Dear Mr. President: Ideas for Fixing Retirement Planning Problems

I know you are getting a lot of advice about how to run the country now, so I don’t feel like I am piling on to give you my piece about retirement plans.

Let me start by saying what you already know: You do have a retirement planning problem looming.  All of us baby boomers are in our 50s and 60s, and many of us don’t yet have retirement figured out. Those who thought they were getting close have seen years’ worth of savings wiped away that they may or may not recoup. Others didn’t lose much, but only because they didn’t have much to lose.  It seems inevitable (if somewhat lamentable) that the boomers will be looking to somebody to bail them out.

So, what are you going to do?

First thing is: You’re going to have to fix Social Security.  We’ve been hand-wringing about it long enough.  Now is the time for action: and that action is to raise the eligibility age for receiving full benefits to age 70. Oh, you can still allow people to retire at age 62 if they want, but with reduced benefits. You might even be able to nudge up what full benefits entail, and still come out ahead, if you delay payment of those benefits by a few years.

The thing is, as I’m sure your advisors could tell you, that Social Security was not intended as anything more than a safety net for old folks. But it has now become the first consideration for everyone’s retirement plan. So it doesn’t matter what it was intended to do, given that it’s now the only income many retirees have, and it will serve as the majority of their incomes for many others. By moving the retirement age up to age 70, this will help ensure there’s enough to pay the upcoming retirees without impoverishing other parts of the country.  Will you catch some heat for doing this?  Sure, but as good old Harry said, “If you can’t stand the heat, get out of the kitchen.”

The other thing that I hope you’ll address (and you said you would) is the lack of savings for retirement. Unfortunately, you’ve only got one tool in the toolkit for this, and that’s a tax break of some kind.  But you know what?  There are already tax breaks for savings.  So, what else can you do?  Well, one thing that I hope you will address is what incentives and myriad of hoops that the average employer has to jump through to get the tax breaks. The laws and regulations regarding retirement plans are so convoluted that it’s not worth the tax breaks to many employers, especially small employers.  A specific proposal I could make is to do away with the concept of “top heaviness.”  I know many employers who dipped their toe into a 401(k) plan only to pull it out when they found out what a top heavy 401(k) plan would cost.

By the way, I’m fine with making fees more transparent.

And, yes, there are providers who are getting fat off of fees, while participants pay the price.  But there are also participants paying the price for legitimate fees, which are too high because of the legal demands on retirement plans.  Maybe someone in your administration ought to be looking at whether there are unnecessary regulations that run up the expense of running a retirement plan, without adding any real value to the participants’ accounts.  I’ll be glad to give you suggestions; feel free to call me any time.

We all know that we have a retirement planning problem looming. Many have seen years of savings wiped away that may or may not be recouped.