Keeping Angst at Bay

“Pension reform. No, it's a no! Starting March 7, France comes to a halt. A renewable strike until reform is withdrawn. Public service is energy of the future.”

People care about their retirement. (When) (will) what’s happening in France migrate to the US?

You could argue we are seeing a bit of it right now. Labor is tight. For a range of reasons employers, especially those whose jobs rank at the lower end of the income spectrum, can’t find enough qualified workers to hire at prevailing wages and with prevailing benefits.

Just ask my friends at the local Dairy Queen, where I’m told they are running the drive through only, because they can’t staff up for inside dining.

Ask too the more than 300,000 workers who have walked off work and gone on strike this year here in the US this year.

It would be naïve to say that throwing retirement benefits into the compensation package could change that equation dramatically. But it turns out it does help. And it helps in particular for workers in their 30s+ – one of whom served me at DQ – who often have to leave or will decline employment that doesn’t come with retirement access.

You could also argue that we’ll see it in a few years when Social Security pass through benefits to retirees are greater than the Social Security contributions being made by US workers. Like France, we’ll either need to stretch our full retirement dates, or reduce benefits, or – the horror – raise taxes. Or a bit of all three. We’re sure we won’t see action on this until the absolute last minute, because that’s how these things get done. Hopefully we will be armed with a number of good proposals when that day comes.

Now you could also argue that we’ll never see the level of angst witnessed in French cities this year. We have a well-formed defined contribution system. We’ve been using it for years. It covers many. Long term savers and higher income workers are beginning to retire well out of this system relying on the two legs of Social Security and Defined Contribution with a splash of Defined Benefit here and there.

If we want to stay ahead of the wave, let’s make sure this system continues to get stronger. Let’s work on universal access, broad deployment of best practices like automatic enrollment with escalation, and good retirement income capabilities that make it easier for people to create paycheck replacement and manage risk in retirement.

Baguettes are good. Retirement beefs are not. Let’s avoid! / Lisa

This piece was also featured in the August 17, 2023, edition of Retirement Security Matters. For more fresh thinking on retirement savings innovation, check out the newsletter here.