The Government Accountability Office (GAO) recently highlighted EPI’s 2007 proposal, Guaranteed Retirement Accounts, in a report exploring different ways to reform the existing retirement system and provide workers more security.
As GAO notes, an erosion in pension benefits over the last decade has left many workers without sufficient income in retirement. Recent losses in the stock market and the generally weak economy have exacerbated the problem. Guaranteed Retirement Accounts, by EPI board member and New School for Social Research Professor Teresa Ghilarducci, is one of four proposals for reforming the U.S. system that GAO addresses in its report.
Ghilarducci proposes establishing a government-managed pension plan for workers who do not have access to an alternative plan, as a means to help prevent a sharp drop in living standards after retirement. The proposed pension plan would guarantee a minimum annual return of 3%, adjusted for inflation, on worker and employee contributions.
In her report, Ghilarducci outlines multiple problems with the current system, including the decline of the employer-provided pension in favor of less secure 401(k) plans.“The plan was expressly designed to address the many problems with the current system, including lack of coverage, insufficient contributions, risky investment returns, lack of portability, pre-retirement leakage, high fees, and the possibility of outliving retirement savings,” Ghilarducci said.
“I am very pleased that the GAO chose to include this plan in its analysis. Its report will help focus attention on the unacceptable risks faced by workers in the current system, and the need to consider alternative approaches to retirement.”