The stats are daunting.
Only half of American workers are participating in a retirement plan at work, according to a study by the Stanford Center on Longevity. Another report found that two-thirds of working millennials have nothing saved for retirement.
But Alicia Munnell, director of the Center for Retirement Research at Boston College, has looked at the retirement system through a historical lens and found reasons for optimism.
“Going forward, I think that we're going to fill in the cracks,” Munnell said on Yahoo Finance’s “YFi PM.” Munnell appeared as part of Yahoo Finance’s ongoing partnership with the Funding our Future campaign, a group of organizations advocating for increased retirement security for Americans.
Munnell said the “easiest” crack to fix is access at work. “We can do through some type of auto-IRA arrangement where employers, if they're not going to provide their own plan, have to automatically enroll their employee in an IRA and make that deposit into their account,” she said. “Employees can then opt out if they want. But we need to get the coverage universal.”
If that problem is addressed, it will likely happen at the state level. Tobias Read, Treasurer of the State of Oregon, founded the program OregonSaves, which creates Roth IRAs that Oregon employers are required to offer their employees if they don’t offer a retirement plan of their own. “Really, what we've done is turn apathy and inertia into our ally,” Read recently said during an appearance on Yahoo Finance. (In a Roth IRA, your money grows tax-free, and there's no tax on Roth IRA withdrawals in retirement.)
Oregon’s program has been around for about two years and has created 54,000 accounts. “About 30% of people are opting out and that's fine” says Read. Tellingly, when asked why they aren’t participating, “most people say ‘because I can't afford too,’ and that's understandable,” he said.
Munnell lists other “cracks” as Social Security’s funding and issues like long term care. She analyzed the state of retirement in America over the last 100 years, before Social Security existed and when retirement often meant crushing poverty.
Compared to that, she sees fixing Social Security’s finances as a smaller problem. With no action, the Social Security trust fund will be depleted in about 15 years, according to the 2019 Trustees report. “It's not an intellectual problem. It's a question of political will,” she said.
There are plans to solve the problem but, as of yet, no political will. Rep. John Larson has a plan, the Social Security 2100 Act, that would fund the program until the year 2100 by asking for more from every working American. He would gradually phase in an increase in the contribution rate for all workers, “beginning in 2020, so that by 2043 workers and employers would pay 7.4% instead of 6.2%.”
On the campaign trail, the Democratic candidates have offered up a range of ideas to tackle the problem.
In a recent op-ed, Munnell ended with an optimistic vision for the retirement system as a whole. “The bottom line is that retirement in 50 years will be more secure than it is today, especially if people work a few years longer,” she wrote. “Otherwise, life will not be that different.”
Ben Werschkul is a producer for Yahoo Finance in Washington, DC.