New Issue Brief: A New Vision of Retirement

NEW YORK, NY – Americans today hold more retirement wealth than ever before, yet many retirees still struggle with inadequate income and persistent uncertainty. The issue is not how much money workers save, but that the retirement system itself was never designed to turn those savings into reliable income. In a new Manhattan Institute issue brief, senior fellow Allison Schrager outlines low-cost, fiscally responsible proposals that could dramatically improve retirement security while putting the system on a more sustainable path.  

The current system is based on three traditional pillars of retirement: government benefits, employer pensions, and private savings. Reforming the first pillar, Social Security, has been a political nonstarter for decades. Schrager argues that reform may be more palatable, however, if framed as part of a broader overhaul of the whole retirement system. Schrager’s updates to the second and third pillars would help turn defined-contribution plan assets into stable income while also offsetting any lower benefits and changes to tax status produced by Social Security reforms. 

This issue brief outlines policy changes to make this framework a reality and improve retirement security for all Americans at little cost to taxpayers, young and old alike. Changes include redefining the three traditional pillars to reflect today’s realities, and adding a new pillar as follows: 

1. Mandatory state benefit: A minimum granted benefit that provides income redistribution and replacement (i.e., Social Security). 
2. Secure income from retirement accounts: Savings funded by employers, individuals, or both, that are converted into predictable income to supplement Social Security, specifically stemming from low-risk options. Secure income is financed from a retirement account, funded by an employer and/or individual (i.e., 401(k) or IRA). 
3. Market-based savings: Retirement accounts and other savings invested in riskier, liquid assets, which can fluctuate with markets but help cover discretionary expenses such as travel or dining; balance between pillars two and three will vary by individual. 
4. Part-time work: Continued participation in the labor force, in flexible or reduced roles to supplement retirement savings and Social Security.  

Click here to read the full report.