Christian E. Weller on retirement security

How has the financial crisis affected Americans' retirement income?

Americans' retirement income has been hurt for a number of reasons. In particular, house prices have fallen sharply; home equity for instance, relative to income, is at the lowest level since December 1976; stock market values are dropping, so people are losing billions, and sometimes trillions of dollars in the aggregate; and the job market is going down, which means that people have fewer jobs, lower wages, and ultimately less money to save for retirement. All of those things together mean that we've now seen one of the sharpest drops in retirement income security in decades.

Why is it important to make better retirement plans a priority?

When it comes to retirement policy, it's a question of pay now, or pay later. Designing good retirement plans so that all Americans can save for retirement and be prepared for retirement means that we don't ultimately have to design social programs to help out those who didn't have enough retirement income because the market crashed right before they retired. So it's very important to get it right on the front end, make sure that people save enough for retirement while they're still working.

What would an ideal retirement plan look like?

The ideal retirement plan has a number of important features. That means the assets of that plan are professionally managed; the costs of that plan are very low; the financing of that retirement savings is shared between employer, employee, and the government; among other things. The important thing here is that we have such plans that we can use as a model in the country. In particular, the retirement savings plans that most states offer their employees actually fit the mold of what we would call an ideal plan. The same is true for so-called multi-employer plans in the private sector where a number of employers are coming together to offer retirement benefits for their employees in one industry, for instance, in the building trades, in construction industry. Those plans can serve as a good model going forward in terms of designing thoughtful, efficient, and guaranteed retirement income.