How Policymakers and State Pension Funds Can Help Prevent the Coming Retirement Income Crisis

Abstract

The United States is on the brink of a retirement income crisis that will have severe consequences for future retirees, workers, and all levels of government if left unresolved. Analysis in this paper reveals that 43% of U.S. workers currently ages 25–64 will not have the adequate resources they need to retire with dignity at age 65. We propose that state legislatures mitigate this shortfall by giving workers who lack access to a retirement plan through work the opportunity to invest in a professionally managed, portable, individual cash-balance account with the state pension fund. At retirement, workers would have the option of converting their savings into an annuity—a guaranteed stream of income for life—to supplement other benefits.