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Retirement Planning > Retirement Investing

GAO: Overhaul Entire US Retirement System

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The U.S. retirement system is in need of a major overhaul, according to a new report from the Government Accountability Office, which is calling on Congress to establish an independent commission that will not just analyze the situation but also recommend changes to promote retirement security. “A comprehensive re-evaluation is needed,” according to the report.

With that in mind, the GAO suggests that the commission include representatives from government agencies, employers, the financial services industry, unions, participant advocates and researchers.

“It has been nearly 40 years since there has been a comprehensive federal evaluation of the nation’s approach to financing retirement and the time has come for a new examination,” said Gene L. Dodaro, Comptroller General of the United States and head of the GAO.

(Related: How to Fix Social Security: Alicia Munnell)

According to the GAO report, each of the three primary pillars supporting the U.S. retirement system — Social Security, employer-sponsored pension or retirement savings plans and individual savings — have experienced dramatic changes over the past 40 years. If they’re not addressed, many Americans could suffer an insecure and undignified retirement.

Those changes include a shift away from defined benefit defined contribution plans which increases the responsibility and risk for individuals; increases in debt and health care costs, which make it hard for individuals to save; and demographic changes which reduce the ability Social Security to pay full benefits beginning in 2035.

(Related: Retirement Assets of Many Households Fell Between 2013 and 2016: CRR)

The vulnerability of Social Security is especially challenging because many individuals have no retirement savings other than their employer-sponsored plan and will rely on federal and state safety net programs, according to the report.

Given these challenges and the complexity of the current retirement system, involving many different federal agencies and no single agency in charge, “a piecemeal approach without clear leadership will not be sufficient” to shore up the retirement system, according to the GAO report.

(Related: 2018 Social Security COLA Is Biggest in Years)

It’s calling for a comprehensive fix that:

  • Promotes universal access to a retirement savings vehicle
  • Ensures greater retirement income adequacy
  • Provides access to improved options to spend down retirement savings
  • Reduces the complexity and risk for participants and employers
  • Stabilizes fiscal exposure to the federal government

“Some of these goals may compete with each other — in particular, ensuring greater retirement security and minimizing fiscal exposure to the federal government,” according to the report, which is why it concludes that  “a balanced approach will be required.”

Related: 401(k) Savings Suffer When Workers Are Financially Stressed


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