and shauna thomas tweeted my view of a speaker vote, i'm watching c-span on the plane, this really is the future. the best access to congress is on c-span, c-span radio and c-span.org. go behind the scenes on capitol hill by following our capital producing at craig kaplan and at c-span. >> next a look at social security, individual retirement accounts, and refundable tax credit. at an event posted by the -- the two panels are about one hour 20 minutes. >> the morning, welcome welcome to the center for american progress, i am chris weller senior fellowship and professor of public policy at massachusetts, boston. , martin was supposed to give the opening remarks she is sick. with each passing generation america's retirement crisis it going. in in 1983 almost one third of the working age household could face i couldn't

expect to live a much less during retirement. in 2013 that number had grown to nearly half of all adults. this trend is getting worse but not better. young families are having more trouble than previous generations to save for retirement. while this problem is that most acute for all middle income families, there are some families who are suffering more than others from the retirement crisis and the expected shortfall. particularly low-income households are more likely to suffer than high income household. this is true for low-income households who do not work for an employer who offers retirement benefits at work. so what can we do to tackle this problem? federal and state governments already offer substantial tax benefits to help people save for retirement. the federal government forgoes with a $100 billion each year tax revenue to incentivize people to save for retirement. states with income tax also encourage workers and their day

to save for retirement. even though federal and state government are spending a lot of money for going tax revenue help people save for retirement, we are facing a growing retirement crisis. part of the problem of the dichotomy of more government spending and less retirement saving is looking at the tax incentives we have are not well-designed or are inefficient. high income earners get the biggest help from the existing incentives, then lower income families. so it is clear that we have to do more to help families save and tackle the retirement crisis. part of the solution is to think about ways how we can reform the tax code and improve the existing standards to help those who need help most. possible solutions solutions include expanding credits, simplifying savings and offering more ways

to help people save for retirement outside their employer and employee rate relationship. we are fortunate to have two distinguished panels today to help us figure out what the data actually say. what are potential solutions and how we talk about the solutions in the crisis. the first panel they'll be will be moderated by profession or tracer, the director for economic policy, at the new school of new york. she will will lead and engage in discussion about the depth of the crisis, the second panel will be moderate who is the director of policy for the poverty to prosperity program. she'll focus on strategies to make it easier for households to say. will be joined by carol, assistant secretary of policy who'll offer keynote remarks an obama administration's effort to

address it. with that, let me welcome the first panel moderated by teresa. [applause]. it's wonderful to have you here with me. there are many questions i want to ask all three of you. let me start with saying that we have a retirement crisis. many people have focused on this idea that government may not be able to pay for all the elderly who will be of retirement age. a bigger problem, another way to think of the retirement crisis is that these folks will not have enough money when they get to retirement age. so, in your remarks i would like you to address what are the facts to help us understand how big the crisis might be? the second issue is also playing off what christian said, we

spend a lot of money in the federal tax code and also at the state level that is invisible. it is indirect, it is in the form of past expenditures, money we don't collect because people get a deferral when they contribute to their qualified tax retirement account, and the contributions and investments that build them. so this indirect subsidy is a large, how large is it? what kinds of reforms? not, what might happen but for years to hear, what policies would best help the people we just talked about get more savings and retirement adequacy? ruby to want to start? >> thank you so much for having me. both you i am very glad to be here today. both christian and you mentioned we are facing an ongoing retirement crisis of retirement security and people haven't

enough to spend in retirement that they can maintain their consumption level to some degree. prior to retirement and particularly low-income people can have a very basic level of income. this is a problem that is concentrating on low and middle income households, households of color, part of the solution is to increase the minimum benefits for social security which at this point is below the poverty line. another huge piece of the puzzle is tax incentives for retirement. we estimate costs about $2 trillion over ten years. the tree says work says it's 20% more if you include the state level attacks because states tend to piggyback on the federal rules of defining income. so i

want to focus on three issues today related to this. the first is the fairness of the current incentives in terms of people who are participating in employer plans. the second is, how to increase access to employer pans. in the last one is to improve the effectiveness of the plans themselves. so on the first subject, john will discuss this and he is the author of research on the subject. the evidence is that our current retirement savings and incentives don't increase how much people save out of their own money for retirement. they do increase how much savings they have for retirement which may sound a little paradoxical. one way to think of it is, suppose i take him $50000 of income. if i would say $5000 for retirement without any savings incentive. then you give me $1000 savings incentive. what the evidence is incentive. what the evidence is suggesting that basically that $1000 will go into increasing a 4o1k, to some degree, i blame most or all of it. i won't increase how much i'm saving. i will end up with $4000 in

concepción and 6000 and my 4o1k but not saving my own money. this is an important pack. it means that these incentives are not spurring people to say more. they are instead, sorta like the government is depositing the subsidy into your 401(k) and possibly into your 4o1k and possibly a bit into your checking account as well. so i think we need to focus on the fairness of these incentives. who savings we should be supplementing the most. my answer would be low and middle income households rather than the wealthy. but, in fact the current retirement incentive very disproportionally go to the wealthiest household. so they have again estimated that about two thirds go to the top, where's only 7% go to the bottom 40%.

if you look at the top 1%, they get 50% more of the benefit then that in tire middle kit quintile. so one way, and one of the main way is to shift to tax credits. you could completely replace the current system on deductions, and taxing the money when it comes out, often many years later were taxing the money when it goes and as a roth model is. they are not taxed on the earnings at all. those out all. those proposed replacing the current system. you could also shift more in this direction by cutting back on the tax incentives for the wealthy. whether that is through reducing the contribution limits, something like the president's proposal to limit the value of lots of deductions and exclusions, including those exclusions, including those for retirement savings to 28%. a cap on the amount of tax preferred savings that you can have as an aggregate balance.

then moving some of that to make the sabres credit refundable and potentially expanded. you might even want to use some of that for deficit reduction or other priorities. it's an awful lot of money. an additional benefit i will mention is a refundable credit, it would enable you to structure the tax and saying that as a match match that is directly deposited into the account. there is evidence that this would increase the responsiveness. >> what is the framing. >> this is just the fact that let's say, lets a get a refund equal to 20% of my savings. i save a a dollar and i get 25 cents back. but i really put in 75 cents out of my own pocket to and up with a dollar my account. instead of of the match you could have the

same results and frame it as a 33% match. i put in a percent and the government would match 33%. most people don't do that math in their head so 33% sounds bigger than 25% of the respond more. also just the fact that it would go into the account in summary form ideas would eliminate some of the friction. so the second thing is expanding access. right now about 130 people do not have access at all to a retirement plan. about half to not participate. the numbers are higher if you're low-wage, part-time, working for small business for about 60% of the bottom quartile to not have access. the fact of the matters people matter is people really don't save for retirement if they are not covered by an employer plan. very few people directly contribute to an ira.

even if you made the tax incentives more progressive you would be failing to cover or increase retirement savings among a lot of people who are not covered or participating in an employer plan. i think that is a very important aspect of retirement security that we need to focus more on. one way of coverage would be the automatic riaa proposal, the president has proposed his proposal would require businesses to have more than ten employees to offer a payroll deduction ira and would provide tax credits if they would do so including larger runs if they are auto enroll. while this idea was originally bipartisan, it has stymied by the fact that it has included the mandate and it brings up images of healthcare refined in

the lives of republicans on the hill. another approach is jon's proposal which is substantially to increase the credit for employers offering plans, but not necessarily for penalty. in the meantime another important effort is to get states to be pioneers in this. if we're not going to see these legislative proposals are enacted in the near future there are states that are wanting to create auto ira plans. the department of of labor is looking at guidance clarifying that they are allowed to do so. the final thing to touch on is cam design. this can can have a tremendous effect on coverage. a lot of people know that if you have auto enrollment, auto escalation and plans, you see a lot more participation, a lot more savings. people's behavior is a lot more influenced by how easy it is to save and the structure of saving that it is by these incentives. we have seen a shift towards auto enrollment since the

pension protection act but there's more we can do for that. i think we could think about calibrating some of our incentives were getting employers to calibrate their defaults and adjusting the auto enrollment defaults based on income. so given the social security as the net progressive and lower wage workers would get a higher share of their income replaced. in an ideal world you would have different savings rates among different income groups. you could go in that direction. one other thing to think about long-term is how the savings are vested. one important development has been due in part of the auto enrollment we have seen investments and target date funds which automatically adjust your pro for the overtime to be less risky as you approach retirement.

i think it would be great if we could begin to think about defaulting people on this would potentially require legislation or guidance to purchase long tear care insurance over time. if the goal is to ensure absurd level of retirement income and adjust healthcare in retirement, you would need less money saved to do that if you are purchasing long-term care insurance. the final, important mission that i have to mention is in reese back to how funds are investigated is the department of labor's conflict of interest pool. this is addressing the very large problem for people who are losing about $17 billion per year due to receiving advice from their financial advisor that is not in their best interests because of conflicts of interest that these financial advisers are receiving. the proposal which still needs to be finalized would require

financial advisers who receive these conflicting payments to provide advice that it's in the best interest. i will stop stop there. i'm taking up too much time. >> he talked about the lack of coverage of most private-sector workers, have given us some ideas of how to treat the design of people who have it, you're hoping that auto iras are covering people who don't have employer, and you talked about the big fault lines in the way people invest now. most of the time asking experts for the advices of fault line. i'm interested later on after we hear from john, what about the design we have in this country is that we allow lump-sum was

drawls, we are seeing already this week what is happening in the uk. they have given that pension freedom to take out lump sums, it the design we have in this country is that we allow lump-sum was drawls, we are seeing already this week what is happening in the uk. they have given that pension freedom to take out lump sums, it is not good. whether or not you think, you're not in politics anymore, whether not you think we should stop lump-sum withdrawals or withdrawals at all before retirement. so i would love to hear your response. john, how would you frame the problem is not being a people problem not a budget problem and how was you frame and have people point the way forward to fiopleng it with the money we already have on the table. did you say it was 120. >> 2 trillion over ten. >> and then you add another 20% for the state. so every year that is overbud00. so if you sold the gun in the first act ill be shot in the second. so so the gun is $200 billion per year, can we use that better?

>> thank you so much for the organizers and for teresa for moderating this panel. it's a great pleasure to be here. you phrase it as a budgetary problem or people problem. the easiest way to see this as a deeper people problem is that i think if you substantially expanded the budget that we are putting forth on retirement incentives, the way they're organized today you still wouldn't really go very far towards fixing the problem. i think that is because these tax incentives, and the research suggests most forms of the incentives whether their company matches or savors credit, or texted action, they just are not that effective in increasinenti% savings. that's for three reasons. first, i don't don't thing this'll come as a great surprise, most americans do not pay his great deal of attention to their savings policy. for instance a five and q double or have the eoplesting taxes system, i don't think most people would notice and literally not that they would

not respond a little bit, i i think they would do nothing. now, of course there would be some who respond so they pll give you the second problem with tax incentives which is it does not appear they actually increase the amount people are savinenti% people. so why this might be true say your firm comes out and they pre going to give you this great match rate and you say this is fantastic i'm going to put more money into retirement,, thand ts only the first step. you have to not only just deposit the money in the account to start with but you have to actually spend less on whatever else you are going to do that year, that turns, that turns out to be much harder. what we see is people do put a lot of money in retirement accounts when their offered incentives but essentialht for each dollar you put into the account you either save less and some other form or your credit card debt goes out and it gets

offset in a way that does not increase your savings and may make the problem worse. if for instance you are borrowing on a credit card that has a higher interest rate than your savinllo apenount. nooub we said it reframes the tx incentives more as a lump-sum deposit that the government is making insert people savinllo account. i think you want to evaluate that on the basis of fset stess. also on the basis of efficienc, what is that we are we're trying to do by augmenting people savinllo. in addition to distributionat i conce sts the motivation for government support is that we think some people, on their own will not be able to save enoanih for retirement. so what that points to this we should be directing the subsidies which are effectiveht lump-sum stores the people who are least prepared for least able to save for retiremend.

epo structuring it as a match we are doing the opposite. first, were given the largest lumings m to people who are are already saving the mosd. second the people who are saving, even if they're saving less, the people who are saving are more likely to be aware, their understanding the problem, there thinking about retirement in a way that the people who really have the deepest problems out the ones who are not thinking about the prnot ylem at all. they haven't started saving, not because not because they haven't thought about it really hard these are people whogust haven't thoanirse about it at all. those are those that we have to help the mosd. how do we help us people? as mentioned there is increasing evidence that defaults, nudges, these other forms of increasing and encouraging participation is much more powerful. so first, take a default for

instance it works on the people who are not paying attention. so now you're primarily going to affect the 85% of the people were not psetd attention as opposed to the 15% who are. second, turns out that defaults when the increased contro evutin to retirement apenounts that actually do increase true savings. there are a few different reasons why that migrse be the case, in contrast to the tax incentives which is the increase in savings in response to that is a more rational well-thoanirse-out thing. when people get defaulted in the contributing more to their retirement apenount, sometimes money is disappearing from the paycheck. for whatever reason there paycheck is less in the and up spending less which is what you need in order to save more. third, the defaults are targeted exactly to the people who are paying the least attention, who often have the lease savings and who need the most help in accumulating a nesting for retirement. in. in this way i actually think

that default as you mention the political prnot ylems with mandates, i think defaults may be better than mandates because it will help target this intervention in the way that's most effective. for instance, instance, the mandate there may be some people who in some way should not be saving, they should be saving overall but maybe they pre earning less issue than they otherwise would. they came out of government service so she was taken a hit for the sake of the countshe. maybe it wascut so much for her to save as she was with the government but now that she's ur ntiv at nyu and earning a sog for teaching there, maybe she can stack more money away. that's a silht epeople gmple but people go throudit bad times and go through good times and forcing everyone to save the same amount no matter what is going on is not rigrse. if you have a default it encourages people to say but if you really need the monacc ind s not forle ng aodone. i think these types of nudges should be put at the forefront

of policy efforts to help retirement savinllo. i think even though the normal thing with tax incentives coming from tax reform migrse not be as effective. thacc can still be effective in encouraging firms to take up y cies or encouraging firms to give workers access to these retirement apenounts at all.inea for instance, being able to havm direct deposit directly out ofe your paycheck insteken of save p and write a check at the end ofu the year it turns out to make an enormous difference and how kno, easiht people are able to say. a two other things while were talking about the tax system is to encourage better entitlement savingsly and behavior in twoese other thinllo is getting monaccf the account and how the money is invested in the account.me.

there is enoacc ous amounts evidence to say people pay hight fees relative to what they need toda, i it is getting better over time i think the conflict of interest rules are going further in thaty directiohave to a lot more encouragement tofe invest in target date funds, the final thing is it turns out to be way too easy in the united states to take monacc out of reti their retirementre apenount. i think the bigger problem is to take it out before retirement. at least you have the monacc to 65. the evidence suggests, in the the u.s. that for every dollar that is invested in a retirement savings apenount, nearly 50 cens is coming up that same year. some of that is coming out because of hardship withdrawals but a lot is comuse of hardships

but a lot is coming out in ways that are not great. for instance people take out loans for their 4o1k, if you switch firms you have to repay the loan and in which case everyone defaults and that monacc is losd. so small changes could increase the amount of savings we managed to get for the retirement age by 25 or 30%. so you get people contro evuting more upfront, maybe 25 or 30% for pain lower fees. for psetn lower fee as and you take them really strides forward. >> i wanted to ask you this over coffee or 100 people. we have $econ0 billion a year, r 2 trillion over ten years. at states and you have a little higher. you say, where spending that incorrectly because qualified

plans of bad design. you would want designed with y its of tweeals but you would t mandate the money go in and stay in. i am intrigued by this idea that would dis qpt people like rillionaires who over their lifecycle, year-to-year have consumer needs and the gove stment would be forle ng people to save too much and they cannot optimally structure there's bending. this came up in the recession. i was asking a member of congress, can people take money out of their 401(k)s now because thacc needed as an emergency? the responses, if you're going to call it a retirement tax credit than that is what it is fo at i'll teale argwerent fore to make a point, would you people to be defaulted into sole al security and then at se

th and yr fica monacc when they needed in those times where they need it the most? how far we got the default rather the mandate idea? s we i think it is very importat to have a base lobby though and i think sir ial security is effective at providing that. i think it could be more effective, not to say that we ove it, we are tsheing to provide a proficient system to get people to save for retirement but we are also treving to avoid a problem where we have elderly. >> would you mandate 2%. >> i did not mandate aodthing atop a sir ded l securit, i i think people should be encouraged to save a lot on top

of social securit, i you really need flexist if you have mandates, also you often end up -- even if it's just a small fraction of people. if you impose enormous hardship on 1% of the population because you haven't structured the mandate in the right way, that can offset almost everything else you're doing that's good with the rest of the system. so i think, again, the real advantage, you know, i gave one example, but the real advantage of having a system where it's kind of a strong hi-suggested -- strongly-suggested default but not one we're going to absolutely force you to take is that you get the main effect of a mandate for 90% of the people. it's just that for that last little bit that really need the flexibility, you're allowing it. >> it's a self-mandate. okay, thanks. thank you. bill, you've always helped me envision that pile of money on the table, you know, by -- with

your work on tax expenditure and calling out that we're really spending lots of money on retirement security. how would you spend it better? is this a people problem or a budget problem? >> no. i guess i would think of to it as both. but, first, let me say thanks to c. a.p. and to you for inviting me. on the one hand, it's very gratifying to hear stuff that i've been saying for 25 years now coming out as conventional wisdom from people as sharp as lily and john. on the other hand, i have to go third, and they've taken most of the sensible, thoughtful points. [laughter] so i'll try to, i'll try to weigh in on different aspects of this. the way i think about it is that, broadly speaking, there's four ways that government can influence retirement accumulation. the first one is mandates. and it goes without saying, but i'm going to say it anyway, that social security is at core of the retirement system.

it should be there, it should be a mandate for the reasons john mentioned, and that's sort of the building point from any additional discussion of retirement policy. the second way in addition to mandates is incentives, of course, tax incentives. tax expenditures, whatever you want to call them. and there's a wide variety of them with a somewhat checkered history as lily and john have described. the third category is information, education. the government can provide people with information; the social security statement that used to go around is an example of some of the stuff that cfpb is doing is trying to get information out to people on various aspects of saving. and the fourth approach is, which i'll refer to as nudges or defaults, what richard saylor calls choice architecture which

has shown to be a powerful influenceym on saving behavior. historically these four ways have developed asñr substitutes( auto-enrollment came along because firms didn't want toç y the cost of a matching incentive and soç on. and, you know, tax incentives came along because social security wasn't meantç to prove all of the retirement needs of people just to provide a base. so historically they've largely come as substitutes for each other, but i think we should think of them as complements in the policy world. and the example just to put an example in your head, let's suppose we want to increase saving, retirement saving by low and middle income households. well, what do you do? the fist thing you do is you default them into a 401(k), or if they don't have a 401(k), you default them into an auto-ira.

the second thing you do is you reform the savers credit so that it provides a refundable contribution to the account. and the third thing you do is you provide them with the information be or education so they know what they're doing with the funds. and you further design the account along the way to that contributions escalate, they're invested in diversified, low-cost funds. i'll talk about what happens when it comes out in terms of annuity in just a second. but it's the combination of the policies that would work, i think, much more effectively than one or other. so you get the person into the account with the nudge or the default, rather, you get them contributing more with automatic escalation. you make their saving more rewarding by providing a matching contribution, and you equip them to figure out what they should do with it through

education and information. so i think that's sort of a framework for where we should go with policy. that suggests, coming back to tax expenditures, that incentives can be part of the solution. and i want to emphasize both the "can be" and the "part." the can be is if they are designed well, if they are going to people for whom the contributions represent net saving, then they will raise national saving. if they're going to people for whom the contributions represent saving they would have done anyway or asset shifting or whatever, then, in essence, they're a waste of money. and one way to think about this touching on the earlier conversations is there's an easy way to take advantage of tax incentives and a hard way to take advantage of tax incentives. the hard way is to reduce your current standard of living in order to get the benefits of the tax deduction.

that represents lower consumption, as lily mentioned, and it represents higher saving. people for very obvious reasons choose the easy way if they can. the easy way is shifting yours assets or saving you would have done anyway and not having to reduce your standard of living. you know, people are very excited about tax subsidies for saving b, but nobody is excited about reducing their standard of living. and if you look at the ads that the brokerage industry offers people, they don't say, you know, cut your standard of living and take advantage of this tax incentive. they emphasize shifting opportunities. and for natural reasons. i mean, if you want people to participate, you want them to participate in the easy way. anyway, so the incentives can be part of the solution, but they can only be part of the solution. if everyone were a perfectly-informed neoclassical consumer, maybe they could be

the whole solution. if they were designed right. but given the imperfections that people have in terms of not being foresighted, not being able to implement plans even if they get plans, we need more than just incentives. incentives cannot be the whole solution. so incentives can be part of the solution, is what i would like to emphasize there. let me mention a couple of other things that i think are important. lily touched on the -- i think it was lily -- touched on the state-level activities. my colleague, david john, who's here has been doing a lot of work on that. i think that's a crucial avenue given the gridlock at the federal level. and as lily mentioned, the federal government can help enable state governments to do

more by clarifying the regulations. i want to talk about it, we talked about automatic enrollment. everybody knows about automatic escalation, automatic investment. and, teresa, you raised this issue about lump sums versus taking the money as an annuity. david and i went to a few other people, mark and lena, to come up with a proposal for automatic annuityization which is actually a really hard issue to think about. if you automatically enroll someone in a 401(k) and you get the contribution level wrong, it's no big deal. they just change the level. if you stick somebody in the wrong annuity, that's a mess because they're stuck there for the rest of their life, and annuity needs varian i substantially. -- vary substantially. some people have a lot of kids that they want to give inheritances to, some people have a lot of health needs, so they want to keep their money flexible for that. some people might think they're going to live very long and so

don't want to annuitize, etc. so annuity needs vary a lot. what david and i and others came up with was the idea of test driving annuities. the idea that people would automatically be enrolled, but it'd be on a temporary basis. they would get a two-year period when they wanted to start taking money out of their 401(k), and that would sort of get over the hump and sort of the big -- small issue with annuities which is, basically, try this at your thanksgiving table. tell your relatives, you give me $100,000, and i'll give you $500 a month. they'll look at you like you are nuts. why would i ever want to do that? but people don't see it that way. so the idea is by getting people to experience that rather than trying to anticipate it beforehand, just have people try

it for two years. if you don't like it, you can take your money out in a lump sum. so there are ways to think about automatically annuitizing people without forcing them immediately into a lifetime commitment. let's see, two other points. one is -- and john has written about this. i'm surprised he didn't mention this. we need to start thinking about ways of divorcing retirement saving from the employment system. employers, it's sort of an accident of history that the dc system ended up in, being employer-based. the db system you can understand why employers set up db structures to manage their work force, etc. a dc program really doesn't have those features, but because the db system was in firms, the dc system came in firms.

you can do all the matching, all the incentives you want in a 401(k) that is not, that would not have to be employer-based. i won't say more than that because john has written about that recently. but i think that's an important way to, important thing to think about especially the latest hot topic is the gig economy and workers who are not really -- workers, people who are functionally workers but for legal reasons are contractors. they don't actually have employers, they're all independent contractors. that's sort of the kind of the tip of the iceberg here. but more generally, we need to think about there's no reason why your retirement security should depend on whether your firm feels like offering a retirement plan. last point, we keep throwing around this $200 billion a year number on tax expenditures.

some people would argue the number's not really that big because it's -- >> [inaudible] >> deferred expenditure receipt, not a complete subsidy. regardless, the point i want to make is we should take 1% of that amount on an annual basis and use it to fund research to understand what works in saving and what wouldn't work. the amount that we could -- we have learned a lot in recent years, but we could learn a lot more at very low expense relative to the stakes involved. so besides the various policy initiatives aimed at people, we should also aim some of them at researchers who are also people but interested in the research issues. >> and the consensus on the panel, the researchers -- that's

a great idea. [laughter] before we go to questions and answers, can i just do a quick elevator speech? you've got less than 30 seconds. is a refundable tax credit a good idea to spend those hundreds of billions of dollars on the table? and how far does it move the needle? how far does it help soft the problem? -- solve the problem? lily, do you want to go first? >> yeah. i think it's a good way to shift the incentives in terms of improving the fairness of the system, and i think some of the credit should go not just to employees to supplement their savings, but to make sure that more, a lot more employers are offering plans. >> interesting. >> so that you really increase the participation rate above the roughly 50% right now. >> increase the participation rate of employers. that's really interesting. that's -- >> they're offering plans and then get people to participate in their plans because people don't generally save outside of the employer context. >> right.

we're in a short elevator ride. >> i think, you know, tax incentives, the key question is compared to what? if it's compared to the current system, i think it's a small step in the right direction. >> right. >> but i think there are many other better things that you can do with that money if you take a step back and -- >> so you would link the refundable tax credit to changes in design? >> yeah. i would use a lot of that money to rethink the design of -- >> i'll come back to what i said earlier. incentives can be part of the solution. this would be if you -- refundable credits aimed at lower and middle income households would be helpful because almost all of them face marginal income tax rates of 15% or less and, hence, the deduction system doesn't do much to help them. i don't think it'll deal with the overall cost issues at the high end, but it could be part of the solution. >> okay. i'd love to open it up more questions. yes.

and can -- yep. can you introduce yourself also. >> i'm david mitchell with the aspen institute. i had a question, just folks could talk a little bit more about the distinction between legitimate hardship withdrawals and kind of the unproductive leakages? maybe touch on an emergency sidecar idea that david leafson's talked about, how do we distinguish between two things, how do we keep people in retirement and let people get access to the money when they really need it? >> yeah. i'm on a bipartisan policy center commission on retirement reform. we spent three hours on this. and a lot of the provisions you can drive a remodeled kitchen through the hardship withdrawals, you know, for home repair. so thanks for that. lily, you want to start? >> yeah. i think what you're raising is a really important issue. i think as related but distinct from the retirement security crisis. so there is also a major problem

of very few households have a basic rainy day fund to deal with both shocks to their income, but also shocks to their consumption expenses. and that actually, at an aspen institute conference, one of my colleagues at nyu, jonathan murdoch, talked about his research on this, just month to month there are dramatic shifts in people's disposable incomes and what their demands upon their income are. and i think that's something that, you know, maybe is a somewhat separate topic from todayok butok is reallyç worthy careful policy attention. in terms of how the retirement savings system works, i think, i sort of want to go back to this issue of annuitizinging and lump sum. and, you know, one solution may be -- i think bill's proposal of sort of trying out annuities is intriguing and worth pursuing. another possibility is just to gradually annuitize people over

time. and this deals with several issues. one issue is that there's, of course, very large adverse selection problems in the annuity market. and so if you had employers defaulting people into products that just are target date funds sort of gradually shift more from stocks to bonds over time, you could imagine a new kind of target date fund that gradually also shifting you into annuities. you would, first because it was through an employer and defaulted, deal with a lot of the adverse selection issues. you'd also deal with the interest rate risk. they face a lot of risk that they're getting a relatively bad deal on that annuity because of what the interest rate happens to be that year which heavily impacts the annuity price. so i think that would, you know, potentially help with less leakage by also give sort of a glide path where in the interim or earlier on in the mid part of your career you have much more of your account not annuitized,

and as you approach retirement, you're having somewhat more of your account annuitized. the other thing i would mention is you mentioned the my ra program, and i think this is a really intriguing program for the issue of precautionary savings and a rainy day fund because even though it is structured as a retirement savings account, it actually works pretty well as a precautionary savings account. it's no risk, it pays a relatively high return for being no risk. it's no fee. the amount that is invested in that product is capped at 15 to ,000 and then treasury's going to have to make a decision about what product it's rolled into once it exceeds that amount. and it's on a roth ira basis which means the money that you put in yourself you can withdraw without penalty. and so that makes it a nice opportunity for people who want, you know, a basic account of up to $15,000 to deal with these

shocks, to have something that is earning a good, safe return but that they can withdraw at least their own contributions at any time for those crises. don't think that's an answer to the retirement security crisis writ large, but it's a partial answer to the other major problem that you've raised. >> so i think that, you know, i don't have kind of a silver bullet for exactly how you delineate, you know, what's a proper hardship expense, but what's striking is many of the withdrawals people make currently in the u.s. don't happen because there's some crisis and we're trying to decide whether it's actually a crisis or not, but they happen almost by accident. so the default on loans, i think, is the best example. i mentioned that briefly, but let me go through that in more detail. you can take a loan from your 401(k), and you have some period to pay it back, and that's fine. that's exactly how it should be working. now, if you had your 401(k) with an employer and you start to roll your money over because you're switching employers or

even if you just leave your employer, you are forced to immediately pay back the loan which which for many people is simply infeasible. so what happens is through things that happened in their life that have nothing to do with retirement and need not actually be bad, right, you get a better job elsewhere and now you're forced to pay back the $50,000 lobe that you took out -- loan that you took out in other in order to help buy your first home, then suddenly you have to default on that, and now you've lost forever opportunity to have that money in retirement savings, and you have to start all over. and i think, you know, while exactly the question you posed, i think, is an excellent one, think we can get a lot of mileage out of just preventing these almost accidental withdrawals. a very similar thing happens a lot of times when people roll the money over. they don't realize what they're doing, and sooner or later it's out of their retirement account. so -- >> i think you asked a great question, and i think what john said is right, no silver bullet

on this. personally, i feel like i'm the dove up here about early withdrawals. i feel like if you tell people when they're 25 or 30 you're putting this money in and you can't get it til you're 62 or 65 or 70, i feel that that's going to cause people not to want to participate. i don't have any good evidence on that. well, i have an evidence of one, my son, who's 26. and opened a 401(k) two years ago and was asking all these questions. it turns out that the idea that he'd have to lock it away for certain until he was 60 -- which seems like infinity, okay? -- was a downer. the idea of saving part of his raise, he thought, was a brilliant idea. so the save more tomorrow stuff, he's like the most enthusiastic endorser of that. but i think it's important to get the money in and rather, and even with the laxer withdrawal rules than it is to insist that

people not take the money out til they're 65. we already have a retirement mandate, that's social security. that is money that you cannot take out til you retire. but i have a very hard time telling somebody who's got a house and kids and loses their job, you know, and they've got, say, 50 or 100,000 socked away in their 401(k), i have a hard time with a policy that says they can't access that to keep their family in their house or something like that. so i think we all want more retirement savings, but i think the perfect can be the enemy of the good here. >> hi -- [inaudible] reporter for financial adviser magazine. this is the ivory tower panel. has any research been done on what the decline in home home ownership has cone to retirement

readiness? i think a strong argument can be made that home equity is a very important part of retirement savings. >> yeah. i'm looking at a couple to researchers -- of researchers in the audience, some from my team. tony webb here at boston college and new school and diane oakley. so it is a really important part of retirement security. comments here on home equity? >> i think, you know, home equity is the second largest source of retirement assets behind social security, so it's a very important source. i think that -- i have not done calculation, but i am guessing that the reduction, the recent reduction in homeownership hasn't had that big of an effect on retirement readiness if only because people seem to be relatively hesitant to tap home equity as a source of income in retirement even though it's a source of asset. >> [inaudible]

spending more money. >> well, you're not spending more money. i think you're just saving less. sorry, you needn't save less, but the point is if you save more in your house and then you don't ever sell your house until you die, which is, i think, how most people do it, then it's kind of not that helpful. i mean, it's -- there's a last stop, but -- >> [inaudible] >> just a second, just wait. any other, any other questions? >> first, can i weigh in on that? >> yeah, yeah. >> there is a paper by researchers at the urban institute a few years ago that showed that there's a correlation between paying off your mortgage and retiring. i think that's what you're getting at. you finished your 30 years of payment, your cash flow goes down and, therefore, the income you need to survive in retirement to maintain your living standards has gone down. so there's a correlation there. what's not clear is whether, whether the drop in mortgage payments, the end of the

mortgage payment is then allowing people to retire. it's not clear if it's causal. it might be that people who know that they're going to retire later decide to, you know, refinance their mortgage in their 50s and, hence, have mortgage payments for longer. but if you're doing retirement adequacy calculations, you know, how much income do you need, that dropoff in cash that someone, you know, when they're paying their mortgage versus having paid it off is a significant amount of money. so when people talk about, well, you need a replacement rate of 70% or whatever, that kind of calculation -- one of the reasons it's not 100 is that there's an assumption that you've finished paying off your mortgage, you're not making payroll tax contributions anymore, 401k contributions anymore, those are the types of things people try to calculate in when they figure out what replacement rate you actually need. >> we time for one more

question -- we have time for one more question. yes. yeah, hi. >> hi -- [inaudible] and a lot of the current savings incentives are not efficient, they're not effective, and many of your ideas that you've communicated i find to be very compelling. so my question is, can you comment on the level of support that these ideas have for working men and women on the hill or within the curb administration? -- the current administration? because i find your ideas very fascinating. >> that's such a good lead-in to the next panel, but any comment on the political popularity of your ideas? >> yeah. i mean, i think, first, a lot of the ideas have been proposed by this president. and i don't want to sugar coat it, i think some of these are very ambitious legislative proposals that will probably take multiple years to get

enacted. but i think there are signs of positive progress on the hill. there was a senate finance committee working group on retirement issues that indicated partisan support for the idea of refundable savers credit. they also indicated some interest in defaulting people boo lifetime income options -- into lifetime income options. there, i think, has been some interest in cutting back on some of the retirement savings incentives at the very high end. for example, there's a stretch ira proposal that limits the extent to which you can continue to reap the benefits of retirement savings once your retirement savings have been inherited by your heir. and that has, at times, gotten bipartisan votes. so i think this is sort of a long haul effort, but there is movement in a positive direction.

>> i have nothing to add. agree totally on this one. >> yeah. >> so i'll toss in two cents. i think that there's a political sweet spot in encouraging saving for low and middle income households. the sweet spot being that democrats care about it because it's low and middle income households, and the republicans care about it because it's saving. that's oversimplification, of course, but i think that if -- my sense is that both parties can support that type of initiative without any sort of stretch of their basic view of the world. and that if and when they do decide that they want to actually do something, that that would be a major candidate for action precisely because it would be consistent with both of their views of the world. >> leslie, as i said, that's a great lead-in to next policy.

thanks a lot. thank you. >> thank you. [applause] >> please join me in welcoming our second distinguished panel of the morning. sean o'brien is assistant policy director for health and retirement at afl-cio. gary koenig is vice president of economic and consumer security at the aarp public policy institute. diane oakley is executive director of the national institute of retirement security, and eric rodriguez is vice president of the office of research, advocacy and legislation at the national council of la raza. thank you so much for being with us today.

it used to be able to secure improvements in retirement savings in a few ways. one was with a strong coalition of business, senior organizations and certainly labor. they were pushing through changes that were very important for workers. as things were becoming more individualized i would change individualized i would change about advocating tools products and changes. when you think about what we see on the horizon there are great ideas out there and other states

there. i think we're seeing a different a broader coalition and constituents coming together and pushing for changes on a broadway than we have seen before. i think we need to broaden the . >> and they're saying should we do something for the low income and that's how we got the child tax credit. it was in a debate like that where we didn't necessarily need a stronger push but you needed stronger people who needed something done in an overall

>> i like to try to bring you into this as well. we are in a fiscal constraints at the federal level, tax reform discussions are sought by many to be on the horizon and perhaps in the very near future. this could benefit retirement savings because as we heard this morning saving incentives make up a large share of the tax code. although, a new new report issued today by the center for american progress finds many of those in sentence are overwhelming complex and hard to understand. it makes it difficult for workers to take advantage in addition, many are are skewed in favor of higher income honors. how can we get more retirement experts like yourself, like the folks we have had here today to

consider tax incentives as an area that they should care about and one that is) permit? >> the one thing i would say about the tax reform is that we have a generally good idea of what works for retirement savings. that is access to payroll reduction payroll plans to work. also plan design, so, tax reform reform i think can complement those features. but we should not lucite of that period is two key things that we know that works. with respect to tax reform, one thing i would say is that in order to have impact in that debate we need to talk about what it means for additional savings, what it means in the context of tax reform which is going to be focused on making the tax code simpler. making it more efficient. focused on progrowth. focus on making it fair.

i think with respect to retirement saving incentives, we can hit all of those buckets. we can come can come up with a tax system, a saving system that is fair, that a simpler, that is progrowth. i think that is a key argument. saving is a pro growth part of the economy. i think we need to emphasize that. in my case, i'm throwing this out there, i'm interested in reforming the savings credit. i would love for that to be made simpler and go directly into an account. >> how can we get more retirement policy folks to see tax as something they should be focused on question. >> i think it is making sure that they understand the value. so right now the way our tech system works is, it works well

for some, but for too many it does not work well enough. i think there is an opportunity here for us to improve it so it works as well for the other part of the population. in fact, we need more savings, it's more it's more important to them for retirement security. >> turning a bit to the politics of tax reform, with the exception of the rare bipartisan in recent days with a budget deal actually moving through the house and early them this morning to the senate. it is not been sent to the president's desk to be signed. were living in an era that most people agree as hyperpolarized, is hyperpolarized, gridlock is the word of the day. so as a result, i think there's some level of cynicism that will not see anything moving the federal level, which policy steps related to tax reform and

the kind of savings incentives that we're talking about today do you see as having the best chance, or any chance of success. does paul ryan's election as speaker change anything qwest mark. >> i think there is an interesting question about paul ryan in particular. i read a tweet from a reporter yesterday in which they said well, for paul ryan what will happen in the next year? there's no budget to worry about, we are not going to have immigration reform will not do anything on entitlements. so is it tax reform. i think we don't know and we don't know where i think where speaker ryan would really come out in terms of his interest or not in addressing retirement savings.

if you look at the work he has done in the past, his interest interest in retirement has been about social security privatization, cuts and social security benefits. on the other hand, he has shown himself open to radical, embracing radical ideas in terms of changing tax code incentive. for example, getting rid of the current tax incentive for workplace health care plans. replacing that with flat dollar credits, actually refundable dollar credits which may tell us something, or not about his willingness to embrace or consider refund ability of the sabres credit. as we think about opportunities for read dressing savings credit and tax reform, i would say the first thing that comes to mind is to worry about the threats to the retirement saving system.

a lot of time retirement saving system is looked at as a piggy bank by congress to pay for other things they want to do. certainly, if you look at what paul ryan's predecessor, the chair of the ways and means committee and the house proposed, he would have actually used changes in the retirement setting to pay for other things. if you reference the budget deal, let's look at the budget deal of what was included there. there's some stuff on retirement, it you was used to pay for other things. actually, thought to myself, i learned after being in washington for a while that i was not cynical enough. the first version that was being released included certain changes to the pension, higher premiums to be paid, as well as, changes in the funding rules. that would have generated about

$5.1 billion over $10 over ten years. within 24 hours they changed what they did for a 50% increase increase of the money they were getting from it. it is hard to believe that this came out of a heartfelt desire to protect pensions. it was about raising the money to pay for other things. it is important to keep that in mind when thinking about tax reform. there is a threat to the workplace-based retirement the workplace -based retirement system and other retirement incentives. in terms of what ideas are most likely to be looked at, unfortunately some of it could consider to be more marginal even though it may or may not be worth doing. changing some some of the rules and creating incentives for more efficient retirement plans designs. there seems seems to be bipartisan interest in multiple employer plans which would allow for targeting small employers to come together in a plan that they do not have to run.

there has overtime been a lot of interest in changing the sabres credit, there has been a lot of talk about that today. gary has talked about in the first panel, it is hard to gauge how much energy there is and whether or not you could get republican support for refund ability. i think some of the structural questions we have heard a lot about today are really important. they are are just as important as the retirement savings. interestingly, the auto ira proposal initially was bipartisan proposal. i think the original republican cosponsors of that lost their election races, unfortunately. it has been bipartisan in the past. there may be opportunities for discussions of proposals. >> diane, i i think what we are hearing is questions, at best.

even if we were to hear forward progress at the federal level to make savings incentives work better and be more efficient, other policy effort would arguably be needed to make sure we see more people save for retirement and take advantage of those kinds of incentives. are those steps that policymakers outside of congress can take, in particular that state policymakers should consider? >> it is a great question, in fact part of the idea is the federal government cannot do it on its own. what is important for the federal government to understand and the state government and legislators to understand, is that individuals know they cannot do it on their own. in fact, we have asked americans do you agree with this statement, i can't save enough for retirement on my own? three force of americans agree with that, 50% of those strongly. the other piece is americans want help. we have data that suggests from

the public opinion survey that we do that 84% of americans want to have higher priorities placed on retirement security. in fact, six out of ten people feel that way very strongly. americans, they know what's in the 4o1k plan or they know they don't have one. because that's where a lot of americans are. we have 40 million americans, 40 million households that have no retirement accounts. so the next level is where do we find some solution? the federal government retirement policy, has never been to expand coverage. it was created to protect the promises that have been made, and also the bill that dairy mentoring, et cetera -- i forget the title of it, the 2001 tax

bill that was not a major tax reform, by the way. it was not like the 86 at which we are talking about some of the discussion here. that bill was the first time that congress passed federal legislation in creating the sabres credit that focused on where the problem was. when you look at who does not have a retirement account, it is is the bottom half of the population by income. the lowest income quartile, only one in four have a retirement. one in four households have a retirement account. if you look at the next quartile, it is about half. that is really where we have a big gap. we have a gap in. we have a gap in the level of savings entirely, but we have a gap in no savings as well. the the sabres credit is targeted towards those individuals. it is work to a modest extent. it is a modest proposal. it got more modified as it does how it was a doubled the amount

or increase by 50% to pay for the retirement community but when metro bill was being put together at one point in time, the sabres credit got cut by half. instead of giving everybody a 50% tax credit it cut it down to 50, 25, 20, and ten. in fact, because it is not refundable for people at the levels where you need to get the incentive because they have no tax liability, they do knock at the same type of benefit to someone in the 39% bracket 9% bracket gets where 40% of the pension contribution is supported by the tax law. they get none of that. so is not surprising they do not have savings. what we have seen is that states realize, that they are closer to their constituents, we have seen bipartisan effort, across the

state. five states have already approved legislation, illinois, and maybe the first state to move ahead with some type of auto proposal instead of having automatic payroll reduction so that company have to give the access to payroll. if you can think of paying yourself first when you get your paycheck by putting your money into your retirement plan, that's the best way to say. if you don't have payroll deduction you don't do it at the end of the month. we know that especially for those incomes. individuals are willing to do that. we have seen illinois adopt a bill that will be implemented next year. california is in the midst of a study that should be finalized within the next few months. we will be moving forward with washington state, oregon, massachusetts, connecticut. more than 50 of the states, more

than half of the states have actually looked at and considered some type of legislation. a lot of the state treasures are taking action. we are seeing this. i think what is important and we have to link up a little better is we have to link up using that sabres credit to the state effort. that can be a really powerful tool. right now one of the things that happens with the sabres credit is that people, 25% of the taxpayers would be eligible for the sabres credit based on their income. today, 20% of that 25 actually make a contribution that would be eligible for the sabres credit which i often talk about a match from uncle sam to save for retirement. it is really important, especially if you are not going

to get a match from your employer that there might be a match of the tax code. the next step of that is a key one, which is right now, especially at the low income level, 40% of the people who open accounts do not go through the paperwork to get the sabres credit. as gary said, we do not put that credit in the account so if the states look and say we are going to create these accounts, one of the way to blow these accounts faster is to put the match in the account and the other piece to make it simpler is make that match stick. i think there'd be a lot of agreement by saying at least the match you get cannot come out until you are retired. we have heard earlier that my son may not go into this if he knows he can't get that money out until he's 65. what may be let him take his money but not let him take out the money that goes in from the tax code. i think there are some things we could do to make it better. i think we have a lot more ideas. i've been i've been thinking

earlier as everyone was commented, i think we could have a big discussion. >> and we are just at the very beginning. we're plenty of time left. >> so i want to give each of you a chance to weigh in on additional policy steps that should be on the table. we have heard about the sabres credit, auto iras, there sort of general sense that the tax code is lopsided, that it is a lot more that benefit the higher income household than those at the bottom refund ability is key there. what additional policy steps have not been talking about that need to be on the table either at the federal or state level. >> i will start. i know i will sound like a broken record here. i apologize. the reason why i am a big supporter of the sabres credit

is because i think it is doable and i think it could get bipartisan support. i i think one of the keys for the sabres credit is not making it refundable, but having it going to the account. i think having it go into the account is ultimately our goal because what we want to do is build asset. i think that that will make it simpler, it will complement the features and the policies that we know work and are effective. providing more access is in it effective feature. auto enrollment is effective. the states picking up where the federal government fell off, as sean mentioned, at the federal level at the very least can have

a sabres credit that could support what is going on at the state level. i know i am am sounding like a broken record but it is a point to emphasize that this is something achievable in tax reform and meets a lot of our goal. >> i would just add, i think it just depends on the problem we are trying to solve more specifically. are we trying to improve adequacy for current sabres in some way? that lead to doubt a certain path. are we trying to bring into the retirement saving system those women left behind, or those who are not behind? that takes you down a different kind of role. you start to think about who are we talking about. we're talking about low-wage workers, those that don't automatically save, and other way that may be disconnected from the banking system. maybe moving job to job. that means a different set of things that you want to look at. you want to see how the tax system is influencing or affecting those workers and families. so i'll say a few things on that. i'm going to plug a cap study recently where we look at the

demographics. the big picture was that we have three states that art majority, minority right now. that will come up to 14 in the next few decades. what is happening to minority workers and how they save question that becomes an important national question but also really important in the states. when when we look at what is happening in california, we are studying it and looking at retirement savings issue, 3 million latino workers do not have access to retirement savings in california. we have to be able to dive into that, unravel that and figure out what is going on with those particular workers if we are going to substantially increase overall savings over time. the other issue that i think it's really important related to this, a lot of the data coming out right now is looking at wealth inequality and what is happening amongst households based on race and ethnicity. fines even even if you control for income, employment, sabres,

you find real disparity in savings and wealth between african-americans, latinos, and whites, in their upper 20s who have good college degrees. but they have student loan debt, they have significant amounts of debt that is preventing them from being able to engage in regular savings. even if you have strong incentives under a retirement fund, even if you have good access, you're going to run into problems if we are not also addressing some of these problems. tax reform can look at what is happening for certain populations and segments and try to provide some relief and i think ultimately the right kind of incentives. i agree, this is an issue with the sabres tax credit that i mentioned. we can get changes to the credit and a

major tax reform overhauled. but at what cost? ultimately, it what cost? ultimately, it will include a lot of other provisions in tax reform package that could skew to the upper half of the income or the upper 1%. you have to wonder, are we really addressing the problem if that is the result we are getting. so we have sabres but we also have a refundable child tax credit. i and other civil rights oppose that bill for justifiable reasons. we are going to have to think about this more holistic lee. i think on the whole, it depends on the problem we're trying to solve. i fundamentally think that it is about workers who are were not in the system, not saving, who have different kind of situations that we should be looking at as long-term investments and improving investment savings. >> building off of that, i want want to bring you in on the sean, given the political's constraints that we're talking about this morning and frames what happens in washington, are we in a place where if you want to see those kinds of improvement, if we want

bipartisan support we are going to have to find a way to pay for those improvements? sunday about that question work. >> i want to talk about a lot of the folks also don't have emergency savings. certainly relates to earlier discussion about leakage from retirement plans and how we think about that. i think right now in most of the proposals out there there is not a way to grapple with that other than to concede that some people have access to this money, so let put them into a roth ira survey can take out their contributions and not pay a penalty. i think there's more work to be done and thinking of how to pair the need for short-term savings with some kind of features in the plan design and help people

in that respect. it is an important area we need to think about. otherwise we are going to have the leakage problem, there will be plenty of people not going in because they feel like they can access the money easily enough. they may need it. on the question a pain for the reform, as i noted earlier my biggest concern is that the retirement saving system is going to be asked to paper other things and we are to take money away from it. that is something i would caution against. to have a discussion about how to use this money more effectively, i think it would be a bad idea to take money away for deficit reduction or to pay for, eliminating or reducing capital gains taxes. i think that would be my biggest

concern. if you're talking about, a lot of people talk about tax reform as something that might be revenue neutral, and would frankly blow open giant holes in the budget because they don't replace the revenue, but even in the context of where it is being paid for as a whole, former ways and means chairman is an example again where is supposedly revenue neutral but it did take money away from retirement saving. >> and you wanted to comment. >> you look at the 2001 tax bill. the sabres credit was scored by about $10 billion a lost revenue, the score for rate reduction was probably about 800

or 900 billion. when you look at the scale, i think one of the hardest things you have and if you look at how much, if you were to look at the i think one of the scoring in the obama budget ted making it auto you are looking at maybe $50 billion and i was back in 2011 so it's probably more than that. you are looking at $50 billion, some of dollars, some of it depends on what you're doing. it sounds like a lot but if you are going to turn around and do major rate reduction and major restructuring of corporate taxation, how do we not do something for half of the americans who right now feel they are in a crisis? there has been some analysis, if if you look at the top of fortune plans which has been done by a group they have a publication and they said well, even among career employees, at

the large corporations were many of them have it defined benefit plans as part of their retirement portfolio, one out of five, only one out of five are going to be able to maintain their standard of living. but they also suggest is that even in their circumstances, 18 or 19% of individuals will not be able to retire until they are 75. that's the best plan. those are not for the latino, the african-american population where the majority of the people have nothing saved. when we look at the populations at risk, they are minorities, women, single individuals, and they are our children.

and we have to do something. >> you mention dollar figures that may seem large as raw figures. but we're talking this morning about the piece that no one often thinks about, the cost of doing nothing. could you talk about that. >> .. as they have done throughout their entire time in the workforce. what does that man inat t as they have done throughout their entire time in the work force. at the same time we have millenials better challenge to buy houses save for coumer ent in save for don'tnt loans. what will happen to thespend economy with a consumerin our

economy if we don't spend what, happens if we ask ine in? the public opinion survey what would we do to respond to the crisis? seventy-five% later. i'm a drug company or a health rnt will spend less money incone retirement o 2500 dollars a persn per year. this is from an estimate done by aarp in utah by people who need that type of direct loan. i can be huge cost. >> to follow dianne and i think understanding that individuals don't have access could create greater burdens for state and local government. the other thing i would say is it a aarp, we want to look to

see if we can increase savings what would that mean for long-term and it's substantial. increasing savings is a way for us to boost our economy and i think that's on the left and right. that's the desirable in -- outcome. we have evidence to support that. >> some people say that the looming retirement crisis is the result of poor choices are personal and aptitude and i think it's important to talk a little bit about messaging because on this panel we might all be preaching to the choir but we were thinking about building public and political will. what do you say to people who claim people should have saved more. it's on them if they don't have savings for their retirement. >> clearly if you look at the experience of the vast majority

of working people in the last couple of decades, which you have at best stagnant wages. you had more recently surging health care costs which by the way are probably going to cannibalize retirement savings when people move forward and they don't address that cost. it's clear that we have an economy that is out of balance that has had an enormously destructive effect on individual families and financial security. so that is the context and particularly for middle and low income americans better than unfortunately the trajectory that we have been on for far too long. you know i think also we have

talked about some of that here today. the enormous differences in people's experience based on whether or not they have the benefit of a work place retirement plan. lilly from the first panel pointing out how people paid directly into an ira. you compare some situated person who has a workplace plan, to one who doesn't have worked place plan and the odds for saving for retirement are tremendously different so really underlines how we have a system that doesn't work that well. it's a real root problem for retirement savings so when you look at the reality of that it's very clear. it is about virtuousness but the larger economic problems that people are facing a justice number or the many more.

>> diana did you want to comment? >> it's important for us to get real pictures of where the typical american is. so many of us in the policy sphere, some people are lawyers and some people are economists and some people are not the average family or the average family for example in california is not covered. the average income of $25,000. and so a lot of individuals don't understand. they can pay $500 a year and that's huge for them. first of all to understand that. the other piece is to understand really where the assets go and i used to work for congressman from north dakota. i is a staff person gave him a statistic one night that he couldn't believe and it was from the government accountability office. they looked at the assets of baby boomers. they looks about the financial

assets of baby boomers and their assessment was the bottom half of the baby boomers are just 3% of the baby boomers financial assets. and that was startling to him. he couldn't believe that. of course the top 5% of the baby boomers, 58% of the -- on 50% of the assets. this was before the financial crisis. we look data to a couple of years ago after the crisis came about and as it was in recovery that was about the same and in fact a little bit more concentrated at the top of the bottom half still only had 3% of the baby boomers financial assets and then we took it a step deeper and we looked at, look at those assets that are dedicated for retirement accounts. we have a lot of stuff in the tax code to make sure those plans don't discriminate. we got the bottom half of the baby boomers retirement assets at 4% of all the retirement

assets. the very top don't get as much but a little bit more goes to the top 20% so in reality there's a real big myth out there that people are supposed to have something in social security but look at the income that goes to people who are actually retired and are no longer working. seniors over 60. the bottom half almost all of their income is coming from social security and that is something if we really want to change we have to start getting real convincing data points that will never ease the mind of policymakers. >> earlier this week and we had reports that top 100 ceos have retirement savings equal to the bottom 41% of american families just to highlight those kinds of statistics you are pointing to. eric you wanted to comment as well. >> this is a common issue. what we tend to get on our side

as well it's a foreign-born and if they have lower educational educational -- of course they can't. a lot of it is looking at net income levels and putting the focus on individuals. in this case we know is really about increasing access, opportunity and increasing incentives for those who are mobile are moving. but it's an important distinction because if we continue to think it's about people and their behavior we never get to the solutions we need. this is true of industry as well. ultimately there is a plethora of financial education information and education, and the information is going to change everything. what we need is a coalition working on policy change in policy change is a significant way to talk about this.

speith is we are talking about messaging and we managed to default than to acronyms, how can we talk about these issues in these goals as part of a larger movement or in a way that might resonate effectively with the american public and i will take answers from anyone who wants to weigh in. >> i will just start. we have had an opportunity to engage workers in a lot of states internationally on the issues. they really want to talk about the economy and we tend to think they only care about immigration let's talk about that and we can move on but in fact a lot of it is wages and opportunities. but what's happening is we are not having that conversation as much. we are not doing town halls. we are not doing the work that's essential to build up those coalitions. it's not just the messaging effort.

it's not just adds or communications campaign. we have to organize and talk to people and to build that coalition. much broader than the coalition we had. even though we have very good smart people on capitol hill that don't have a constituency that they need to make the kinds of changes we want. we have to roll up our sleeves and get out there. >> our members and our member union do a lot of work to provide for retirement security. over 80% of union members have retirement plan or to the thirds of them are in a traditional pension plan, and that starts

with instead of what we are trying to accomplish in bargaining and boiling it down from a values perspective on retirement security wanting to make sure that people after a lifetime of work can afford to retire and on a panel like this we throw around a lot of numbers and acronyms but the discussion that we have to have starts with really talking about what do we want the country to look like and retirement is a piece about what we wanted to look like wax i think that's important in one of the things that's promising from the bigger picture perspective i think people are really paying attention now to the fact that we have an economy

run by a set of rules that unfortunately are designed to benefit middle-class workers were working people generally. that's why think is a real interest in making some changes that will lead to better outcomes but it's important to link the discussion of retirement security into that larger discussion and i think people are. >> i think two things. number one the idea of working people, so many working individuals just feel they spend so much time working they don't have time to understand the financial education we want them to understand. they don't have time to do the advocacy necessarily. they need to have advocates may need to have data that the other reality of it is the most convincing thing we can help understand is give us something we can all relate to. we all have to understand that we are human beings and all of

this is us together. i think what's interesting is when you start to look at millennials there is a great deal of interest and in retirement security with millennials. i think a lot of it is they are seeing their parents struggle and they see grandma and grandpa who might be look enough to have a pension. i heard somebody say tension is like a foreigner to them as a millennials. i know i'm never going to get a pension but the reality of it is in fact some of our data when we asked people could you save another 3% or could you save another five and actually millennials are twice as likely to say that they are willing to save more than the baby boomers. >> we say they are willing who are we seeing savings? >> i think we are starting to see savings behaviors even though they know they have to pay their student loans. they do get it when you start to explain to them that gee you

don't want to leave the match on the table. they are not backing away from auto enrollment so they are embracing some of those things. to think we have two say that's the biggest thing about the sabres credit. when you put the two of them together and this is data from the government accountability office they did a study and what they showed in the bottom half they would increase retirement income by 20% for individuals who today are relying only on social security. that's a huge benefit to our economy and to our future and the huge benefit for millennials. >> people do understand the need to save. i think they want to save and i think it's incumbent upon policymakers to design the system where they can save and

we are not there yet. i am optimistic. i think we can get there. i think i can be part of tax reform. building on what tom said i keep thinking about emergency savings. it's really important because that's really what people need initially some money for an emergency and then they can start building up their retirement savings. if they don't have emergency savings they're more likely to dip into that but i think people understand the need to save but i think it's difficult. savings is the financial challenges, because of having to go out in open up and i are a tango to a bank, that is actually a barrier to a lot of people. i think the willingness is there and i think policymakers design system that could make it more

efficient so they can do what they aspire to do. >> we have a lightning round before we do audience questions and answers. if you had to pick one take away from this morning's two-part discussion that you hope the audience leaves with what would you say? sean? >> in the small group i think there is an understanding that at least in the private retirement savings and pensions space we need to not only think about the savings incentive but the right kinds of savings plans systems are in place. that can mean employer paid retirement plans as well as making sure that people have access. we are just talking about

retirement savings. >> one thing we need to talk about is the state level. i think sean mentioned the ira and the states have really picked up the ball. i think diane mentioned there are five states that have already passed plans and horror in the process of implementing them. there are dozens more who have set up commissions and that is a real opportunity for us to make savings and i think we need to support that work. >> diane. >> i think we have to start looking at retirement savings as a win-win for everybody. it's a win for the individual, it's a win for the low-income individual, it's a win for the high income individuals because these people might rely less on entitlement or grams.

it's also a win for our economy and its a win for business. it's a win for the financial services and what we really have to do is we have to find a way to come together as opposed to be there defending our sacred cow. i think that's the key thing. >> eric doesn't get a chance for final word because he had another engagement yet to run off to but i think we will open it up to the audience for q&a. please are raise your hand if you have a question. right here in the front row. >> if i may start with a comment, if a problem with the general premise that facilitating more retirement savings will solve the retirement crisis. i believe the issue is much more complex and some of the problems , some of the complexity was alluded to by some of the

commentators. for example looking at the macroeconomic context. many people do to the dell development over the last 30 years, the decline in wages, the fact that most people have not seen an increase in real wages at all, and the fact that the tremendous productivity increases during the last 30 years was not passed on to the average american and as a consequence people just do not have money to save for anything. college costs have gone up, everything has gone up while wages are declining. the middle class is declining. as we all know we hear it everywhere. we here at the middle class is shrinking. the incomes are shrinking so

there is just not enough money. so that's the first . the second if i may and then i will come to my question. as a former economist wrote an investment banker to savings issue also has to be looked at in a national and a global context. what if we all save more? we need to have good assets to invest them in and it is i believe is the case we continue to have savings plus meaning all the money is looking for investment in what happens is after prices increase their rates of return continued to fall. right now we are lucky if we invest to get one or 2% rate of

return. i don't think that's going to change anytime soon especially if we push people to save even more. and then now to my question. considering all that would be better instead of motivating people are spending a lot of money to motivate people to save more for retirement, wouldn't it be better to use that money, $50 billion, to support social security, a program that the majority of americans trust and like and it seems to have worked for decades? why not do that? stimulating the financial factor because that's what it is also. we are stimulating the financial sector by giving tax credits for

more savings because the money has to go somewhere. why not use that money for social security? >> there's a lot there. i think probably three of the most common questions that you guys always get, people have flat incomes and rising costs. how can they possibly afford to save? the second piece being interest rates are really low so what's the point in saving anyway? that won't change for the foreseeable future although people might differ there in the third being why not just focus on social security? who wants to take any and all of that? >> a brave man here in the front row. >> i think your comments are probably consistent with some of the things that i said. you have a bigger economic context. we don't have an economy that works for people. we have a much bigger problem and we have to look at these issues in that context. absolutely agree with you on the

basic point that we need to look at expanding zoster should carry and it's certainly something that we in the labor movement support. you mentioned it's very popular and effective way to retire. within labor we have also invested heavily trying to deliver retirement assets that supplement social security. i think we are going to continue the need to do that. although it segments the pair trying to have a discussion about retirement savings and you are right to point out that we need to connect to the bigger picture. and i would say their private retirement system is a necessary fix but not a sufficient one and so i think we still need to have a better retirement system.

in addition to strengthening social security. one thing that i would point out is even with no change in social security which we know some changes are going to happen, benefits are being cut right now so we have where the retirement age is going from 6567 so at any given age you claim benefits you are getting a lower benefit as they age increases. per year in increases. we also know the threshold for tax benefits are fixed. so we have are people having more of their social security benefits tax. my point in saying all that is we definitely need to look at the system as a whole but i think we need in addition to a strong social security we also need individuals to have additional savings in order to live they want -- the way they want in retirement. >> i couldn't agree more. obtusely there isn't anybody on this panel -- panel that says we

would need to and how do we make the lower end a little bit better for people. women once they get to be about 85 have a substantial increase in the level of poverty just because of their lack of resources. at the same time there is a reason that everybody should have some stake and everyone of these things we should make sure we keep a high and people and social security and i also think we have to make sure we keep the low when people having some opportunity to say. what happens to us and this gets to the things that are out there individuals at the low end, their car breaks down or their house needs a new roof. if they are just living on social security they do not have the resources to going get that repair and they may be forced to do something like go to a payday lender and give them their social security check and get it to that kind of financial downward spiral that they have

done a lot of work on two. want to find ways to bring retirement system. we have a bifurcated retirement system in the united states especially when you compare it to our peers. i was in hearings before members of congress sitting next to one of our major financial mutual funds and they turned to me and said well so scioscia he has to deal with the bottom half. we can't have that kind of mentality. i think we all have to have the piece of something to really make it work for everybody. >> other questions from the audience? right here. >> i'm an associate with cpac. one thing that i heard that surprised me was this is the issue that we both agree on. i personally work in retirement

account balances and everyone should agree with the fact that there is not enough savings for the individual. it's surprising point that i heard aarp's is saying that saving grows in the place that even the federal reserve know it doesn't and so is it something that the right and the left agree on or said something on to write that you are moving to aggravate just because it's the right policy and that's the only option right now? >> thank you for the question. i think aarp was mentioned. you want to respond? >> i think you are referring to oxford economics which looked at savings and what that meant for

long-term growth. the research found that it does help growth. so i think your question was is this a left or the right issue? i think economic growth is a left and right issue and -- what is that? it may be an issue but in the past retirement saving policy has been a bipartisan issue. sam mentioned the 2001 tax cut bill. the dollars were mainly the rate reductions and two-thirds of it was retirement savings and pension reform and i came about from bashur one different sides of the aisle when they were in the house and they worked together in the two bill that bill. i think what happened is with

the ira we had the affordable care of tin created issues but fundamentally people's save more for their issue. i think it's a bipartisan issue. >> diane would you like the last word? >> i read -- remember being at the last savor some of that they had that encourage people to save for retirement and part of the discussion it was all about the growth we had created but most of the growth we had created and this was in 2006 was because we expanded the debt and we were borrowing money. i think we saw what happened when me expanded growth on par of money as opposed to when we create growth based on savings and investment, investing in things like our infrastructure and investing in our employees and our students to give them a better education. we end up with a better economy

in the end and that's the key thing we have to remember. ..

serve toes the vice president and codirector of the economics study program at the brookings -- and work -- is a senior economist at the white house council of economic advise years inch addition authorize work with the government she is a visiting a sis stand professor at johns hopkins university. her career has been one of public experience and her expertise in financial issues has provided critical insight in a time when middle class families are being squeezed more and more between risings costs and stagnant income. it's pri -- my great pleasure to bring dr. dynan to the stage. thank you very much. [applause] >> thank you. thank you, christian, for that very gracious introduction, and thanks for inviting me to

participate. i'm really so glad that cap is digging in on this topic. in the two plus year i've been in the administration i learned things that have really unscoredded for me the importance of higher saving in the retirement context, and in other con texts as well. and i've also learned just how complicated. it is to develop policy options on those fronts. so, i think it's great you're digging in. i also will say i'm glad you assembled such an all-team of experts to participate in this conference, speaking to people who have influence, people's research. i've been in conception research for years now, and the group you had on the agenda this morning was just a group that is influenced me as well. so i'd like to thank that group for doing that important public service. today i'll offer some remarks that talk about the importance of saving and