Retirement Insecurity: Testimony from the Poverty Commission Hearing

IABG testified at a public hearing in Chicago for the lllinois Commission on the Elimination of Poverty on September 3rd, 2013. The testimony below, on behalf of our coalition members, focused on seniors living in poverty and the need to expand access to retirement savings accounts.

My name is Lucy Mullany. I’m a Senior Policy Associate with Heartland Alliance for Human Needs & Human Rights. I also serve as the Coordinator of the Illinois Asset Building Group. IABG is a statewide coalition made up of over 100 community based organizations and financial institutions. We are committed to expanding access to the tools people need to build financially secure futures for themselves and their children. One of these vital tools is an employment-based retirement savings account.

Almost half of all Illinois seniors are economically vulnerable. Too many who want to retire in dignity lack the savings to do so. They struggle to cover their basic expenses such as housing, utilities, food, and healthcare. Without sufficient savings for retirement, more and more workers are retiring into poverty and overelying on social security.

Social Security benefits were intended to supplement a worker’s own retirement savings. However, for nearly two-thirds of elderly beneficiaries, Social Security provides the majority of their cash income. For more than one-third it provides more than 90 percent of their income. For one-quarter of elderly beneficiaries, Social Security is the sole source of retirement income.

This is not sustainable for individual retirees, families, and for our state.

By 2050, one in five residents will be a senior. When we look at the current workforce, we see that these workers are ill prepared for retirement. According to a study by the Woodstock Institute, 2.5 million Illinois private-sector workers (over 50%) have no access to an employment-based retirement savings account. Low-income workers and workers of color are even less likely to have access to this important savings tool.

We need to provide all workers easy access to a retirement savings account. An Automatic IRA Program, introduced in the Illinois legislature this past session, offers workers who are not covered by any form of employer-sponsored retirement plan the opportunity to save through regular payroll deposits. The employer’s administrative functions are minimal and under this proposal involve little to no out of pocket cost for business. Likewise, the funds invested in these accounts would be managed by an outside investment firm with minimal administrative duties for the state.

Low-wage workers can save. In fact, when given the opportunity to save, they often save at a higher rate than higher wage workers. The barrier here is access. If we do not take action to expand access to retirement savings options, “too frail to work but too poor to retire will become the new normal” for millions of elderly residents. On behalf of IABG, I ask that you consider the Automatic IRA program as a simple and effective solution and I thank you for listening to our testimony.

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