. Three 

basic items—housing, transportation, and food—make up 63 percent of the average household budget, and these things are getting 

more expensive, not less. They are eating up more of the family 

budget, even more than they did 20 years ago. It does not take an 

economist to figure out that if you are spending more money just 

to keep the lights on, you have got less to set aside for retirement. 

And that is exactly what we see today. 

The number that sums it all up for me is this one: The typical 

American aged 55 to 62 has only about $14,500 in savings. That 

is it. And this is at a time when Social Security is sinking further 

and further into the red. 

2 

But it is even worse than that. At the very moment that people 

are seeing their expenses go up, they are also seeing their retirement plan options go down. In 1979, at least a third of our workers 

had defined benefit plans. Today it is only 14 percent. 

You might say to move from defined benefit to defined contribution plans was inevitable. Overseas competition has increased, and 

companies were feeling the pressure to become more efficient. And 

that is fair. 

But today fewer workers have access to any retirement plans at 

all, defined benefit or 401(k). And then, even if you do have a 

401(k), you still may not be saving enough to retire in comfort and 

security. 

These are the facts. They call out for a rethinking of how to 

achieve retirement security in America. We have to rethink how 

Americans can save and plan for retirement if we hope to maintain 

the kind of lifestyle to which so many Americans have grown accustomed over the years. 

Luckily, we have two distinguished witnesses to help us think 

through how to tackle this problem. Our goal today is not to solve 

the problem, but to answer a few basic questions. How many Americans are prepared for retirement? What is holding them back? And 

what can Congress do to make it easier for working families to 

save? 

First, we will hear from former Senator Kent Conrad, of North 

Dakota, now a Senior Fellow at the Bipartisan Policy Center, 

where he co-chaired a Commission on Retirement Security and Personal savings. Senator Conrad has done excellent data-driven work 

on the state of retirement security in the United States, and we are 

fortunate to have him here. 

Next we will hear from my good friend, Walter Russell Mead, 

Distinguished Scholar in American Strategy, the Hudson Institute, 

Chace Professor of Foreign Affairs and Humanities at Bard College, and Editor-at-Large of the American Interest. Professor Mead 

has been studying the change in the American workforce over time 

and its ramifications for many years. Professor Mead has testified 

many times about foreign policy before Congress, and we are happy 

to welcome him to the Banking Committee now to discuss economic 

policy. 

I want to thank you both for taking the time to join us today. 

I look forward to hearing your testimony, but first, Senator 

Heitkamp. 

STATEMENT OF SENATOR HEIDI HEITKAMP 

Senator HEITKAMP. Thank you, Chairman Cotton, and thank you 

for being such a great partner in putting together this hearing on 

such a critical and important topic. Our hearing today is our first 

Banking Subcommittee hearing this Congress, and I am very 

pleased that we are starting off exploring the issue of retirement 

security. 

You know, I wake up every morning thinking about the men and 

women in rural America, especially in North Dakota, who play 

hard, play by the rules, and try to earn an honest living and save 

for retirement—in fact, their golden years. The working class is the 

3 

backbone of our country, and they should not have to fear about 

their retirement future. 

Unfortunately, the trends we are seeing suggest that retirement 

security is far more uncertain today than it was even 20 years ago. 

Only 22 percent of workers are very confident that they will have 

enough money in retirement, according to the Employee Benefit 

Research Institute, and 64 percent say they know they are behind 

in where they should be in their savings. 

In fact, somewhere between 60 and 70 percent of all working 

Americans have access to a workplace retirement account or a 

401(k). That leaves about 30 million full-time workers without access to a workplace-sponsored plan. And among those who do have 

access to a 401(k), a recent Census Bureau study determined that 

up to two-thirds—let us repeat that again: Of those that do have 

access, up to two-thirds do not put away nearly enough to cover the 

cost of retirement. This should not come as a surprise given the 

fact that about half of all adults in our country would be unable 

to come up with $400 to pay for an emergency expense. They would 

have to borrow that money or sell a possession. 

In my home State of North Dakota, about 41 percent of all private sector employees—that is roughly 112,000 workers—work for 

an employer who does not offer a retirement plan. These are the 

truck drivers, the sales clerks, and the farm workers that are working very hard to make ends meet, put their kids through college, 

cover healthcare costs, and provide a better life for their children, 

thinking they will just put off that decision of their retirement 

security until tomorrow. 

We owe it to these men and women to strengthen our retirement 

system. There is certainly no silver bullet, but we need to think 

creatively to educate workers and expand access to retirement vehicles so more workers can afford to save and take advantage of 

the substantial benefits a sponsored retirement plan can offer. 

We also need to protect the men and women who still have access to a defined benefit plan or a pension as we transition to this 

new model. This means standing up against cuts to private pension 

plans, like Central States Pension Fund, whose members would 

economically be devastated if they lose access to the pension benefits that they bargained for and that they earned. 

As we dive into these issues, I look forward to hearing the testimony of today’s brilliant witnesses—I said that just as a moment 

of suck-up, ‘‘brilliant witnesses’’—Senator Kent Conrad, my mentor 

and great friend, who has spent a lifetime working to help the men 

and women of this country, and particularly the men and women 

of North Dakota, achieve economic success. And I am interested to 

explore some of the proposals he has put together as part of his 

work as co-chair of the Commission on Retirement Security and 

Personal Savings. 

I am also very eager and grateful for Mr. Mead’s testimony and 

Mr. Mead’s appearance. He has me doing some rethinking of fundamental ideas that I have had about what we need to do with 

pensions. There is no doubt that the new economy where work is 

taking place in a series of one-off gigs presents challenges in the 

retirement space. And we have to develop a model that is realistic 

4 

for today’s economic model, especially at a time when we are really 

uncertain about what the future of work will look like. 

So I want to thank both of you for, number one, your enormous 

work that you have done in the past for our country, in the case 

of both of you, and the thinking that you have done about the future of the people of the United States of America and how we can 

improve the economic outlook for them. 

And so, Mr. Chairman, with that, I look forward to the testimony. 

Chairman COTTON. Thank you, Senator Heitkamp. 

Both of our witnesses’ written statements will be entered into the 

record, as will a written statement from the American Council on 

Life Insurers. 

We will start with Senator Conrad. Senator Conrad, welcome 

back. I am sure you are thrilled to be back. 

[Laughter.] 

Senator HEITKAMP. I keep trying to get him to trade places with 

me. He is not buying it. 

STATEMENT OF KENT CONRAD, FORMER SENATOR FROM THE 

STATE OF NORTH DAKOTA, AND CO-CHAIR, BIPARTISAN 

POLICY CENTER’S COMMISSION ON RETIREMENT SECURITY 

AND PERSONAL SAVINGS 

Mr. CONRAD. Well, thank you, Chairman Cotton, Ranking Member Heitkamp, Senator Kennedy. Good to see you as well, sir. 

Senator KENNEDY. Good to see you, too. 

Mr. CONRAD. Chairman Cotton, if you will permit me just a moment of personal reflection, Senator Heitkamp succeeded me as tax 

commissioner when I came to the United States Senate. She succeeded me in the U.S. Senate when I went into retirement. And I 

am so delighted to see her on that side of the dais. 

And, Senator Cotton, my daughter I think went to college with 

you and tells me that you are very smart. And I have a very smart 

daughter, so when she says that, I listen. 

So thank you very much for this opportunity to talk about retirement security. For the last 2 years, as the Chairman mentioned, 

I have been running a commission, along with Jim Lockhart, now 

the co-chair of Wilbur Ross, who helped run Social Security during 

the Bush administration. We were the co-chairs of this Commission 

on Retirement Security. And the numbers that both of you used are 

exactly what we found. I brought this slide. This is from a Gallup 

poll of last year, and they asked the American people what were 

their biggest financial worries. And number one, was not having 

enough money for retirement. Fully 64 percent of the American 

people said they were worried about not having enough money for 

retirement. The Urban Institute reported to our commission that 

the median retirement assets of the age group 62 to 69 is $30,000. 

We have got a problem. 

Senator Heitkamp, you talked about the Federal Reserve study 

that showed 46 percent of the American people would have a hard 

time coming up with $400 for an emergency car repair. So we have 

got issues, and one of the biggest is access to retirement plans at 

work. Both of you mentioned this in your opening statements, and 

this slide shows the gap between access and participation. Access 

5 

and participation. As you can see, about half the country is participating in a retirement plan at work, but fully half the country is 

not. Thirty-four percent do not have access, 17 percent have access 

but do not contribute. So to me there is a big opportunity here, and 

our commission really fastened on this opportunity. 

Just a word about the commission. Nineteen members, as I indicated, co-chaired by Jim Lockhart, diverse backgrounds, former 

Governors, Senators, Congressmen, Republicans, and Democrats. 

We had thought leaders, business leaders. We had both public 

trustees of Social Security, both the Republican and the Democrat. 

So this was a very diverse commission. 

At the end we had 18 of the 19 agree to the recommendations 

of the commission, so after 2 years of discussion and study, we 

were able to achieve agreement. 

And we had the Chief Actuary of Social Security say if our recommendations were adopted, Social Security would be solvent for 

75 years and beyond. 

The top-line results of our work were this: that if our commission 

recommendations were adopted, we would improve retirement savings by 50 percent for middle-class Americans once all policies are 

phased in; and that implementing those recommendations would 

also reduce old-age poverty by one-third from today’s levels by 

2035. I think those are significant accomplishments. 

We started with this whole question of retirement plans at work, 

and we advocated creating a new vehicle, something we called ‘‘Retirement Security Plans.’’ When we talked to small business, they 

told us, ‘‘Look, we would like to offer plans, but it is too expensive. 

There is too much administrative burden.’’ I come from a smallbusiness family, as Senator Heitkamp knows well, and I found that 

to be absolutely true. The administrative burden for small businesses, the cost, the liability, just prevents them from doing something many of them would like to do. 

So we said let us cut away all the chaff. Let us make it easy for 

companies with up to 500 employees to offer Retirement Security 

Plans by having third parties administer them and take on the financial responsibility. The only thing the employer is asked to do 

is make payroll deductions and transfers. That is the only thing 

they have to do. 

We suggest, after that has been in place for several years, that 

then we would recommend establishing a national minimum coverage standard for all businesses with 50 or more workers. 

Now, this is controversial, and we understood it is controversial, 

asking businesses to take this on. But the finding of the commission—and, again, this is on a totally bipartisan basis—was if we 

are going to simplify it to the point all they have got to do, all the 

employer has to do is make a payroll deduction and transfer, it is 

not unreasonable then to ask businesses with 50 or more employees to offer some kind of plan. They can choose which kind of plan. 

They can choose these retirement plans that we have constructed, 

or they can offer something else. 

We also allowed employers to automatically enroll employees into 

multiple savings accounts so they could save for retirement and 

also have a rainy-day fund, because one of the things we found is— 

kind of surprising to me, frankly, but we found that people are 

6 

saying to us, ‘‘Look, yeah, I have got a retirement fund, but I have 

got to go to that because I do not have any other savings account 

because it is not offered.’’ And you go to the employer and ask why 

it is not offered, and there are all kinds of legal problems constructing multiple accounts. We take away the legal chaff that prevents employers from offering multiple accounts. 

We also incentivized retirement savings for young workers. I will 

just touch on the Saver’s Match, a refundable credit of up to $500 

per individual or $1,000 for a couple, to encourage younger workers, those 18 to 35, with lower wages to start savings. The income 

limit for an individual is $30,000, for a couple it is $60,000. But 

if they put away $1, it is matched up to $500, age 18 to 35, with 

up to $30,000 of income for an individual, $60,000 for a couple. 

We also facilitated the establishment of a Retirement Security 

Clearinghouse to improve portability. Many individuals, when they 

go from job to job—and we are in an economy where people go from 

job to job—they leave accounts behind. In fact, the Government Accountability Office reported that over the course of a decade, 25 

million Americans changed jobs and left at least one account behind. 

Now, for those of you who serve in this body, I can attest to the 

fact that when I left here, I had multiple accounts, and, you know, 

it is hard to put them together. And managing dribs and drabs 

here and there is a challenge. So it makes a lot of sense to create 

these clearinghouse functions to allow people to unite their 

accounts. 

We also encourage plan sponsors in general to integrate easy-touse, sophisticated, lifetime income features. One of the things, if 

you talk to financial advisers, they will tell you is a lot of people 

do a pretty good job in the accumulation phase, but they are really 

flummoxed when it comes to converting those financial assets into 

income. In fact, I was just with a financial adviser in Florida who 

told me he just had a multi-millionaire come to him and say, ‘‘You 

know, I was great at accumulating money. I have no idea how to 

turn it into lifetime income.’’ And this is somebody from one of the 

most prestigious financial firms in America. If anybody does not 

think this is a problem for people, the testimony before our commission indicated it really does create an issue for people. 

We also encouraged plan sponsors to do this through automatic 

purchases of annuities over time, so-called laddering, because as 

you know, the value of annuities is so dependent on interest rates, 

and you do not want to get locked in when interest rates are low. 

So we think to provide an ability to ladder these investments to 

make them over time so you are not taking on too much interest 

risk at any one time makes a great deal of sense. 

Finally, we think it would be wise to accurately reflect retirement tax policy changes in the budget process. As a former Budget 

Committee Chairman, I know how these things look from a scoring 

perspective. Most of the costs of tax-deferred accounts occur within 

the 10-year budget window. The costs of Roth accounts occur outside the 10-year window. So there is a tremendous incentive for 

policymakers to take advantage of that budget window in terms of 

their tax policy. I would just alert colleagues that could lead us 

7 

down a road that we already have serious problems with, and that 

is the budget outlook for the United States. 

Let me just close there and say it is an honor to be joined by a 

professor and a scholar and an author of the repute of Mr. Mead. 

Thank you. 

Chairman COTTON. Thank you. 

Professor Mead. 

STATEMENT OF WALTER RUSSELL MEAD, DISTINGUISHED 

SCHOLAR IN AMERICAN STRATEGY, HUDSON INSTITUTE, 

AND CHACE PROFESSOR OF FOREIGN AFFAIRS, BARD 

COLLEGE 

Mr. MEAD. Well, Chairman Cotton and Ranking Member 

Heitkamp, thank you so much for inviting me here today. It really 

is an honor to be asked to appear at this Subcommittee and a privilege to sit next to Senator Conrad, who is one of the leading lights 

in this whole field in the country and whose commission I think 

has done ground-breaking work that we can all learn from. So 

thank you. 

I would also just like to commend the Members of the Subcommittee for setting an example. This is the kind of issue the 

American people need for their Congress to be working on, and this 

spirit of bipartisan amity and pragmatism that you are bringing to 

this process is an example of the way America can solve its problems. Both of you are people who have roots, deep roots in the lives 

of ordinary America. You do not come from fancy backgrounds. And 

unlike some people who come from Middle America and then go on 

to the fancy lifestyles, you have maintained your commitment to 

the issues that matter to ordinary people. So this is a good place, 

and you are doing good work, and I just want to thank you both 

for that. 

When I look at retirement and the real crisis that we are in, I 

inevitably see this—maybe it is because I am a historian and try 

to think in these terms—in the context of sweeping changes that 

are not just affecting retirement but are affecting every other part 

of our society. And we are now in the middle of, perhaps in the 

early stages of a transformation of human life that is as profound 

and as far-reaching as the Industrial Revolution was. And if you 

think about how the Industrial Revolution in 100 years changed 

the nature of the family, of the state, of religion, of the economy, 

of the way people earned a living, of the ideas that people used to 

understand the world, it really was a revolution. 

We are in the middle of one now, and more to the point, we are 

in the most difficult part of that transition where the old system 

no longer works as well as it used to, but we have not quite figured 

out where the new system is going or how it will work. And many 

of the Americans, I think, today who are coming up to retirement 

without a clear path forward are people who have been caught in 

this transformation. That is, if you went back to the 1950s and 

1960s, most people then thought that defined benefit pensions were 

going to become a universal feature in the workforce. And, in fact, 

starting in the 1970s, for a whole variety of reasons, the change 

went the other direction, and defined benefit pensions began to disappear. And many of the companies that had made these 

8 

commitments went out of business, which created another set of 

problems. 

We then tried to improvise to some degree with programs like 

the 401(k), IRAs, ways of trying to substitute for this system. But, 

clearly, as we look at some of the statistics on lack of availability 

and lack of participation that Senator Conrad has drawn our attention to, the new improvised system was not adequate. And we now 

have a couple of generations of people who have been going 

through life without the kind of solid pension and retirement set 

of policies and institutions that people really need in a society as 

complicated as ours. So I think we have the challenge of helping 

these bridge generations manage the reality that they are approaching retirement with very, very small retirement savings. 

And at the same time, if we talk to Millennials and younger people, there is a sense that the institutions we do have do not work 

very well for them. If you have a part-time job and you work for 

Uber some of the time and you rent out an extra room in your 

apartment on Airbnb, you sort of do all of these things, none of 

that is really connected to a retirement or savings program. 

Our system is focused on the employer as the nexus, because in 

former times these large, stable corporate employers were the 

places where Government could intervene. They in a sense collected taxes for the sake of the Government, and they administered 

benefits and other programs on behalf of the Government. 

Some companies are still able to do that, and still do it very well, 

but in more and more cases, particularly younger workers simply 

do not fall under the umbrella of this kind of system. 

So, without wanting to take more of the Committee’s time, I 

would just like to underline the reality that our retirement system, 

like our entire society, is in a time of upheaval and unpredictable 

change. Yet retirement of all the aspects of a person’s lifecycle is 

the one that is most affected when we are not able to plan long 

term or think long term. So this Committee’s decision to make retirement a focus of its work in this year I think, again, is commendable and vital, and I wish you every possible success in what 

you do. 

Thank you. 

Chairman COTTON. Thank you, Professor Mead. 

In your opening statement as well as your written testimony, 

Professor Mead, you described the shift from the agricultural economic model of the 18th and 19th century, what you call ‘‘the green 

model,’’ into the industrial model, especially the post-war model, 

what you call ‘‘the blue model,’’ and the stresses that model is beginning to see. What happened to stress the blue model, a model 

that seemed to work so well in the immediate post-war period? 

Mr. MEAD. That is a very good question, Senator. 

Chairman COTTON. Would you press your microphone, please? 

Mr. MEAD. That is a good question, Senator. And I think what 

happened was that the nature of the world economy and technology 

began to change so that, you know, before World War II, for many 

years, as the Industrial Revolution was taking place, we did not 

understand, our ancestors did not understand that industrial economy very well. We would have financial panics and crashes, depressions, and people did not feel they had a reading on what caused 

9 

these or how to prevent them. The industrialization created huge 

new problems. In an agrarian society, if there is a banking depression, people simply eat what they grow on the farm. But if you are 

in an industrialized city and there is some kind of banking depression and work ends, you have millions of people with nothing to 

eat, no work to do, no ability to heat their houses. 

By the end, I think, of World War II, at least in this country, we 

had a pretty good sense of how to use the wealth that the industrial economy creates in order to address the problems that it 

causes. We had a system of large national champion firms. We had, 

you know, the three car companies, the big seven oil companies, 

the one phone company. And these pretty heavily regulated monopolies and oligopolies could give—you know, when you had one 

phone company in the United States, they could give somebody a 

job for life. Or when you had only the Big Three auto companies 

making cars for the American market without a lot of competition, 

again, GM, Ford, Chrysler could offer stable opportunity, could 

work with unions. 

So after the 1960s, as Germany and Japan and other countries 

began to recover from the devastation of World War II, you had a 

more competitive economic environment. As the financial system 

escaped the very, very tight, rather unrealistic post-war constraints, and you began to get international banking and offshore 

banking, interest rates became more volatile. In the 1970s, we had 

the oil price shocks; inflation rates went up. A massive inflation 

rate is devastating to a company that is trying to operate a large 

guaranteed benefit pension program. 

So you had all kinds of new stress coming onto the system. In 

order to respond, companies had to become much more nimble, 

much more competitive. They could not say, ‘‘Well, we are not making much off of that factory, but it has really been a part of our 

company for many years, and that city is an important part of who 

we are.’’ They were under much tighter pressure. 

And at the same time, particularly as countries like China and 

Japan came back into the market, you had a competition from lowwage labor. You had automation. You had the development of these 

global assembly chains. And so there was increasing pressure on 

wages and salaries in the United States. The pace of technological 

change increased, so we see today a company like—oh, now I am 

trying to think of them, the video—Blockbuster Video that you 

used to rent the tapes from. It rose and fell in a very short period 

of time. Companies were no longer able to provide lifetime employment. All of this means defined benefit pension plans do not work 

as well and are not offered as widely. 

So the system has come under stress. Wages have come under 

stress. And I suppose we should add that costs in certain areas— 

health care and education—however, continued to go up. So the 

basic needs of a middle-class family are getting more expensive, 

but their ability to buy these goods is not increasing over time. All 

of this stresses the retirement system in many, many ways. 

Chairman COTTON. Can the blue model be resurrected or preserved? Or should we focus on transitioning to what the next model 

will be? 

10 

Mr. MEAD. My own sense is that you could not stop the Industrial Revolution in its tracks, and you cannot stop this transformation in its tracks either. 

I would also say that for all the disruption and pain that the 

transition causes, the Information Revolution, like the Industrial 

Revolution, is going to enrich us. Since we are in the presence of 

a flood, not the presence of a drought, you know, we cannot manage the immense new capabilities. We like to romanticize factory 

jobs today, and I certainly do not want to take anyone’s job away 

or do anything but honor people who work hard. But do we really 

think that in an economy where 38 percent of the population is 

doing repetitive labor on an assembly line 8 hours a day for 40 

years of their life, is that the highest possible use of human creativity? 

So I actually think this transition, which is a difficult transition, 

is one that opens the door to a much better life for people, just as 

in the end the Industrial Revolution, despite all of the commotion 

and upheaval that it caused, brought people to a much higher level 

of living. 

Chairman COTTON. Senator Heitkamp. 

Senator HEITKAMP. Thank you, Mr. Chairman. 

I want to follow-up on all of that. You know, there has been a 

series of reports about automation and about the future of work. 

What does the future of labor look like? One report is saying we 

are going to lose 47 percent of all of our jobs in the next 20 years. 

I do not know if that is an exaggeration. I think sometimes people 

write these reports so you can get a big headline and get more attention to the report. But I will tell you I think things are changing 

dramatically, as the professor has outlined. 

The question is: Without knowing the future of work and the future of labor—and this is for both of you—can we really design a 

retirement plan today that will address these concerns? And how 

nimble do we have to be as we are going through this transition? 

Let us start with you, Senator Conrad. 

Mr. CONRAD. You know, I listened with great interest to Professor Mead’s description of what has happened, and I thought he 

was spot on. If you had to reduce it to a word, I would reduce it 

to ‘‘globalization.’’ But it is really more than that because it is this 

remarkable technological revolution that we are going through. You 

and I have talked about these long-term challenges. What is going 

to happen to all the truck drivers of America when we have selfdriving vehicles? And this is not so far away. What are we going 

to do to a whole series of other jobs that Professor Mead describes, 

repetitive, in some cases back-breaking, difficult jobs that people 

have that are being replaced by technology? 

I do not know if you have seen the video of a new Tesla plant. 

Five minutes, watch what happens there, how few people are involved in the process of building a Tesla automobile. 

So things are changing very rapidly, and it presents us with a 

requirement to change how we envision retirement as well. That is 

one reason we came to this idea of having Retirement Security 

Plans to make it much, much easier for those employers who want 

to offer them, who are small business, because small business is 

11 

going to continue to be one of the chief job creators in our economy, 

make it infinitely easier for them to offer plans. 

I know from a business family, I remember these discussions in 

our own family about offering retirement plans. And people wanted 

to do it, but the administrative hassle and the financial burden 

were just too great. I mean, it was not so much the money that was 

involved. It was the liability that was involved. 

So, look, I think we are going to have to be much fleeter in terms 

of our ability to react to these fundamental changes in the economy, both here and across the globe. 

Senator HEITKAMP. Professor Mead? 

Mr. MEAD. Well, your concerns are spot on, Senator. When I 

think about the jobs of the future, I do say sometimes, you know, 

in the 1850s, when well over 50 percent of the workforce earned 

its living farming, and you had said, well, now, suppose in 100 

years only 2 percent of the workforce will be in farming, the question would be: What on Earth are all those people going to do? And 

no one would have guessed, for example, that there would have 

been a factory that made fuzzy dice that hung down from car windows and that people would be making a living in such a factory. 

So there are ways in which we cannot imagine the future, but 

I can think of things today—we are rich in goods as a society. Any 

ancient king or emperor could only dream of the stuff that even the 

average American family has today; but in services not so much. 

For example, my father lives in a retirement center not far from 

here. Suppose there was somebody there who said to me, ‘‘If you 

will pay me X amount a month, I will make sure your father’s computer is always working, he is always able to use his email. And 

if there is some kind of issue with the printer or something, we will 

be there to help him.’’ There are lots of services. We are seeing 

some of these proliferate. Certainly, when I was a kid, only the 

Rockefellers had wedding planners. You know, now that is a real 

profession, and it enhances the quality of life, and people make a 

pretty good living helping others celebrate these high moments in 

their lives. 

Senator HEITKAMP. If we look at kind of the need to have a much 

more nimble retirement system—I am going to have Craig just put 

up a chart because I love—I do this with high school kids and college kids that I visit with. I say, ‘‘What did Albert Einstein say was 

the greatest invention of the 20th century? Compound interest.’’ 

And so we put together a chart that shows what happens if people invest early and then stop investing compared to people who 

delay that decision to later in life, and what does that result in? 

And you can see that early investment makes all the difference in 

the world if we could just get people to do it, if we could just get 

people to make those investments. 

But as they are struggling in this transition period of time—you 

know, am I going to start my own small business? Am I going to 

augment my salary or the work that I do with Airbnb or with 

Uber? And what does that mean in terms of my retirement and 

what are the economic challenges I have today? And this is the 

challenge that we have as a country because one thing that we 

have not talked about, which is this lack of savings, this lack of retirement security, is not going to go without a cost on the public 

12 

fisc. You know, whether it is earlier involvement of Medicaid dollars for assistance and whether it is food assistance, whether it is 

Section 8 housing, whatever that is, we are going to pay the price 

for the lack of retirement security in this country. 

And so I think what I am grasping with is I do not know what 

the future, 20 years from now, the work world looks like, so it is 

hard to design a retirement system around the workplace. And I 

think, Professor, that is exactly what you are telling us in your testimony, I think. 

Mr. MEAD. That is right. And this is why I was trying to imagine 

this kind of one-stop account where you would set up a specially 

designated account, and if you are working for Uber and you are 

working for Airbnb and so on, this money goes into that account, 

the financial institution does whatever withholding and so on, but 

also it is at that point of that account where the retirement programs can set in, where there can be the point of—you move it 

away from the employer, which is no longer the center of that person’s economic life, and you move it to the person in a sense. 

Senator HEITKAMP. But that person has to be literate. 

Mr. MEAD. Again, when we went from an agrarian society to an 

industrial society, people had to get smarter. It is actually harder 

to live in a city full of immigrants who are different from you than 

to live in the country where everyone is related to you and you 

know all the customs. And our school system actually changed dramatically as a part of this shift. So, yes, as individuals, as a society, we have to raise our game so that we are producing young people who have the financial literacy, entrepreneurial spirit, all of 

these elements that can help them to flourish in this new kind of 

complex environment that is coming into existence around us. 

Chairman COTTON. For the record, I think the Ranking Member 

and I would agree that it is not only easier to live in the country 

but more enjoyable as well. 

[Laughter.] 

Chairman COTTON. Senator Tillis. 

Senator TILLIS. Thank you, Mr. Chair. Thank you both for being 

here. 

First, I want to underscore what has been talked about. I come 

from the technology sector and spent a lot of time, most of my time 

in the private sector, and these discussions about how do we stem 

the tide of technological innovation and make sure that the current 

job base exists really ignores the fact that we work in a globally 

competitive economy, and that is the surefire way to have us go to 

second or third or fourth in terms of economic performance and 

prosperity if we do not recognize that near-peer economies understand it, embrace it, and have to deal with it. And there are unknowns, but every time we have had these unknowns, we have 

found a way to move from the agrarian to the industrial, and we 

will move through the Information Age. The real question with respect to the topic before us today is how do we also help better ensure that people are creating some amount of wealth that help 

them as they get further into their lives. 

I actually made my first contribution into Social Security in 1972 

at the age of 12, $33 that year. One thing for everybody who has 

not done it, you really need to go on the Social Security 

13 

Administration website and see where you are today. And I have 

not missed a year of contribution since then. 

I think a part of what we have to do when we talk about Social 

Security is be realistic about the reality, the lack of indexing and 

the lack of foresight. I am not faulting anybody. It is just the reality of the system today. We do not have a sustainable system. 

And not unlike the defined benefit plans that are out there with 

certain States, our State has a relatively solid—I am from North 

Carolina—a relatively solid plan. But as Speaker of the House, I 

was really urging consideration of transition to a defined contribution plan so that we could make sure that the variables that we 

do not know about would not put those savings plans at risk, and 

I think other States would be well advised to do that. 

And, Senator Heitkamp, I could not agree more in terms of financial literacy. A part of what we have to do is see this multifaceted 

challenge. And one of the things that the States need to do is make 

sure that they have curriculums that are educating people at a 

very early age. We now have financial literacy, something I did 

when I was back in the legislature, in school at the appropriate 

time, and I think the workplace needs financial literacy. I do it in 

my office. We have an annual meeting where I tell these people 

what boneheads they are if they are not maxing out the Thrift Savings Plan that they have. I apologize to all of you who may not 

have maxed out, but it is because of that miracle of compounding. 

My daughter just went into nursing, and I told her, ‘‘You are 

about to get a major increase in compensation from school. Set a 

different baseline for how much disposable income you have, and 

you will see exactly what Senator Heitkamp has said happens over 

a brief period of time.’’ So financial literacy is also important. 

Now I want to get down to some of the policies that could affect—that are right before us. The fiduciary rule probably will get 

delayed, but we need to determine whether or not it is going to be 

implemented. In your opinion, does that help or hurt the people 

who have limited capacity to put into plans and also limited capacity to pay for advice for those plans? Professor Mead, we will start 

with you. 

Mr. MEAD. Well, Senator, thank you, and as someone who spent 

many happy years as a kid in North Carolina, I am glad to see the 

State is so well represented, and it is a time when all true North 

Carolinians are very excited about the recent NCAA championship. 

Senator TILLIS. Really, did we win a championship this week? 

[Laughter.] 

Senator TILLIS. It happens so frequently, it is hard to keep up. 

Mr. MEAD. But, you know, when I think about this, I actually 

think that one of the problems we have in a way is that the current 

system, people have scattered plans, small balances. There the 

costs sometimes of the fiduciary rule would make it very difficult 

for them to operate, the cost structure would be so high. 

Senator TILLIS. They would have an ‘‘eeny, meeny, miny, moe’’ 

strategy for portfolio allocation. 

Mr. MEAD. You know, the thing to think about is, again, the lifetime accounts that build significant balances where also both for 

the financial institution that is issuing the account and maintaining it, it is a more profitable approach. 

14 

Senator TILLIS. I do believe that going to a worker-centric versus 

workplace-centric model where things can move around makes a lot 

of sense. It has a lot more prospects for longevity. 

As a matter of fact, I chair the Personnel Committee in Senate 

Armed Services, and that is why we are moving toward different 

pension options within Armed Services, allowing those who want 

the pension plan as it currently stands to move in that direction, 

but allowing others to be able to opt in to a 401(k) type of a model 

that I think makes sense. 

My time has gone over, but, Senator Conrad, do you have anything to add on the fiduciary rule or what has been discussed? 

Mr. CONRAD. Well, let me just say our Commission did not deal 

with the fiduciary rule. I would say personally I would not go to 

a company advising me on wealth management that did not have 

it because I think whoever is advising me ought to have as their 

highest responsibility to be giving me advice that is in my interest. 

And I am very concerned about people giving advice that is in their 

interest and it is not revealed to the person they are giving advice 

to. 

Now, with that said, Professor Mead makes a very important distinction here. You have got lots of people, as I indicated in my 

opening remarks, who have very little money. In fact, you know, 

when I talk about people with $30,000, 62 to 69, as being the median retirement savings, one-quarter of those people have nothing. 

Have nothing. So we may need a system that takes account of people’s different circumstances in terms of what rules apply. 

Senator TILLIS. Thank you. 

Thank you, Mr. Chair. 

Chairman COTTON. Senator Warren. 

Senator WARREN. Thank you, Mr. Chairman. Thank you for holding this hearing today, and Ranking Member Heitkamp. 

As we have all been discussing, we know there is a retirement 

crisis in this country, that across the board wages are flat, fixed 

costs are going up, people cannot save for retirement, pensions are 

disappearing, and that means more reliance than ever on Social Security. For almost two-thirds of seniors, Social Security makes up 

the majority of their income in retirement, and for 22 million 

Americans, Social Security is literally the only thing standing between them and poverty. 

When a parent dies or is incapacitated, grandparents often step 

up, and this can create a huge additional burden on the family for 

people who are already struggling because of the financial crisis. In 

these cases, Social Security is a double lifeline for both the grandparents and for the kids. Today about 98 percent of children in 

America are eligible for survivors’ benefits when a working parent 

dies. 

So I want to ask you about this, Senator Conrad. You are the 

principal author of the Bipartisan Policy Center’s report on retirement security, and in the report, you propose several expansions of 

Social Security for low-income seniors. But you also propose expanding Social Security survivors’ benefits, something not many 

people have talked about from this report. Can you tell us a little 

bit about the survivors’ program—how it currently works and what 

your proposed expansion would entail? 

15 

Mr. CONRAD. Well, if we remember our history, until 1981 we 

had a survivors’ benefit in Social Security for kids who stayed in 

college until they were 22. If they were in an approved college, they 

would continue to get benefits. This also applied to those who 

qualified for disability. And this made a major difference to thousands, tens of thousands of kids who were survivors, tens of thousands of people who had a disability, that they were able, if they 

stayed in school, to get an additional Social Security income. However modest it was, it made a big difference. 

In the work of this commission, we agreed on a bipartisan 

basis—and, again, 18 of the 19 commissioners agreed with the recommendations—that we ought to reestablish this benefit for survivors and those affected by disability. 

You know, if we think about the transition Professor Mead has 

been talking about, quite rightly, others from the dais, we are 

going through this dramatic economic change. We have got to be 

sensitive to that. And, you know, I think about when we were 

growing up, high school was a minimum requirement. Right? If you 

did not graduate from high school, your prospects probably were 

not very good. I have to say now we look at society, if you do not 

have a college education, your prospects are not very good. In fact, 

I have just been talking to some young people who did not finish 

college. They cannot get a job interview, even for things they are 

actually qualified for, because they do not have that certificate. So 

I think this is something we have got to adjust to. 

Senator WARREN. I very much appreciate that, and I want to be 

mindful of the time, but I understand, Senator Conrad, you were 

actually a beneficiary of this program? 

Mr. CONRAD. Well, I was. And, you know, when I was going to 

school, I remember getting that check, and I tell you, it made a 

world of difference. I was going to school out in California, and I 

remember very distinctly that green check that would arrive once 

a month and really made it possible for me to be in college and 

complete school. 

Senator WARREN. And you think about overcoming the loss of a 

parent is devastating for any child, but loss of the income and savings should not also destroy a family’s financial security and a 

child’s chance to go to college. 

This is a problem that is going to get worse in the years to come. 

Last year, for the first time since 1993, life expectancy in America 

decreased. And there are a number of reasons for that, but one is 

that tens of thousands of Americans are dying of opioid overdoses 

every year. And many of the victims of these overdoses leave children behind, and often grandparents are the ones who step in to 

help. 

So let me just ask one more question here. Senator Conrad, it 

seems to me that given this decline in life expectancy and the increase in deaths from opioid overdoses, shoring up the survivors’ 

program may be more important than ever. Do you agree? 

Mr. CONRAD. Well, I do, and I made that argument to the commission, and others on the commission made some of the points 

that you are making now. It was very interesting. And, again, one 

of the things that was most interesting was how bipartisan this 

particular discussion was in the commission. Some of the most 

16 

prominent Republicans on the commission felt strongly we ought to 

restore this benefit. And I was very pleased that we agreed to do 

so. 

Senator WARREN. I am pleased that you did as well and glad to 

try to highlight your good work on this. My view is we should be 

talking about expanding Social Security across the board. But we 

also ought to be able to agree that it is long past time to expand 

survivors’ benefits to age 22. Children who have lost their parents 

need to have a chance to be able to build a future for themselves 

without destroying the finances of their surviving parent or of their 

grandparents and others who step in to take care of them. 

So thank you very much for your work. Thank you for the report 

on this, and thank you, Mr. Chairman. 

Chairman COTTON. Thank you, Senator Warren. 

Senator Conrad, how many workers today participate in a defined benefit plan? Do you have that handy? 

Mr. CONRAD. I do not. We all know what is happening to defined 

benefit plans. I mean, in large measure, what we see is a decline 

in defined benefit, a dramatic rise in defined contribution. I have 

actually got that chart—did not bring it with me—but would be 

happy to provide it to the Committee. But these trends are very, 

very clear. 

Chairman COTTON. So do you think there is anything that we 

can do as a matter of policy to reverse that trend, or is it a function 

of changes in the economy like we have been discussing with you 

and Professor Mead and we simply need to make defined contribution plans work better for all Americans? 

Mr. CONRAD. I wish I could look you in the eye and say, you 

know, if we just had the will, we could reverse this, and we could 

go back to a time when defined benefit plans were on the increase. 

I do not think that is in the cards. I think because of the things 

we have previously discussed, these fundamental changes in the 

economy here and globally, that it is just not a realistic prospect. 

What is realistic is to deal with these changes in a way that does 

expand access, that does expand the opportunity for people to participate in a retirement plan at work. What is a possibility, as we 

were talking about Social Security, is to make Social Security solvent for the long term. And, yes, we can have some expansions 

while we do that, but it will require hard choices. 

Chairman COTTON. Professor Mead, do you agree with that, that 

defined benefit plans are going to continue to decline in their usage 

in America? 

Mr. MEAD. I think they will, and this is in part because of the 

choices that workers are making. That is, one of the disadvantages 

of a defined benefit plan is often it is stacked in such a way that 

it strongly rewards seniority and longevity of service. So, you know, 

one of the tragic things for someone who has been working for 18 

years and is 2 years short of a pension, if that factory closes, they 

suffer an immense loss. 

But, also, let us look at the part of the economy where defined 

contribution plans are still common, which would be Government 

work, and especially in the State and local sectors. We see, first of 

all, in many States and cities these plans are in a state of real financial disrepair and are causing serious risks to the well-being of 

17 

communities. I think the city of Chicago is trying to keep its 

schools open while it pays what it needs to pay on its pension plan. 

And at the same time, if you are a public employee and you want 

after 10 years—you do not want to teach middle school anymore 

after 10 years, and you want to move on, you take a hit in the pension with a defined benefit program. So it locks people into life 

choices. 

Now, the good thing about defined benefit programs is they did 

provide a certain kind of security and stability to income. And as 

I say, we have failed as a society to replace the defined benefit program with defined contribution programs that accomplish the same 

objectives as well. And so our focus has to be, I think, on making 

defined contribution plans work better, make it easier for employers to offer them, find ways even perhaps for the case, say, of lowincome workers, a Government match of some kind of contribution 

can also be possible. Again, thanks the miracle of compound interest, if the Government is going to have to support a low-income 

person in old age, it is actually better to do that on the basis of 

long-term contributions to retirement plans. It is cheaper to the 

taxpayer that way. 

Mr. CONRAD. Can I just make a quick point—— 

Chairman COTTON. Senator Conrad. 

Mr. CONRAD.——on the point that Mr. Mead made? Because I 

think it is so important. On defined benefit plans, if you look at the 

chart that I discussed looking at defined benefit in terms of firms 

offering, that is in decline. You know, at one point it was growing 

rapidly back in the 1950s. Defined contributions now are rising 

dramatically. But if you look at defined benefit plans in terms of 

individuals covered, you see a very different pattern between firms 

offering and individuals covered, because what Professor Mead just 

talked about was a very real thing that we have not sort of talked 

enough about; that is, yes, companies offered them, but all too 

often, when somebody got to the point of being qualified, they lost 

their job. 

And so there is a gap between firms offering and individuals covered with respect to defined benefit plans, and that was true long 

before these recent trends. 

Chairman COTTON. You both, as you talk about what future retirement models would look like, have proposals in your written 

statements, but also you have said it today, Senator Conrad, you 

have talked about Retirement Security Plans which would have 

two elements: one, retirement savings, and, two, short-term savings, especially for smaller businesses. And, Professor Mead, you 

have spoken about American Mobility Accounts, which would also 

include what you call Supplemental Retirement Accounts and 

Human Capital Accounts. As you have listened to each other here 

today, do those two concepts strike you as similar or close to 

identical? 

Mr. MEAD. I think we are both looking at the same sets of problems, and there is a lot of parallels in the way we are thinking. I 

think both sets of proposals are identifying the need to move toward a more worker-centered approach. I would guess we have not 

discussed it, but I think we are both concerned that there is kind 

of a multiplicity of 401(k), four-oh this, five-oh that. After a while, 

18 

the average not only, you know, person but the average supervisor, 

the average business just looks at this and says, ‘‘I cannot do this. 

This is too complicated.’’ 

So the issues that we are looking at are universality, flexibility, 

and individual-centric. Then I think, again, given, as we have all 

been saying in this hearing, that we cannot really predict what the 

economy of 20 years will look like, what jobs will look like in 20 

years, we need an architecture that is open to change because we 

do not want to put the next generation in a straitjacket that does 

not fit. And I think when you put all those things together, you end 

up with—there is actually not that wide of a range of approaches 

that would cover these bases. 

Chairman COTTON. Go ahead, Senator. 

Mr. CONRAD. I would just say our Retirement Security Plans and 

our Retirement Security Clearinghouses are responding to the underlying dynamic that Professor Mead has done such a good job in 

describing. You know, we got a circumstance in which people just 

do not go to the same job for most of their careers and have a pension. Those days are changing, and we need to respond to this new 

dynamic, this new reality. 

Chairman COTTON. And you both have spoken about the administrative challenges that multiple accounts can cause, especially 

small accounts of different types, and you are speaking there not 

only of the individual who is trying to save but also of the business 

that is trying to sell cars or sell farm equipment or sell clothing, 

and it is not in its core competency, and your concept in these accounts would be to get that out of the hands of those businesses 

and into some kind of third-party organization, whether it is a financial institution or an administrator, somewhere where it is in 

their core competency to manage those accounts. 

Mr. CONRAD. I think you have described it very well. You know, 

here we have a circumstance where we have got 25 million orphaned accounts. You know, what sense does this make? It does 

not make any sense for the business who has got the orphaned accounts. It does not make any sense for the employee who has got 

maybe a string of orphaned accounts, which makes it very hard to 

manage, very hard to keep track of. In some cases, they completely 

forget that they have got them. I mean, we found that in the work 

of the commission. 

Chairman COTTON. Senator Heitkamp? 

Senator HEITKAMP. I think the component of all this—and it is 

like you can lead a horse to water, but can you get it to drink? And 

there are a couple complexities that we have not talked about, one 

of which is choice. There has been a number of sociological studies 

that say if you give people too many choices, they will make no 

choice because it is overwhelming. 

The other problem that I think is that we keep saying, well, if 

this account or this, you know, opportunity performs the way it has 

in the past, this is where you will end up, and there is no certainty 

to that. So there is not this idea that if I do this, then I am guaranteed that that is what it is going to look like when I am age 65 

or age 70, right? 

19 

So people have this insecurity, and they say, ‘‘Live today. I probably will not live long enough,’’ or, you know, ‘‘I am not going to 

ever retire,’’ which really is very problematic. 

And so I want to talk about another vehicle that we have not 

spent a lot of time talking about and get your reaction to it, and 

that is low-cost guaranteed annuities. When we look at the defined 

benefit plans, it is that you knew that at the end of your work life 

there would be a guaranteed set sum that would come every 

month, that you could count on, that was predictable, that was 

taken care of. And my question to both of you is: Do you believe 

that annuities—not annuities with big front-end loads—you know, 

a product that reflects Senator Conrad’s statement that it should 

be fiduciary to them, it should be for me, do you believe that annuities can fill the gap for retirees looking to access some kind of 

guaranteed minimum income in the years going forward. 

Mr. CONRAD. I would just say in this whole area of lifetime income options, there is a tremendous opportunity here, and there 

are lots of models. If you look around the world at what other 

places are doing, lots of interesting ideas about how you can give 

people lifetime income options and give them a choice to make. You 

know, we talk about just-in-time choices. When people are about to 

make those decisions, to get advice to them at the critical moment 

that they have a decision to make. We talk about capability. We 

talk about people having the basic information. Well, hard to get 

them taught in high school to prepare for what is to come 30 years 

from now. But when they are at the moment of choice, getting 

them help in making those decisions makes a lot of sense and is 

affordable. 

Senator HEITKAMP. But, Senator Conrad, if we look at—if your 

choice is, you know, here is this high-yield fund, it has got more 

risk, or this or that, you know, all of a sudden people go, ‘‘I do not 

know enough to make that choice. I am not going to decide that. 

I would rather have that money today to pay off the bills that I 

have rather than risking that that will not ever come in the future.’’ 

Professor Mead, what do you think about some kind of product 

that would guarantee monthly income at a low cost? 

Mr. MEAD. Well, I think that it has a place in retirement planning, and I think you are right that simplifying options is important. 

I think there are other elements of this sort of, you know, hesitation about saving and investing, and I agree with you that this 

is an important barrier, because we see that there are these products that people are not—you know, there are plans that they are 

not participating in, even though they have the option. 

One thing that I think is worth looking at is the Singapore approach to this where there is an account which you can use—you 

know, it is sort of you have to have an account, but you can use 

it for different things, including some are really annuity-type products. But you can also use it toward a downpayment or even part 

of the principal payment of housing. 

Senator HEITKAMP. So, Professor Mead, is this structured as a 

mandate or is this structured as an option in Singapore? 

20 

Mr. MEAD. In Singapore, it is a mandate that you must have 

this—— 

Senator HEITKAMP. Like everything else in Singapore. 

Mr. MEAD. Exactly. And you must smile, yes. 

[Laughter.] 

Senator HEITKAMP. And not spit on the sidewalk. 

Mr. MEAD. Please do not. Do not scratch cars with keys either, 

I am told. 

But, you know, they have a homeownership rate now of about 90 

percent in Singapore because if you can—you have to put this 

money away, but you can put it in different purposes. People do 

have some freedom. So this is—— 

Senator HEITKAMP. So it would include things that build wealth 

for the family. 

Mr. MEAD. Exactly, and so the system is you have to maintain 

a certain balance in your account before you can do certain discretionary things, but you can count property value against that core 

amount. 

So I think we can actually be—we can think much more flexibly 

about what we do. We are fortunate now. When the United States 

started Social Security, there were some similar examples, but it 

was a pretty simple menu of choices that existed. Today a number 

of countries around the world have tried very different approaches. 

So I think we might as well benefit from the experience. 

Senator HEITKAMP. I just want to say I think this is something 

that everybody needs—to check ideology at the door, you know, all 

of this stuff, and look with very clear vision at what is going to 

happen in the next 20 years as we transition away from defined 

benefit plans to a society that is not saving for retirement, and we 

need to look at what works, not what fits within an ideology. And 

that is a critical component. But we need to understand the human 

dynamic of choice and why it is difficult for people to see value in 

making a choice of saving for retirement. 

But I look forward to learning more about the Singapore plan 

and more about your reaction to Senator Conrad’s report. I think 

it sounds like there is some merging of ideas here, and then how 

can we effectuate that either working with the private sector to develop products or looking at—we do it typically through tax incentives, but also taking a look at how we can make this a social norm 

that we are saving for retirement and not necessarily an anomaly, 

which we are beginning to see that it is. 

Chairman COTTON. Senator Toomey. 

Senator TOOMEY. Mr. Chairman, Senator Heitkamp, thank you 

very much for doing this hearing. I appreciate it. 

Senator Conrad, it is good to see you again, and, Professor Mead, 

thank you for joining us. 

I apologize I was late. I was the presiding officer. I am not going 

to ask any questions at this time, but I do look forward to reading 

the testimony of the witnesses and looking at the discussion that 

you had. 

Chairman COTTON. Thank you, Senator Toomey. 

And he replaced me, which is why I was late initially to the Committee. I was the presiding officer. As Senator Conrad remembers 

21 

from his days as a junior Senator, it is very much a duty and not 

an honor. 

[Laughter.] 

Chairman COTTON. Professor Mead, we talked a lot about a lifetime of savings and how Americans save because it is so important, 

as Senator Heitkamp pointed out, that you save from the beginning 

of your life, even small amounts, to take advantage of the miracles 

of compound interest. 

But then there is how you live at or near retirement. One point 

you have written about is the payroll tax on elderly Americans who 

are still working. Could you elaborate on your thinking there? 

Mr. MEAD. Well, I think, again, work is becoming, you know— 

more and more of our workforce have jobs now that you do not 

really need to leave at 65, and many people do not want to. The 

work I do teaching is work I enjoy. And while I am able to, I hope 

I can continue. But if I were a bricklayer or, you know, doing hard 

physical labor, I would need to be able to retire at a certain point. 

So as we think about how our system works and how we can 

make the system work for everyone, it does seem that, first of all, 

it is in our interest that people defer taking out of the system. 

Those who enjoy working and want to work continue to work and 

are able to do so, we should say, yes, go ahead. We do not need 

a one-size-fits-all approach to this. So if you have someone who has 

paid up to Social Security and they want to continue working, 

maybe you take the payroll tax off their shoulders at the end. In 

the same way, I have suggested we now require mandatory withdrawals from IRAs and other tax-deferred investments to start, I 

believe, at 70 1⁄2 years, why not, if someone is still working, let 

them postpone that, let their assets grow a bit? 

So I think there are very much—we penalize people who are continuing to work while drawing Social Security benefits by withholding some of their benefit. Again, we should be looking at a system that allows Americans in very different circumstances with 

very different sort of needs to be able to design their own lives 

without penalty, and where their choices actually help strengthen 

the system, we should be blessing and encouraging and 

incentivizing those choices. 

Chairman COTTON. Senator Conrad? 

Mr. CONRAD. Could I just say, I am very happy to hear Professor 

Mead talk about these ideas. We tried to include some of these 

ideas in our Social Security reform package, to actually provide incentives in the system for people to continue to work. You know, 

the way the Social Security system works now, once you get your 

PIA, the primary insurance amount, established, it is done by looking at 40 years or 37 years of work—35 years of work, what we say 

is do it year by year, so those additional years add to somebody’s 

Social Security payment. 

We did a whole series of things in our Social Security reform not 

to discourage people from working, but to encourage them to continue working if they are able to do so. That makes great economic 

sense for the system. It makes great economic sense for the individual. 

Chairman COTTON. Professor Mead, one final question about living in retirement. You wrote in your statement and you have 

22 

written elsewhere about the possibility of retirement overseas and 

the lower-cost options that some Americans who are looking for 

warmer climes might have. Could you elaborate on those ideas? 

Mr. MEAD. I am happy to do that, Senator. We should remember 

that no matter what we do, there are Americans who are 

approaching retirement with inadequate savings, and we cannot 

change that, much as we would like to. 

What I think we can do is think about ways where even—we 

could help them stretch their dollars a bit, and it is certainly true 

that in many countries living costs are lower than in the United 

States. Originally, one of the reasons that many people retired to 

States like Florida and Arizona was that costs were lower there 

than they were in the States where they were. So today someone 

could just stay on the plane a couple of hours south of Miami and 

retire there. 

One of the obstacles to this—and, by the way, many Americans 

are already doing this in countries like Costa Rica. Also, many immigrants who come here, work hard, retire basically with Social Security, can go back to the country where they came from where 

that retirement income stretches farther. But one of the problems 

is that you cannot use your Medicare insurance for most things 

outside the United States. 

Now, since healthcare costs are often much lower outside the 

United States than in it, some kind of system that allows American 

citizens to access their Medicare benefits for treatment in approved 

hospitals and facilities overseas would simply give a lot more 

Americans more choice in retirement and might provide some options that would help these bridge generations who have grown up 

after the old system began to fail but before we as a society have 

gotten a new system that works for them, they still have choices. 

No one has to do it. I suppose it is the opposite of what people used 

to say happened in the far North, that you would put the old folks 

out on the ice floes. Maybe we can send the old folks to tropical 

beaches. That seems a bit more humane. 

But, in any case, I think this is about—we need to think creatively about giving people choices as they try to have a good retirement when not all the circumstances are favorable. 

Mr. CONRAD. Mr. Chairman, could I just say that we would welcome people from higher-cost jurisdictions to retire in North 

Dakota? 

[Laughter.] 

Mr. CONRAD. Perhaps you would welcome them in Arkansas as 

well. You know, it is amazing, the difference in cost between these 

more urban areas and the more rural areas that we have grown 

up in, and, really, a Social Security dollar goes a lot farther in 

North Dakota than in the more urban places on the east and west 

coasts. I am sure that is true of your home State as well. 

Chairman COTTON. Given the realities of the brutal winters in 

North Dakota, we would be happy to welcome North Dakotans who 

do not want to go all the way to Costa Rica to the Ozark or 

Ouachita Mountains. It is very affordable. 

Senator HEITKAMP. And then when the mosquitoes get you in Arkansas, we will welcome you back to North Dakota. 

[Laughter.] 

23 

Chairman COTTON. Senator Heitkamp. 

Senator HEITKAMP. I want to just ask a question. You guys have 

just been—you know, just thought-provoking testimony and really 

quite an enjoyable hour and a half. I think both Senator Cotton 

and I are deadly serious about this topic. 

I want just a couple of pieces of advice from both of you on if you 

were sitting not where you are sitting but sitting back on this side 

of the dais. What would be your next steps? And we will start with 

you, Senator Conrad. 

Mr. CONRAD. Well, organize and educate are always my two notions of how you get something done around here. I think there is 

just a tremendous opportunity here, and I really applaud the two 

of you for doing this in a bipartisan way, because as I learned, very 

little happens around here unless it is done in a bipartisan way. 

Even less is sustainable unless it is done in a bipartisan way. And 

these are issues that really should not be partisan. There is no reason that it should be partisan to expand opportunities for people 

to participate in retirement plans at work. There is no reason that 

it should be partisan to change the incentive systems that we have 

in Social Security to encourage people to work longer. You know, 

there is nothing partisan about it. 

So I would say those would be my observations. 

Senator HEITKAMP. Professor Mead? 

Mr. MEAD. Well, I would second that, and I would add to it. I 

would try to remind my colleagues, if I were in your situation, that 

we see a lot of lack of trust today between so-called elites and the 

folks in the grass roots. One of the reasons that that is the case 

is because of the failures of national systems like the retirement 

system. People do not expect the Government to guarantee them 

affluence, but they do expect to have a system that, if they play by 

the rules and do their part, it brings them to a decent result. And 

the sense that somehow something as fundamentally important to 

the lives of the American people as our retirement system, we have 

not yet put the kind of effort and diligence into constructing and 

repairing that system, is a message from Washington to the folks 

out there that we do not care. 

So I would urge you to impress the importance of this issue on 

your colleagues as a concrete kind of governance issue that can 

help rebuild the faith of the American people in our democratic system, and that is really something that we need to do. 

Senator HEITKAMP. OK. 

Chairman COTTON. Gentlemen, thank you both for your appearance here today and your work on this important issue. Thank you 

both to your organizations and your teams. We appreciate the hard 

work they do. We know that those statements do not write themselves, and the spread sheet models are not created by themselves. 

So we appreciate very much also the Bipartisan Policy Center, the 

Hudson Institute, and the American Interest. We thank you again 

for your testimony. 

This hearing is adjourned. 

[Whereupon, at 4:31 p.m., the hearing was adjourned.] 

[Prepared statements and additional material supplied for the 

record follow:] 

24 

1The Urban Institute. 2016. DYNASIM3. 

2 VanDerhei, Jack. 2014. ‘‘What Causes EBRI Retirement Readiness Ratings to Vary: Results 

from the 2014 Retirement Security Projection Model.’’ Employee Benefit Research Institute 

Issue Brief, no. 396. Pp. 6–19. http://www.ebri.org/pdf/briefspdf/EBRIlIBl396lFeb14. 

RRRs2.pdf. 3 EBRI, Policy Forum #79. Basic Facts: Retirement, December 15, 2016. 4McCarthy, Justin. 2016. ‘‘Americans’ Financial Worries Edge Up in 2016.’’ Gallup. http:// 

www.gallup.com/poll/191174/americans-financial-worriesedge-2016.aspx. 5Federal Reserve. ‘‘Report on the Economic Well-Being of U.S. Households in 2015.’’ May 

2016. P. 1. http://www.federalreserve.gov/2015-report-economic-well-being-us-households-201 

605.pdf. 6The Pew Charitable Trusts. ‘‘Small Business Views on retirement Savings Plans.’’ January 

2017. http://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2017/01/small-business 

-views-on-retirement-savings-plans. 

PREPARED STATEMENT OF KENT CONRAD 

FORMER SENATOR FROM THE STATE OF NORTH DAKOTA, AND CO-CHAIR, BIPARTISAN

POLICY CENTER’S COMMISSION ON RETIREMENT SECURITY AND PERSONAL SAVINGS

APRIL 5, 2017 

Good afternoon, Chairman Cotton, Ranking Member Heitkamp, and Members of 

the Subcommittee. Thank you for inviting me here to discuss the state of retirement 

security in America. 

Millions of Americans are financially unprepared for their retirement. Too many 

lack adequate savings, having set aside money at insufficient levels. Even those who 

do accumulate sufficient savings for retirement run the risk of outliving those funds, 

and others are forced to raid their retirement accounts early due to a shortage of 

short-term, emergency savings. Compounding these challenges is the fact that 

Americans often lack the financial capability to take actions that are in their own 

best interests. Meanwhile, the Social Security system—the bedrock of retirement security in America—is facing a serious shortfall, with its trust funds set to be exhausted by 2035. 

The lack of retirement savings is eye-opening. According to research from the 

Urban Institute’s DYNASIM model, the median amount of retirement assets held 

by Americans aged 62–69 stood at just $32,000 in 2015. More than one-quarter of 

households in this group had zero in retirement savings.1 But this problem is not 

limited to older Americans. Research from the Employee Benefits Research Institute 

(EBRI) has found that more than four in 10 Gen-Xers are projected to run short 

of money in retirement.2

Part of this problem can be attributed to a lack of access and contributions to employer-sponsored retirement plans. Modeling from EBRI has found that 31 percent 

of civilian workers lack access to an employer-sponsored retirement plan. Among 

those with access, many choose not to contribute. In total, just over half of civilian 

workers contribute to an employer sponsored-plan.3

Given these disturbing statistics, it is little wonder that Americans are concerned 

about their retirement. A 2016 Gallup poll found that 64 percent of Americans are 

either very worried or moderately worried about not having enough money for retirement, making it their top financial concern in the survey.4 A recent study by 

the Federal Reserve found that around half of adults say they would be unable to 

come up with even $400 in an emergency without borrowing or selling possessions.5

The Bipartisan Policy Center’s Commission on Retirement Security and Personal 

Savings, which I had the privilege of co-chairing with the Honorable James B. 

Lockhart III, former Principal Deputy Commissioner of the Social Security Administration, identified six key challenges associated with retirement security in America 

today: 

1) Too few workers participate in a workplace retirement savings plan. 

As described previously, just around half of private-sector workers contribute 

to an employer-sponsored retirement plan. One primary cause of this lack of 

access is that some businesses find it too expensive and complex to sponsor either a traditional ‘‘defined benefit’’ pension or a 401(k)-style ‘‘defined contribution’’ plan. Small businesses, in particular, are often unprepared to take on 

what can be large administrative, financial, and fiduciary burdens. In a recent 

survey by the Pew Charitable Trusts, 59 percent of small- to medium-sized 

businesses not offering a plan attributed that decision to either the associated 

expense or the firm’s resource constraints.6 As a consequence, 53 percent of 

workers at businesses with fewer than 50 employees do not have access to a 

plan, compared to only 10 percent among companies with more than 500 employees. Simply put, workers without these plans are less likely to enjoy 

25 

7This result is for Gen-Xers (born between 1965 and 1974) who are in the second income 

quartile (i.e., between the 25th percentile and the median of the income distribution). For more 

information, please refer to: VanDerhei, Jack. ‘‘What Causes EBRI Retirement Readiness Ratings to Vary.’’ Employee Benefits Research Institute. Issue Brief #396. February 2014. P. 7. 

https://www.ebri.org/pdf/briefspdf/EBRIlIBl396lFeb14.RRRs2.pdf. 8Munnell, Alicia and Anthony Webb. 2015. ‘‘The Impact of Leakages From 401(k)s and IRAs.’’ 

The Center for Retirement Research at Boston College. P. 1. http://crr.bc.edu/wp-content/ 

uploads/2015/02/wpl2015-2.pdf. 9 Butrica, Barbara A., Sheila R. Zedlewski, and Philip Issa. 2010. ‘‘Understanding Early Withdrawals from Retirement Accounts.’’ The Urban Institute. P. 23. http://www.urban.org/sites/ 

default/files/alfresco/publication-pdfs/412107-Understanding-Early-Withdrawals-from-Retirement-Accounts.pdf. 10 Ibid. 11 Argento, Robert, Victoria Bryant, and John Sabelhaus. 2015. ‘‘Early Withdrawals from Retirement Accounts During the Great Recession.’’ Contemporary Economic Policy. Vol. 33. No. 1. 

(January). P. 14. http://onlinelibrary.wiley.com/doi/10.1111/coep.12064/epdf. 12Munnell, Alicia H. 2015. ‘‘The Average Retirement Age—An Update. Center for Retirement 

Research at Boston College.’’ Pp. 3–4. http://crr.bc.edu/briefs/the-average-retirement-age-an-update/. 13Social Security Administration. 2015. Annual Statistical Supplement, 2015. Table 6. B5.1. 

https://www.ssa.gov/policy/docs/statcomps/supplement/2015/6b.html. 14See, Board of Governors of the Federal Reserve System. Financial Accounts of the United 

States: Fourth Quarter 2016. P. 138. March 9, 2017. http://www.federalreserve.gov/releases/z1/ 

Current/z1.pdf. Home equity is equal to total household real estate less total home mortgages, 

as calculated by the Board of Governors of the Federal Reserve System. 15See, Investment Company Institute. 2016. Report: The U.S. Retirement Market, Fourth 

Quarter 2016 (xls). Table 1. March 22, 2017. https://www.ici.org/research/stats/retirement. Retirement savings include assets in DC plans and IRAs. 

retirement security. According to projections from EBRI, 56 percent of those 

without ongoing access to a DC retirement plan will run short of money in retirement.7

2) Many Americans lack the income or resources to save for short-term 

needs, forcing them to raid their retirement accounts for unexpected 

expenses. Usually called ‘‘leakage,’’ preretirement withdrawals occur when 

savers withdraw their DC plan or IRA assets before retirement. Research suggests that between 1 and 1.5 percent of 401(k)-plan and IRA assets are lost 

to leakage each year.8,9 Individuals who pull savings out early tend to withdraw a high percentage of their retirement assets, averaging around 20 percent.10,11 Leakage can not only lead to high fees and penalties, but it also directly translates to a reduction in retirement assets. 

3) Americans are living longer and are increasingly at risk of outliving 

their savings, but despite rising life expectancy, the average retirement age 

has stagnated. Between 1962 and 1996, the average retirement age among 

men actually declined from 65 to 63. Though the average retirement age increased for women—along with workforce participation—it remains relatively 

low, at 62 in 2013.12 To make matters worse, most Social Security beneficiaries 

claim their benefits well before the full retirement age (FRA). In 2014, roughly 

three-fourths of individuals claiming Old-Age and Survivors Insurance (OASI) 

benefits did so at an age below the FRA.13 Early claimers in 2016 saw their 

monthly payment reduced by up to 25 percent from what it would have been 

if they claimed at the current FRA of 66. A diminished stream of income from 

Social Security compounds the problem of having fewer years in the workforce 

to save for retirement. This is especially concerning for the large number of 

older Americans who depend on Social Security for the overwhelming majority 

of their income. 

4) Home equity is an under-utilized source of retirement savings. For 

many retirees, home equity represents a significant portion of their assets. 

Americans own more than $13.3 trillion in home equity—a sum that rivals the 

$14.9 trillion that Americans hold in retirement savings.14,15 Just like retirement savings, housing assets are built slowly over most people’s working life, 

making home equity a crucial stock of wealth for many older Americans. Unfortunately, the past several decades have seen increasing indebtedness among 

older Americans—driven by increases in mortgage debt—which poses a unique 

threat to retirement security. The share of older households holding any form 

of housing-related debt has more than doubled since 1989, from 15 to 32 

26 

16 Board of Governors of the Federal Reserve System. 2014. 2013 Survey of Consumer Finances. http://www.federalreserve.gov/econresdata/scf/scfindex.htm. Housing-related debt is 

defined as debt secured by one’s primary residence. 17Mottola, Gary R. 2014. ‘‘The Financial Capability of Young Adults—A Generational View.’’ 

FINRA Investor Education Foundation. http://www.usfinancialcapability.org/downloads/ 

FinancialCapabilityofYoungAdults.pdf. 18The Congressional Budget Office expects the OASI Trust Fund to be exhausted in 2029— 

six years sooner than the projection of the trustees. 19 Committee on Ways and Means. 2016. ‘‘The 2016 Annual Report of the Board of Trustees 

of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds.’’ 

U.S. House of Representatives. 114th Congress. H. Rep. 114–145, P. 6. https://www.ssa.gov/ 

OACT/TR/2016/tr2016.pdf. 

percent.16 Federal tax policy worsens this problem by promoting mortgage 

debt. Mortgage interest payments are usually deductible for taxpayers who 

itemize. Ultimately, holding mortgage debt in retirement limits retirees’ ability 

to tap home equity and is among the many considerations that Americans need 

to understand as they make decisions about their own savings and retirement. 

5) Many Americans lack financial capability. Financial capability is defined 

as the knowledge, ability, and opportunity of all individuals to manage their 

personal finances. It is more important now than ever, as workers are increasingly responsible for their own retirement security. Unfortunately, too many 

Americans struggle in this area. A 2014 study found that 23 percent of 

Millennials and 19 percent of Gen-Xers spend more than they earn, and only 

about one-third of each group has set up a rainy-day fund.17 In addition, Americans fare poorly on assessments of financial literacy. 

6) Social Security is facing a significant financial shortfall and needs 

modernization. Social Security is the foundation upon which Americans 

across the economic spectrum build their retirement. While the program continues to serve as an essential safety net for nearly all American workers, its 

financial troubles put that position at risk. Under current projections by the 

program’s trustees, the OASI Trust Fund—which pays benefits to older Americans, their dependents, and their survivors—is projected to be exhausted by 

2035.18 At that point, beneficiaries would face an across-the-board benefit cut 

of 23 percent.19 While that may seem far off, Social Security is already paying 

out more in annual benefits than it collects in taxes. Waiting to address this 

shortfall increases uncertainty for beneficiaries and makes the policy fixes 

more difficult. 

Though these challenges are indeed daunting, our commission put forth a comprehensive package of recommendations to improve retirement security for all 

Americans, focusing on the six broad challenges described above. 

To expand access and make it easier for individuals to save for retirement, we 

propose several solutions. Generally, our strategy is to reduce the burden on small 

businesses and simplify the process of providing retirement benefits to employees, 

incentivize enrollment in workplace retirement savings plans, and create a national 

minimum-coverage standard that would require all businesses with at least 50 employees to offer their workers some form of workplace retirement savings option. 

Our modeling shows that such changes would increase savings among middle class 

Americans by 50 percent once fully phased in. 

Enhancing retirement saving opportunities is critical, but planning for retirement 

should never be considered in a vacuum. Retirement security is inextricably linked 

to everyday financial security decisions during one’s working years. Americans need 

to increase their personal savings so that they are better positioned to handle emergencies and major expenses, and when appropriate, purchase insurance against the 

vicissitudes of life. Insufficient short-term savings can lead workers to draw down 

their retirement accounts, incurring taxes and (often) penalties. This ‘‘leakage’’ of 

retirement savings—while it might address an immediate financial squeeze—jeopardizes many Americans’ long-term retirement security. To address this issue, we 

recommend allowing employees to be automatically enrolled in multiple savings 

accounts—a standard checking account for short-term savings and a tax-preferred 

retirement account. We would also reform the regulations surrounding retirement 

accounts to further deter preretirement withdrawals. 

Once workers reach retirement, they face the daunting prospect of making their 

savings last for the rest of their lives. With Americans increasingly living into their 

80s and 90s, this challenge has only become more difficult. By clearing regulatory 

barriers to lifetime-income options for retirees and encouraging Americans to claim 

27 

20Please see page 69 of our report for our full recommendations on facilitating the use of 

home equity for retirement consumption. 21Please see page 78 of our report for our full recommendations on strengthening Social Security’s finances and modernizing the program. 22Please see page 39 of our report for more information about Retirement Security Plans. 

Social Security benefits later to maximize their incomes, our recommendations 

would ensure that fewer retirees outlive their savings. 

To diversify Americans’ options for retirement income, our proposals would make 

home equity more readily available for retirement needs. We discourage the use of 

home equity for preretirement consumption by removing the deduction for interest 

on second mortgages and other lines of credit that reduce home equity before retirement. We also recommend expanding awareness of Federal Housing Administration 

(FHA)-insured reverse mortgages and establishing a low-dollar reverse-mortgage 

pool, allowing retirees to tap into a smaller portion of their home equity without 

incurring the large fees that accompany larger loans.20

Increased use of IRAs, 401(k)s, and other defined-contribution accounts means 

that today’s workers have more responsibility for managing their personal finances 

than previous generations. To improve Americans’ financial knowledge and better 

equip them to manage their own finances, we recommend expanding personal financial education at all ages and stress the importance of ‘‘just-in-time’’ interventions, 

in which individuals are provided with important information at the moment that 

they are making major financial decisions. 

Finally, no discussion of retirement policy would be complete without addressing 

the significant challenges that face Social Security. Our package would avoid the 23 

percent cut that is set to take effect and give Americans certainty about what to 

expect in benefits from the program as they prepare for retirement. The Chief Actuary of Social Security found that our plan would achieve ‘‘sustainable solvency,’’ 

meaning that the program’s reserves would be increasing even after 75 years. We 

achieved this outcome through a balanced package of revenue increases and benefit 

savings. Our policies include gradually increasing the payroll-tax rate, raising the 

amount of income subject to Social Security taxes, very gradually raising the full 

retirement age, and using a more-accurate measure of inflation for Social Security’s 

annual cost-of-living adjustments. But what I am most proud of is the enhancements that we were also able to make for the most vulnerable beneficiaries, including surviving spouses and low-income workers. These groups would see dramatic 

increases in benefits, which is why the Urban Institute found that our package 

would reduce elderly poverty by 30 percent in just 20 years.21

To achieve agreement, the commission voted on these recommendations as a package, not as individual policies. My fellow commissioners and I continue to believe 

that, taken as a whole, these policies represent the most comprehensive, bipartisan 

proposal to reform U.S. retirement policy for the benefit of all Americans. 

Based on the interests of this Committee, there are a few policies I would like 

to highlight that might be particularly ripe for near-term action: 

Establish simplified Retirement Security Plans for small businesses. To 

expand access and make it easier for individuals to save for retirement, the commission recommends creating new Retirement Security Plans that would dramatically 

simplify the process of offering automatic enrollment plans for small businesses.22

These plans would allow employers with fewer than 500 workers to band together 

and form well-run, low-cost retirement plans that defuse administrative expenses. 

Responsibility for operating and overseeing these plans would fall to a third-party 

administrator that would be certified by a new oversight board designed to protect 

consumers from bad actors. A similar proposal (entitled ‘‘pooled plans’’) was included 

in the Retirement Enhancement and Savings Act of 2016, which was unanimously 

reported out of the Senate Finance Committee on a bipartisan basis. 

Allow employers to enroll employees in multiple savings accounts. To help 

ensure that retirement savings last until retirement, we believe that employers 

should be able to automatically enroll their employees into two accounts—one meant 

for retirement savings, another for short-term savings. By building up these rainyday savings, individuals might be less likely to raid their retirement savings in the 

event of an unexpected emergency. 

Incentivize retirement savings for young workers. To help build a culture 

of savings and improve the financial resilience of American families, we propose a 

new Starter Saver’s Match, which would replace the existing Saver’s Credit for individuals under the age of 35. The current Saver’s Credit reduces the income-tax burden for lower-income individuals who contribute to retirement accounts, but the 

credit is not refundable, meaning that individuals with no income tax liability cannot benefit from it. The Starter Saver’s Match would instead be a refundable credit 

28 

23Please see page 53 of our report for more information about our Starter Saver’s Match. 24Please see page 61 of our report for our full recommendations on Lifetime-Income Options. 25Please see page 51 of our report for more information about our recommendation on changing congressional budget-estimation rules for retirement tax expenditures. 

of up to $500 deposited directly into the claimant’s retirement account. This change 

would better encourage younger workers with lower wages (those who are least likely to save on their own) to start saving for retirement. It would also maximize the 

Government’s ‘‘bang-for-the-buck’’ by allowing the invested match more years to 

grow.23

Facilitate the establishment of a Retirement Security Clearinghouse to 

improve portability. Many savers face the problem of having several retirement 

accounts scattered among their previous employers. For this reason, we recommend 

the creation of a Retirement Security Clearinghouse to ease the process of consolidating accounts. 

Encourage plan sponsors to integrate easy-to-use, sophisticated lifetimeincome features. Including lifetime-income options can be a complex endeavor that 

entails concerns about fiduciary liability; in addition, businesses often have to invest 

significant time and resources to develop lifetime-income features. We recommend 

providing limited protection for fiduciary liability, modifying regulations, and giving 

additional guidance to plan sponsors that wish to incorporate lifetime-income options within a DC plan.24 These developments could have a similar effect for lifetime-income solutions as the Pension Protection Act of 2006 had for retirement plan 

auto-features. Removing barriers to auto-enrollment and auto-escalation, as well as 

providing limited protection from fiduciary liability for the use of qualified default 

investment alternatives, increased substantially the number of plan sponsors that 

implemented auto-features. The lifetime-income field is ripe for comparable changes. 

Accurately reflect retirement tax policy changes in the budget process. 

Last but certainly not least is an issue that I know well from my years chairing 

the Senate Budget Committee. As tax reform discussions progress, the tax treatment of retirement savings accounts appears to be on the table. In particular, some 

have proposed moving all traditional tax-deferred retirement plans (such as 401(k)s 

and IRAs) to an after-tax Roth system in order to create ‘‘budget savings’’ in the 

10-year window. However, the current scoring system significantly overstates the 

costs of tax-deferred accounts and understates the cost of Roth accounts. We recommend changing the scoring of these tax provisions to a system that would score 

both types of accounts on an equal basis.25 I would encourage caution among policymakers when considering dramatic changes to retirement policy for tax policy purposes. Hundreds of billions of dollars are saved in these retirement accounts every 

year and the tax incentives play a significant role in this system. While debating 

the merits and structure of retirement tax preferences is certainly appropriate, hastily overhauling them without due consideration for the impact on American savers 

could serve to worsen the retirement security predicament about which we are all 

concerned. 

Conclusion 

I am encouraged that the issues of savings and retirement security have attracted 

bipartisan interest among not only members of Congress, but also business leaders, 

the media, the Administration, and the States, as well as from candidates seeking 

public office. I hope that the work of our commission can inform these efforts and 

can contribute to meaningful action by individuals, businesses, and governments to 

improve the economic well-being of all Americans. 

Thank you for inviting me to be here today, and I look forward to answering your 

questions. 

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PREPARED STATEMENT OF WALTER RUSSELL MEAD 

DISTINGUISHED SCHOLAR IN AMERICAN STRATEGY, THE HUDSON INSTITUTE AND

CHACE PROFESSOR OF FOREIGN AFFAIRS, BARD COLLEGE

APRIL 5, 2017 

Good afternoon, Mr. Chairman, Ranking Member Heitkamp, and Members of the 

Subcommittee: 

It is an honor to be invited to testify before this Subcommittee and its distinguished Members. Moreover, it is a privilege to testify alongside former-Senator 

Kent Conrad. I congratulate the Subcommittee on its interest in creating a sustainable and viable retirement system for the 21st century. 

My testimony today is divided into three parts. In the first, I look at the history 

of Federal policy with respect to the economic security of the American people, how 

that policy changed in response to changing economic conditions, and how our current set of retirement programs and policies emerged from these changes. In the 

second section, I draw the Subcommittee’s attention to the ways in which the economic changes our country is currently undergoing are deep enough and pervasive 

enough to require fresh thinking about economic and retirement policy. Finally, I 

offer some suggestions that I hope will assist the Subcommittee’s distinguished 

Members as they work to craft novel retirement security policies for an approaching 

economic order while preserving programs like Social Security that remain essential 

to the economic security of older Americans. 

The American Dream & Government 

Many believe that the Federal Government’s promotion of the economic security 

of the American middle class is a relatively recent development, dating back to 

Franklin Roosevelt and the New Deal. This is far from the truth. From the revolutionary period to the present day, American presidents and congresses have worked 

to develop policies and laws that promote the American Dream—to help the American people build dignified and secure lives through hard work. Our understanding 

of the American Dream has changed over the centuries, and successive generations 

have changed the methods by which they seek to promote the common welfare, but 

the prosperity and the security of the American people has remained at the center 

of national policy from the time of George Washington into the 21st century. 

For much of our history, the majority of the American people earned their living 

in agriculture. In the 18th century, farmers comprised approximately 90 percent of 

the American labor force. Only in the 20th century did the percentage of agricultural workers fall significantly below 50 percent of the labor force. For both American citizens and the immigrants drawn to our shores, the American Dream at this 

time meant a freehold family farm; elected officials understood that the opportunity 

to own a farm was what constituents most wanted, and they made it their business 

to ensure that Federal policies supported that goal. 

Politicians also understood that the independence and security of family farming 

was the foundation of the American political system. Political theorists like Thomas 

Jefferson believed that independent free farmers made the American democratic 

system possible. Freed from the servile dependency that characterized so much of 

peasant agriculture in Europe, and trained in the habits of responsibility and hard 

work by the requirements of property owning, American farmers could be safely entrusted with the choice of elected officials. Federal support for the independence and 

prosperity of farmers was not just in the country’s economic interest; such support 

strengthened the foundations of American society in line with Jefferson’s belief that 

‘‘Agriculture . . . is our wisest pursuit, because it will in the end contribute most 

to real wealth, good morals, and happiness.’’ 

Indeed, the Land Ordinance of 1785 and the Northwest Ordinance of 1787, both 

of which were adopted by Congress before the Constitution was signed, already envisioned a future of independent, yeoman farmers in early America. These ordinances helped create a system that organized the sale of Federal land west of the 

Appalachians to private citizens, and remain a basis of the Public Land Survey System and the Bureau of Land Management that we know today. 

The Federal Government continued to promote the establishment of the family 

farm throughout the 19th century with a full range of economic, diplomatic, and 

even military policies. President Jefferson’s Louisiana Purchase opened up over 

800,000 square miles of land for Americans to settle. The 1862 Homestead Act gave 

away millions of acres of land to settlers who were willing to brave the treacherous 

35 

1 It is important to note that, although the Homestead Act essentially provided free land to 

settlers, the westward journey inflicted heavy physical, emotional, and fiscal costs on settlers. 

It would be incorrect to view the Homestead Act as a handout. 2 It is worth noting that a disproportionate number of policies seek to aid American farmers 

today despite the fact that less than 2 percent of the American labor force works in agriculture. 

One can argue that these policies harken back to Jefferson’s vision of America and the Green 

Model. 

westward journey and settle in the interior.1 The early diplomatic emphasis on gaining free access to the Port of New Orleans for western farmers, like the later promotion of railroads to open up the vast western territories, was designed to ensure 

that farmers in the remote American interior were able to sell their goods on world 

markets. The establishment of land grant colleges at the end of the 19th century 

sought to both train young farmers and to conduct important research into new 

farming methods. Taken together, these policies, among others, formed what might 

be called the ‘‘Green Model’’—a coordinated Government effort to provide Americans, who lacked opportunities to own large tracks of farmland on the coast, with 

the ability to seize the 19th century American Dream if they moved to the interior. 

By promoting land ownership at low cost and encouraging agricultural education, 

the Green Model sought to deliver for Americans the unique financial and societal 

security that a family farm could provide. Besides the revenue and sustenance from 

working the land, family farming helped Americans accumulate wealth. Additionally, family farms provided for retirement. Grown children could continue tending 

the land while taking care of their elderly parents, or the family farm could be 

rented or sold, providing an income for farmers who could no longer work the land 

for themselves. 

The security provided by the family farm began to erode in the late 19th century. 

As more settlers took advantage of Green Model land policies, the remaining unsettled land became ever more marginal. At the same time, a more competitive, largescale, and capital-intensive farming model emerged, which gradually made family 

farming riskier and less rewarding. The share of farmers in the labor force declined 

from approximately 64 percent in 1850 to 27 percent in 1920. 

As the American economy shifted away from American agriculture and toward 

factories and mines, Americans experienced growing inequality and uncertainty between 1865 and 1900. Following the Civil War, portions of American society clung 

to the Green Model way of life even as the rural economy fell behind the manufacturing economy of the great cities. 

Farmers lobbied for Federal assistance to achieve ‘parity’ with urban workers, but 

the relative decline of the agricultural economy continued. While pro-farm policies 

aimed to preserve Jefferson’s idyllic vision of a Nation of yeoman farmers, these 

policies were no match for larger economic trends that were recasting American society as well as the economy.2 It became increasingly clear that the Green Model 

could no longer serve as the ordering principle for Federal policy, but the dynamics 

of the new economy were not well understood and its full wealth creating potential 

had not yet been realized. 

As the twentieth century witnessed a clear transition from an agricultural to an 

industrial era, a new version of the American Dream appeared and a corresponding 

Federal policy model began to take shape. Teddy Roosevelt capitalized on widespread calls for reform and ushered in a new kind of politics. Past presidents made 

history by opening new land for settlement; Theodore Roosevelt made history by 

protecting Federal lands from settlement and establishing our system of national 

parks. Franklin Roosevelt’s New Deal policies further advanced the evolution of a 

new system tailored to an urban society with a manufacturing economy. 

The process of transition was a slow one, with many setbacks and upheavals, but 

by the 1950s, a new and stable social system had emerged. Americans had learned 

to manage the forces of industrialism, to regulate the power of finance, and to use 

the vast resources which an industrial society creates to address the unprecedented 

social problems that the rise of the modern city and the modern factory system 

brought into being. In post-World War Two America, both blue-collar and white-collar workers increasingly had stable, lifetime jobs in a growing economy. Within this 

new economy, high school graduates were essentially guaranteed lifetime employment in a job that, at a minimum, provided a comfortable, lower middle-class lifestyle. Likewise, college graduates could expect an equally secure future with an 

even greater standard of living. 

The new economy led to a new American Dream. Americans no longer dreamed 

of owning a family farm, rather they dreamed of owning a suburban home accompanied by a consumer lifestyle. To ensure that Americans willing to work for it 

could have that dream come true, the United States Government created a novel 

36 

policy system during the 1950s and 1960s—a set of policies and practices sometimes 

called the ‘‘Blue Model.’’ New transportation measures, like the Federal Aid Highway Act of 1956, aimed to link cities and employment centers with cheap, suburban 

housing, so that geography would not prevent Americans from achieving the new 

American Dream. Likewise, 30-year mortgages with low interest rates allowed 

lower- and middle-class Americans to own suburban homes and accumulate wealth. 

Tax advantages for the municipal bond market allowed American cities and towns 

to build the infrastructure the new suburbanites wanted at an affordable cost. 

The United States Government demonstrated its commitment to promoting opportunities for working Americans. While Blue Model policies differed significantly 

from those of the Green Model, both models aimed at the same goal—to provide as 

many Americans as possible with the opportunity to realize the American Dream 

in accordance with the economic and societal conditions of the time. Neither model 

sought to accomplish this goal through ‘handouts’ or guaranteed outcomes. Rather, 

they provided Americans with the ability to accumulate wealth through hard work. 

Sadly, both the Green Model and the Blue Model developed policies to the exclusion or even the detriment of American minorities and particularly African Americans. American slavery and the share-cropping era under Jim Crow meant that free 

black farmers were virtually absent from the independent yeoman-farmer vision of 

Jefferson and his 19th century successors. In the 20th century, red lining prevented 

many African Americans from attaining the financial security and independence of 

home ownership, while New Deal programs often excluded domestic workers, waitstaff and farm-hands—occupations that were disproportionately held by minorities 

or women. Nonetheless, for a large majority of Americans, these policies contributed 

to the enormous growth of economic prosperity of 19th and 20th century America. 

Retirement policy was one of the areas in which policy had to change in response 

to new conditions. Factory jobs did not provide the same kind of economic security 

that farm ownership did. Especially in the early years of the factory system, and 

again during the Depression, many ordinary working people lacked the ability to 

save for retirement, but the factory system was unforgiving. 

Like the Green Model, the Blue Model began to fail over time. As foreign manufacturers recovered from the devastation of World War II, German and Japanese 

companies challenged complacent American firms. 

In this new and often more challenging environment, companies had to become 

more flexible. Industry became more competitive, private-sector managers shed bureaucratic habits of thought, and defining characteristics of the economy, like lifetime employment and defined benefit pensions, began to disappear. Additionally, the 

combination of low-wage competition from the developing world and automation in 

advanced country manufacturing began to cut into manufacturing employment in 

the United States. The process of change started in the 1970s; in subsequent decades it became clear that the global economy, and the American economy with it, 

were caught up in a process of transformation as dramatic and far reaching as the 

industrial revolution itself. 

A New Economic Revolution 

Americans today are caught up in a whirlwind of change, and most basic assumptions on which our social policy are based are coming under challenge. Old jobs and 

old industries are disappearing, and new ones are sometimes frustratingly slow to 

emerge. Wages for many workers have stagnated as well paid jobs, especially in 

manufacturing, become scarcer. The percentage of nonfarm workers in manufacturing has declined from a World War II-high of approximately 38 percent to approximately 8.6 percent in 2016, and many clerical jobs have also disappeared. 

New technology and competition also have pushed out, and will continue to push 

out, many legacy 20th century employers and the jobs and job security they provide. 

For example, nearly 88 percent of the employers featured on the 1955 Fortune 500 

list did not make the 2014 Fortune 500 list. The rise and fall of companies like 

Blockbuster highlight the pace and intensity of change in the 21st century economy. 

In addition to the decline of stable companies and the lifetime assurance of stable 

employment that they brought, the traits that define jobs today vary significantly 

from the traits that defined mid-20th century jobs. Workers today are no longer 

guaranteed long careers with a single employer or within a single industry, nor do 

many of them want to be confined by a lifetime job, and the percentage of the labor 

force employed by the same company for 20 years or more continues to decline. 

Workers today, especially millennial workers, are more likely to ‘‘job hop’’ than 

past generations. According to the employment-based, social networking website 

LinkedIn, ‘‘the number of companies people worked for in the 5 years after they 

graduated [from college] nearly doubled’’ from 1.6 jobs in 1986 to 2.85 jobs in 2010. 

Polling data has also shown that millennials view job hopping more favorably than 

37 

other generations. Gallup found that 60 percent of millennials are open to a new 

job opportunity (as compared to 45 percent of nonmillennials) and that millennials 

are the ‘‘least engaged generation in the workplace.’’ 

The advent of the technologically facilitated gig economy also has added to the 

high level of ‘‘churn’’ in the workplace today. The McKinsey Global Institute estimates that between 20 and 30 percent of working-age Americans currently participate in the gig economy. As apps and websites like Uber, Lyft, Airbnb, TaskRabbit, 

Ebay, and Etsy have become commonplace in our society, there has been a growing 

acceptance of gig jobs. Indeed, out of the 68 million independent workers in the 

United States, McKinsey estimates that 72 percent of them chose to be independent 

workers. As technology continues to engrain gig work into the ethos of American 

workers—especially younger workers—I believe that gig work will contribute to an 

increased restlessness in the future workplace and could well become a defining 

characteristic of the information era. 

The structural employment changes that have taken place in the information era 

have coincided with important societal changes. Americans have a dramatically different concept of retirement than previous generations. American living standards 

and life expectancy have increased. (In 1935, American average life expectancy was 

61 years; by 2016 it had risen to 78.) Now, Americans need enough retirement income to facilitate an active lifestyle defined by travel and leisure. Historically, many 

people saved to avoid poverty in old age; Americans want more out of their later 

years—but neither as individuals nor as a society are we making the choices that 

can sustain these expectations. 

At the same time that Americans expect to spend more years, and more active 

years, in retirement, they are increasingly delaying their entry into the world of 

work. In 1900, many Americans went to work after eight or even fewer years of formal schooling; more and more young Americans today spend 16 or more years in 

education before they begin their life’s work. In 1935, many Americans entered the 

workforce at 15, stopped working at 60, and died soon thereafter. Today, many don’t 

enter the workforce until they are almost 30, retire between 65 and 70, and live 

for 15 to 25 years longer. In 1935, Americans spent almost 75 percent of their lives 

in the workforce; today, we are only in the labor force for about 50 percent of our 

lifespan, but the income from those years must support the costs of child-raising and 

the costs of a long retirement. As a people, our savings patterns do not reflect these 

realities. 

In the long run, this pattern cannot be sustained. We must either save more, 

work longer, or consume less in retirement. Yet even as we contemplate this uncomfortable reality, many Americans feel their choices are constrained. Stagnant or falling wages make it harder for many families to save. The costs of college continue 

to rise, and ‘degree inflation’ means that more students must spend more years in 

school—during which time their parents, instead of saving to fund their own retirement, must struggle to support their children in school. Rising healthcare costs 

continue to press on family budgets. As employers shift insurance costs onto the 

workforce, and as more gig workers and self-employed people buy insurance in the 

individual markets, Americans often have a harder time setting money aside for old 

age. 

Two-hundred-fifty years of American history tells us that the Federal Government 

cannot and will not remain indifferent to the difficulties of the American middle 

class. But in both agrarian and industrial America, the Government found ways to 

give an assist to hardworking Americans seeking to build stable and prosperous 

lives, rather than providing handouts and creating dependencies. Providing a policy 

framework so that young people could clear the land and start a farm is very different from creating a lifetime income entitlement; supporting the development of 

a financial system and transportation network so that young families could buy 

their own homes is very different from offering each citizen a housing voucher. 

The question for retirement policymakers in this time of transition isn’t, or 

shouldn’t be, how to give Americans a retirement that they can’t afford. It is how 

to set up a system that makes it possible for hardworking Americans to build the 

kind of future they want through their own efforts. 

A New Vision for Retirement 

Today, we are caught between an old system that is getting less effective and a 

new one that is still developing. This is not, of course, just true for the retirement 

system; it is true of the economy and society at large. But the retirement crisis is 

rapidly becoming one of the most serious and damaging consequences of the decay 

of American social order, and the outdated assumptions on which the retirement 

system relies make matters worse. To put it simply: Our three-legged retirement 

38 

system—public savings (i.e., Social Security), employer-provided retirement plans 

(e.g., pensions)—and private savings and investments—are failing Americans. 

It is important to remember that Social Security was never intended to serve as 

the only source of retirement income for older Americans. Social Security payments 

were to be supplemented by employer pensions and from individual savings and investments. While Social Security faces some financial challenges, the real problem 

we see today is that the other two legs of the system are in much worse shape. Increasing numbers of American workers face a future in which Social Security is 

their only significant source of income in retirement; this places a burden on Social 

Security, and on the Federal treasury, that will be difficult to bear. 

In the Blue Model era, the idea was that for more and more workers, employerprovided pensions would supplement Social Security. From the 1930s to the 1960s, 

the percentage of workers covered by employer-provided pensions tied to length of 

service tended to rise. This system fit the needs of a workforce that looked to stable, 

long-term employment from big business and stable nonprofit employers like hospitals and State and local governments. But as the economy began to change, the 

private pension system came under increased stress. The percentage of workers covered by employer plans began to decline, and the plans themselves tended to become 

less generous and less secure. 

At the same time, the third leg of the stool, personal savings and investments, 

is also under stress. Stagnating wages and the rising costs of raising children make 

it hard for families to save. As Americans delay starting families and raising children until later in life, parents are older when their children start college, and there 

are fewer ‘empty-nest’ years in which parents, free at last from the financial responsibility of raising their children, are able to focus on funding their own retirements. 

Policymakers have, of course, been aware of these problems, and the last few decades have seen a number of initiatives, like the rise of 401(k) programs and the IRA 

system, to strengthen private pensions and personal savings. Thanks to these programs, a significant number of Americans have more assets for retirement than 

would otherwise be the case. But those programs have not lived up to the hopes 

that were placed in them. Only 58 percent of workers today, for example, have access to employer-based retirement plans. Of that 58 percent, fewer than half participate in these plans. At the same time, only 10 percent of workers contribute to private savings plans like IRAs, which were meant to help augment employer-provided 

retirement plans and Social Security. 

As a result, we now face a retirement problem that is both serious and complex. 

More and more Americans are approaching retirement age without having the savings needed for the kind of retirement they want. Moreover, the millennial generation is currently set on a dangerous course that would make this generation even 

less well prepared for retirement than their parents and grandparents. 

Clearly, our programs for employer-based retirement systems and for encouraging 

private savings have not accomplished what we hoped they would do. We must 

think more deeply and act more decisively to create a system that will work in the 

new economy taking shape around us. The paradigm is shifting and we must shift 

with it. Just as policy made at the end of the 19th century could not fully account 

for the needs of the 20th century economy, our new policy model will have to adapt 

to the profound changes we now face. 

While these failures owe something to larger social challenges (hard pressed families are less likely to set money aside for future needs even if such savings are taxadvantaged), there are some ways in which our retirement programs don’t align well 

with the emerging new economy. In particular, the link between the employer and 

the individual was at the center of Blue Model era social policy. Firms were expected to provide defined benefit pension plans and promote personal savings, even 

as firms were expected to handle health care, tax collection, and a variety of other 

social missions. 

With the end of lifetime employment and the shift to a job hopping and gig economy—to say nothing of the decreased stability of many larger firms in an era of 

global competition and rapid technological change—the employer is losing the capacity to act as the intermediary between the individual worker and Government, while 

simultaneously being the locus for Government mandates, tax collection, and social 

policy. For retirement policy especially, the focus needs to be on the individual rather than the employer. Employees will have many employers over the course of a career and, often, many income streams at the same time. The same person may simultaneously be a full-time employee in one job, a part-timer in another, while 

moonlighting as an Uber driver, renting out a spare bedroom to travelers, or selling 

goods on eBay. Such a worker still needs to think about retirement, and still has 

taxes to pay, but there is no single employer who plays a role in this person’s life 

39 

3 ‘‘American Mobility Account’’ and the other, subsequent account names are merely descriptive placeholders. Ideally, these programs would be swept into a simpler package, as the proliferation of programs with complicated names, rules, and eligibility requirements itself becomes 

a disincentive for individuals to participate. 

comparable to that of, say, General Motors in the heyday of the old industrial 

system. 

Small businesses and the self-employed are particularly poorly served by the current system. These businesses and workers often do not have the time or resources 

needed to scour the marketplace to find the savings plans best suited to their needs. 

Nor do employers have the capacity or resources for the complex and often expensive work needed to comply with various Government mandates about how retirement plans work. This has created a perverse economic reality, in which saving for 

retirement has become a perceived benefit of working for a large corporation that 

is less attainable for small businesses and the independently employed. 

At the same time, we need to understand that the retirement crisis is part of a 

larger problem of savings. Young workers may not be focused on retirement savings 

because more urgent needs preoccupy them: student loan repayment, savings for a 

down payment, healthcare costs, and so forth. We cannot look at retirement savings 

in isolation from the other economic challenges facing Americans today. 

What I propose below is intended to stimulate new thought on the Committee and 

elsewhere as a new generation of Americans rethinks the foundations of our social 

contract and economic system. After looking at what a new approach to retirement 

and related issues might look like, I also offer some suggestions about how we can 

help members of the ‘bridge generations,’ people caught up in the transition from 

the old system to a new one, cope with the challenge of retirement given the financial issues they face. 

There are, I believe, two basic things we need to do: first, to begin shifting the 

tax collection onus and the retirement savings apparatus from employers to privatesector financial institutions. At the same time, we need to blend retirement savings 

with other forms of savings, so that Americans have multiple, clear-cut avenues toward wealth accumulation in the information era. The creation of a flexible and 

multifaceted retirement savings system that better aligns with our current and 

near-term economic conditions and can adapt to the unknown economic conditions 

of the future will be critical to the 21st century success of the United States. 

One way to move toward this goal would be to offer every American citizen and 

Green Card holder the ability to open an account known as an ‘‘American Mobility 

Account’’ (AMA).3 These ‘one-stop-shop’ accounts would be managed and administered with a financial institution, in which employers or independent workers would 

deposit gross, pre-tax income. Financial institutions would collect and withhold the 

variety of different taxes that businesses and contractors are currently required to 

withhold, thereby shifting the tax collection onus from employers and the self-employed to third-party financial institutions. In addition to managing tax collection 

and withholding, financial institutions would be able to provide a variety of Government-regulated and tax-advantaged financial options within AMAs that promote retirement savings and human capital formation. 

With the introduction of AMAs, our tax regime would be better able to accommodate the increasing amount of gig work and job-hopping that I believe will take 

place in the future. Since all earned income would be deposited into one AMA, an 

individual could earn income from a variety of different employers, and have a 

streamlined accounting process. For example, instead of multiple employers filing a 

collection of W–2 and 1099 forms on behalf of an employee working several gigs, 

the financial institution would be responsible for compiling all streams of earned income and filing a single reporting form on behalf of the worker. 

This system would benefit employers, workers, and Government. On the employer 

end, AMAs would largely shift the accounting and compliance burdens from employers to financial institutions: an important change that would be particularly beneficial for small businesses, the self-employed, and startups. Additionally, AMAs 

would help workers comply with tax laws and simplify the task of tax preparation 

while ensuring that they receive all benefits and credits to which they are entitled. 

Finally, Federal, State, and local governments would benefit from the increased 

transparency and accountability that AMAs would provide them. As part-time work 

and multiple sources of income proliferate (e.g., combined income from Uber driving, 

eBay sales, Airbnb rentals, etc.), tax collection will become more difficult and less 

fair without reforms along these lines. 

The ability to better accommodate self-employed workers who may play a defining 

role in the 21st century innovation economy is another benefit of an AMA-centered 

system. In many ways, our current retirement system hinders self-employment since 

40 

self-employed workers have to pay the regressive Self-Employment Tax of 15.3 percent, which covers both the employee- and employer-end of the payroll taxes levied 

against traditional businesses and their employees. While this high tax rate discourages many individuals from pursuing self-employment opportunities, it incentivizes 

others to avoid taxes altogether. Making AMAs cheap and easy to understand for 

the self-employed population, enabling the holders of these accounts to benefit from 

various tax savings and other programs, and increasing penalties for those who pay 

self-employed individuals outside of the financial system will improve tax collection 

and reduce monitoring and enforcement costs for the Government. (Such accounts 

will also make it easier for the self-employed and gig workers to demonstrate their 

creditworthiness by documenting their income, an important consideration for promoting home ownership). 

Additionally, to promote retirement savings, a Supplemental Retirement Account 

(SRA) would be embedded within an AMA. A certain percentage of an AMA-holder’s 

monthly income would be deposited automatically into the SRA. The deposited income could only go toward saving for retirement, with all SRA holdings initially defaulted into a Roth IRA savings plan. AMA-holders would be able to opt out of their 

monthly SRA deposits, change to a different retirement savings plan with different 

tax preferences (e.g., a traditional IRA), or further diversify their SRA holdings into 

several different savings plans. 

An SRA would solve the issue of workers lacking access to employer-supported retirement plans. Moreover, employers could be given tax incentives to encourage contributing toward employee SRAs, thereby addressing some of the major issues with 

current individual retirement savings accounts. Further, SRAs would reduce costs 

for employers since they will no longer need to maintain retirement plans of their 

own, thereby leveling the competitive playing field for small businesses and 

startups. Means-tested Government programs to promote retirement savings for 

low-income workers could also be more effectively and transparently administered 

through the use of these accounts. 

Finally, AMAs would promote human capital formation to augment the financial 

security provided by retirement savings. For example, much like an SRA, a worker 

could choose to deposit a certain percentage of his or her paycheck into an embedded Human Capital Account (HCA). In turn, individuals could spend HCA monies 

on certain items deemed important to enhancing individual financial security (e.g., 

job training, professional licensing, college education, etc.) in a tax-free or tax-preferred fashion up to a lifetime maximum limit. 

The formation of human capital will be vital to growing wealth in the future. Giving Americans the opportunity to use savings to take the future version of today’s 

coding class, for example, will be imperative to both their success and to the success 

of the Nation, and is in line with past social policies like the creation of land grant 

colleges during the Green Model years. Following the example of the very successful 

Singaporean Central Provident Fund, the accounts can also contribute to wealth creation. Through its public social security scheme, which allows Singaporeans to finance the purchase of homes with retirement savings, the Singaporean government 

has increased home ownership to 90 percent. A simple homeownership savings account option would encourage financially sustainable homeownership and wealth accumulation in the United States. During the housing bubble, well-intentioned lawmakers and officials tried to promote better access to home ownership by relaxing 

the criteria needed to qualify for a mortgage. It would be much better policy to encourage home ownership by helping more people to qualify legitimately under existing, prudential rules. 

In sum, the introduction of AMAs would better fit the current and future direction 

of our 21st century economy. The transition would not happen overnight, and a variety of regulatory mechanisms and changes would need to be put into place to make 

sure that this plan would benefit all Americans in a fair and transparent way. Finally, there would need to be incentives to encourage the adoption of AMAs among 

employers, workers, and financial institutions, as an outright mandate would be too 

disruptive in the near-term. 

Reducing the Costs of Retirement 

While the introduction of AMAs would help transition the United States from an 

outdated, employer-based system and increase saving for retirement, the reform is 

primarily geared toward younger and future generations of workers. In order to enhance retirement security for Americans, policymakers must enact reforms that help 

older generations of workers successfully retire during the transition. 

On the front end, we should allow workers later in their careers to accelerate 

their savings. It is human nature to postpone thinking about retirement, and, in 

any case, younger people often have more immediate needs, whether this involves 

41 

paying off student loans, buying a home, or caring for their children. Older workers 

often have more discretionary income, fewer calls on their resources, and a greater 

focus on the need to save for retirement. Government policy should aim at creating 

more tax deferred savings opportunities for these people. It is good social policy to 

encourage savings, and greater savings equate to retirees being better prepared to 

handle retirement costs. Current policy allows older workers to accelerate their contributions to retirement plans; those allowances should increase. 

Many seniors today are not only physically capable of working longer, but they 

also want to work longer as they find work fulfilling and intellectually stimulating. 

Advances in medicine and in technology, such as driverless cars and enhanced 

telework capabilities, will make it easier for older generations of Americans to continue to work well into old age. To encourage more capable seniors to work longer, 

the Government should eliminate the Social Security Payroll Tax for seniors and 

delay the age requirement (generally 70 1⁄2-years old) that triggers mandatory withdrawals from retirement savings plans. To increase the attractiveness of tax deferred savings plans to lower income Americans—those who have the hardest time 

saving for retirement and most need the financial security that those savings provide—income from tax-deferred investments below a certain (low) threshold should 

also be tax free. 

Government could also enhance the menu of retirement options available to seniors who cannot or do not want to work longer. Promoting retirement abroad, where 

income that can barely cover a trailer home in Florida can equate to a luxury condominium in Costa Rica or Mexico, is an easy way to give seniors comfortable retirements. Today, Medicare does not cover health care received abroad, except for in 

an extraordinarily limited set of circumstances. This lack of healthcare coverage is 

a major barrier to retiring abroad. Though health care and prescription drugs can 

be far cheaper in Latin America and the Caribbean (LAC), serious illness is a financial issue anywhere, and, as younger and active retirees become older and more 

frail, they often have to return to the United States to obtain better services, which 

hinders permanent and/or semipermanent retirement abroad. 

Helping seniors move to countries where costs are low could reduce Medicare 

costs and give seniors more choices during the transition from the Blue Model retirement system to a new retirement system. To that end, the Federal Government 

should smooth the path for seniors looking to retire abroad. Congress should pass 

legislation to allow Medicare to cover eligible seniors using certified, inspected, and 

qualified providers. Medicare payments should be lower to these providers, reflecting different cost levels. 

Conclusion 

Much as they did during the transition from the Green era to the Blue era, Americans find themselves at an important, historical inflection point. Like the Industrial 

Revolution, the Information Revolution has disrupted the economy in unpredictable, 

complex, and far-reaching ways. Not all of the changes to come can be predicted or 

understood today, but there is an immediate need to craft policies to account for 

those changes we can discern before the consequences of the failures of the current 

system become unbearable. Adopting a system of retirement policies that shifts the 

burden of taxation and collection from employers to financial institutions while protecting the retirement security of those caught in the gap would do much to promote 

the emergence of a dynamic new form of the classic American Dream in the 21st 

century. 

42 

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD


25680.001
43 


25680.002
44 


25680.003
45 


25680.004
46 


25680.005
47 


25680.006
48 


25680.007
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25680.081
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25680.093
135 


25680.094
136 


25680.095
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25680.096
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25680.097
139 


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25680.099
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25680.134
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25680.135
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25680.136
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25680.138
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25680.139
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25680.140
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25680.141
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25680.142
184 


25680.143
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25680.144
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25680.145
187 


25680.146
188 


25680.147
189 


25680.148
190 


25680006.eps
191 


25680007.eps
192 


25680008.eps
193 


25680009.eps
194 


25680031.eps
195 


25680032.eps
196 


25680033.eps
197 


25680034.eps
198 


25680035.eps
199 


25680036.eps
200 


25680037.eps
201 


25680038.eps
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25680039.eps
203 


25680040.eps
204 


25680041.eps
205 


25680042.eps
206 


25680043.eps
207 


25680044.eps
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25680045.eps
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25680046.eps
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25680048.eps
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25680049.eps
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25680050.eps
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25680055.eps
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25680058.eps
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25680059.eps
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25680010.eps
224 


25680011.eps
225 


25680012.eps
226 


25680013.eps
227 


25680014.eps
228 


25680015.eps
229 


25680016.eps
230 


25680017.eps
231 


25680018.eps
232 


25680019.eps
233 


25680020.eps
234 


25680021.eps
235 


25680022.eps
236 


25680023.eps
237 


25680024.eps
238 


25680025.eps
239 


25680026.eps
240 


25680027.eps
241 


25680028.eps
242 


25680029.eps
243 


25680030.eps