Georgetown on My Mind: Sweet Retirement Success

Angela Antonelli, we are so pleased to have you with us today. You launched the Georgetown Center for Retirement Initiatives in the early days of the current state retirement security movement. What was that like?

Thank you so much for the opportunity to spend some time with you! The retirement security movement actually has been around for a long time. What drove the creation of the Georgetown Center for Retirement Initiatives (CRI) was the realization that if we kept waiting for the federal government or private sector to address the fact that 57 million private sector workers go to work every day, but don't have a way to save for retirement through an employer-provided plan that we would essentially be waiting forever.

We love❤ it.

So, Mark Iwry and David John, the bi-partisan dynamic duo, combined forces and developed the idea of the Automatic IRA (Auto-IRA) account. It was originally envisioned as something that would be adopted at the federal level more than a decade ago, but progress stalled.

As a result, a number of states began to give the idea a closer look. When you think about it, policymakers have a responsibility to address economic and societal challenges. With the aging of the population and a growing number of individuals and families completely unprepared for retirement, state policymakers recognized that over time they would be facing greater fiscal and economic pressures.

States, as they often are on so many different challenges, became the innovators and leaders.

The genesis of the Center for Retirement Initiatives was to encourage states in taking the lead to drive solutions to address these challenges, in part, by establishing these new savings programs to strengthen the retirement security of private sector workers.

So what are you seeing in the retirement security – or insecurity – space?

As we've seen over the past four decades with a movement away from traditional defined benefit pensions to a defined contribution system of retirement savings, some folks are being left behind. For the private sector workforce, too many workers have been left either without a way to save, or even if they do have access, not always taking the actions in their own best interests to save what they need for retirement.

The Georgetown CRI saw this opportunity to work with the states as innovators and leaders to start moving the ball forward and addressing this challenge that is in desperate need of attention.

Early days.

Yes. When we started the Center in mid-2014, there were no programs yet in active, funded status. There were a few study states. We were inspired to encourage and support states like California, Connecticut, Illinois, Oregon, and others contemplating solutions to retirement insecurity. It's amazing to see just in these past seven years – through multiple changes in the Administration in Washington, DC, through the COVID pandemic and business and employment crises -- the amazing progress that's been made by the states to address this challenge.

It is exciting to hear the Program Directors highlighting the number of new savers they’ve enabled in such a short period of time.

It's amazing. I was just looking at the figures. Here we are at the end of February 2021, it's been a year of pandemic that we've all been navigating through, and in just three Auto-IRA states we’ve seen approximately $188 million saved in over 302,000 funded accounts. And more than 32,000 employers are registered to facilitate.

It's exciting to see what's happened in such a short period of time. And to have these thousands of new savers who weren't saving for retirement, just three or four years ago. As we look to the future, we know we’ve got Connecticut, Maryland, Colorado and others coming down the pike; that will only increase coverage and savings. We are all hopeful other states will be joining in 2021 and 2022. Just think where we’ll be five years from now in terms of a number of savers and the amount of assets that are going to be in these accounts. It is life-changing for individuals and families.

Tell us a bit about how you are supporting states in this mission.

Our top priority will always be the basis upon which we initially built the Center, to be a resource for states, providing technical assistance and support. We help drafting bills, providing data and information, and sharing thought leadership, best practices and lessons learned about the implementation of these programs.

Delivering thought leadership is also important. A couple of example include providing guidance on the applicability of the federal tax code to state programs, IRAs and 401(k)s. Another example is a piece we did in 2019, encouraging states to think about multi-state partnerships. We now see most states including some form of multi-state language in their bills.  

Another way we work with the states is facilitating a network of connectivity among states. We do that on a monthly basis, on an annual basis, and ad hoc as it makes sense.

We just hosted our third annual states meeting to discuss program best practices and lessons learned. We were also thrilled to give the Center’s 2021 Distinguished Leader Award to Treasurer Dave Young of Colorado for his commitment and leadership in creating Colorado Secure Savings. The states will always be of great importance to us and a priority.

Over time the Center has extended its focus. What are some of your top initiatives in 2021?

When you look at the retirement lifecycle, it consists of three major, fundamental pieces. One is savings into the system. That’s getting people to save and put money away for retirement. The second piece is that once they put that money in, how is their money invested, and how is it going to grow over time? Here we consider what are the investment vehicles that are offered and available. And then the third piece, too often ignored, is as you are moving from savings and investment growth over time, how do we manage decumulation? How do you help people manage their savings to last and generate income in retirement?

I'm a strong believer that if you look at the entire retirement life cycle, what we're doing with respect to the state retirement initiatives is focused on helping to move savings into the system, to get more people to save, and to save more.

Yes – access and use.

But we care about that entire life cycle. We care about what happens on the investment side, and we've done some work focusing in on the design of target date funds. Target date funds tend to be the default investment in many of these retirement programs. So are there things that we can be doing with the design of target date funds to improve how they work in Auto-IRAs? We'll be also looking at other investment vehicles as well.

I'm also a very strong believer in outcomes. Our current retirement system exists to provide income in retirement. We need to have a paradigm shift in the way we think about our defined contribution retirement system. It isn't just about this focus we've tended to have on an account balance, and how many dollars are in an account. At the end of the day, it's about how much that savings will actually generate in the way of income at the time of retirement.

We are thinking about this as we look to the future. In our work examining a variety of lifetime income solutions, we quickly recognize that one size doesn't fit all. So we continue to explore how to add that component, finding a way to bolt it on to our existing DC retirement system. In some respects, this means taking attributes of those good old fashioned traditional defined benefit plans and bringing them forward -- perhaps in different design – into today’s defined contribution retirement system.

At the end of the day, if we're truly focused on what we're supposed to be achieving with our retirement system, it is about the generation and protection of income. So unless we focus on that, we're not truly getting the job done.

We couldn't agree with you more. The Georgetown CRI recently commissioned and published an important work on the potential benefits of universal access to retirement savings. What findings struck you most?

Thank you! This work considered what might happen if we were to take the current work of states and apply it on both a state-by-state and national scale. It was a lot of analysis to make some very simple points!

Number one, as we know from the state programs, the beauty of it is that there are really simple, low cost, easy ways to help people save for retirement. In the context of this analysis, end results show that if we make it easier for folks to save, even small amounts on a monthly basis can significantly add up over time. We’re seeing savings levels of a little over $100 a month in existing programs. This can be life-changing in terms of the ability of this savings to be a significant supplement to something like Social Security income.

We thought that it was important to highlight the value of this savings -- what it would mean to our economy and to the fiscal well-being of our nation.

If we have 57 million private sector workers who don't have access to or ways to save for retirement, let’s take what we're seeing at the state level and make it national in scale. We estimate this would expand coverage to between 20 million and 40 million of those private sector workers. If those workers are putting away as little as a hundred dollars a month for anywhere from 20 to 40 years -- even starting later in life -- it makes an enormous difference.

Your report shows both a powerful big picture, and a more granular state-level view.

We took the analysis and broke it down to create a state by state analysis of the benefits of access to saving for retirement. This gives 51 profiles -- 50 states and the District of Columbia – two-page fact sheets for each state covering demographic trends, the size of the access gap, how savings grow over time to generate additional income, and the economic and fiscal benefits of this additional retirement income.

We feel like this is one of the most impactful pieces we've seen in the last few years, and we’re going to encourage everybody to take a good close look at it.

Candidly, the benefits of expanding access to retirement savings could be enormous.

What makes you most hopeful about the future of our retirement system?

You know, out of the tragedy of the COVID pandemic and its economic damage, a bright spot has been this greater understanding of the need to expand access to ways to save and retirement coverage.

Prior to 2020 we saw the start of this trend.  In a double-edged way, the tragedy of COVID has helped to further raise awareness of the need to address retirement savings, generally improve financial wellbeing and the importance of addressing financial challenges like emergency savings.

Out of tragedy comes understanding, compassion, a greater focus on solving some critical, critical economic issues. I think this is one of them. And I think this more holistic view of financial wellbeing is a positive development. Coming out of the pandemic, it is something that gives me hope for the future.

I think another thing that makes me hopeful is the way in which the state retirement savings initiatives and the focus on the lack of access to savings has really put a bright light on a serious problem. It's pushing the private sector to do better. The reality is corporate America doesn't have to foot the bill for the fact that small businesses and low- and moderate-income workers don't have a way to save for retirement. But policymakers do, it's their job. They have to focus on these critical economic and fiscal issues. And we know from analysis that was done in Pennsylvania and Colorado on the cost of doing nothing, how much that fiscal and economic pressure on states can be.

So, it's been very positive to see the way in which the state initiatives have challenged the private sector to step up and do a better job. It’s a factor driving some of the innovation that we're now seeing in the private sector to develop products for employers to help get more workers saving.

We’re guessing that with some innovations, the states are going to be at the front of the pack because they can, when employers and others may hang back.

Yes, one of the other beauties of the state programs that we've also seen internationally is the effectiveness of features like auto-enrollment, and the use of very thoughtful defaults. These are things that we have seen in the private sector, but the states are embracing them and showing how well they work.

As a result, we're seeing private sector employer plan sponsors realizing, gosh, we can boost default savings rates from 3% to 5%. We can enroll everybody and let them opt out if they prefer that. I don't think most people realize that the use of automatic enrollment is not “automatic” yet in the US. So it's a pretty significant impact the states have been having, I think, to help push forward the evolution of our existing retirement system for the better.

Hadn’t thought of that, but we think you are spot on! The Georgetown Center provides critical resources to the retirement savings innovation community. Where can folks get more information?

Well, we work hard to keep our website as a robust source of information on everything related to the state initiatives, and to the future of retirement security. It’s designed to be one-stop shop for states information and where people can quickly learn more and get some basic information on what's happening with the state programs. We also produce content in a variety of forms to get the word out on what the states are doing, and on the future of the retirement system, including research that we're doing. And we do that through podcasts, blogs, webinars, a variety of different communications channels to get the word out and to help provide that information and education to as many people as possible.

So useful! Final fun question: the pandemic is getting a little long in the tooth, but tell us about some of your silver linings.

Wow, this is a defining moment in history that we'll all remember for the rest of our lives. For me professionally, the silver lining during the pandemic has been that as a small, self-funded, university-based, nonprofit think tank I am grateful for the amazing group of supporters we get to work with. They are passionate about these issues and have continued to support us in this important effort. I’m grateful that we have the ability even during a difficult time to continue to expand what we do every year.

Personally, I realize just how fortunate I am to be working through this pandemic. And as we get closer to vaccinations, I’ll share that I have an elderly parent in a nursing home. I can't wait to see her. Like so many others, I haven't been able to see my mom very much over the last year. I am coming out of this terrible time with a much greater appreciation of all the little things: the value of spending time with family, the importance of relationships, the need to spend more time having fun.

As much as I love the work that I do, I treasure balance. And I am thinking more about knowing the things you can just let go of, a greater appreciation of each day, gratitude for the small moments.  Time is our most precious asset, and you can’t do anything to get more of it, so you have to use it well.

Priorities.

Yes. More fun. More family time. It's all the little stuff.

Amen! Thank you Angela Antonelli! If you’d like to connect directly with the wonderful Angela Antonelli, you can reach her here. In addition to the CRI’s website, you can follow Angela’s work and the Georgetown Center for Retirement Initiatives on Twitter and LinkedIn.

This piece was featured in the March 25, 2021 edition of Retirement Security Matters. For more fresh thinking on retirement savings innovation, check out the newsletter here.