Compliance October 3, 2018

Legislator Introduces Portable Retirement Account

The account stays with an individual from job to job and in between. 

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Congressman Jim Himes of Connecticut has introduced the Personal Retirement and Investment Account (PRIA) Act, a bill he deems as a solution for Americans lacking benefits in the current retirement savings system.

Himes says individuals cannot rely on employer-sponsored plans at all times, and considers this bill’s introduction as a call to partnership for all who know the existing system isn’t working and hope to fix it.

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“The current retirement savings system is not working for most Americans. It is too reliant on employers and leaves too many people behind. Most accounts are employer-sponsored, but not every business offers a plan and more often than not, part-time and contract employees are not eligible for these accounts,” he says. “We need reforms to the system that offers universal and portable options to all Americans to retire with dignity and security.”

PRIA’s goal will be allowing individuals to have personalized and independent accounts, regardless of their employment situation. Hines identifies several statistics that he says indicates the need for a new retirement-savings vehicle:

  • According to the Bureau of Labor Statistics (BLS), 49% of Americans have access to a retirement account and contribute to it, while 35% have no access and 17% have access but don’t contribute, meaning more than half the country is not saving any money in a retirement account.
  • While 81% of full-time workers have access to retirement savings accounts, only 39% of part-time workers have access.
  • According to a 2016 study by the Minneapolis Fed, nearly 40% of Americans will be working outside of traditional full-time jobs, including in the gig economy, by 2020.

“Millions of Americans are not properly prepared for retirement,” says Himes. “We need a mechanism that makes it easier to save throughout their lives regardless of employment status. PRIA is the solution. It’s an account that’s created when you’re born and stays with you from job to job and in between. Employers can contribute just like in legacy plans when you have a job, but individuals can contribute whenever they have the resources.”

Jim Himes represents Connecticut’s 4th District in the United States House of Representatives, where he is serving his fifth term.

Data and Research October 3, 2018

Financial Priorities Differ With Stages in Life

“Millennials in particular should pay off student loans and other debt, so that they can take steps to focus on longer-term issues, such as retirement security," says Anna Rappaport, with the Society of Actuaries.

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The Society of Actuaries (SOA) released a series of reports on the financial challenges and retirement perspectives affecting all generations, namely Millennials, Gen Xers, Late Baby Boomers, Early Baby Boomers and members of the Silent Generation.

The first report, “Financial Priorities, Behaviors and Influence on Retirement,” reveals that Millennials are struggling to establish themselves financially, particularly with regards to establishing an emergency fund, saving for a home and paying off their credit card debt and student loans. These obstacles may impact their ability to establish a financially secure retirement, according to SOA.

Gen Xers are in a much better financial place, with many having paid down their student loans. This is enabling them to focus on retirement savings. Eighty percent of this group have access to an employer-sponsored retirement plan.

Late Baby Boomers are the most focused on financial planning, with the majority gearing up for retirement. Fifty-one percent have a financial planning horizon of three years or more. They are targeting their investments to grow their money and produce income now and in retirement.

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The most financially stable group is Early Baby Boomers. They are the most likely to be working with a financial adviser, and 60% say they could afford a sudden expense of $10,000. Additionally, approximately three-quarters are retired.

The Silent Generation has fewer savings priorities. Like Millennials, they lack financial stability.

“This research demonstrates that consumers face unique financial priorities throughout all stages of life, and that even the oldest group we studied, the Silent Generation, is not free from vulnerability,” says Anna Rappaport, chair of the SOA Aging and Retirement Strategic Insight Program. “Millennials in particular should pay off student loans and other debt, so that they can take steps to focus on longer-term issues, such as retirement security. This is especially important knowing the challenges their predecessors still face and that they may face even tougher financial challenges due to the large student loan balances many have when they enter the workforce.”

A second SOA report is focused specifically on Millennials, “Difficulties in Gaining Financial Security for Millennials.” Thirty-four percent say that debt is complicating their finances. Thirty-three percent have student loans, the largest amount of any generation.

Millennials are also worried about the value of their investments keeping up with inflation, that they may not be able to maintain a reasonable standard of living in retirement or that they could outlive their savings.

Forty percent of Millennials feel overwhelmed by their financial situation, compared to 22% of all other generations.

Fifty-six percent of Millennials say their generation has a harder time achieving financial security than their parents. Forty-four percent of Baby Boomers and the Silent Generation say that the younger generations have it harder than they did in terms of achieving financial security.

Greenwald & Associates conducted the survey for the Society of Actuaries.

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