Offering pension plans for Americans who don’t have them at work seen as way to deliver retirement security: TIME

Creating more pension plans for U.S. workers who lack them at work is seen as one of four key measures that can be taken to improve retirement security there, reports Time magazine.

Writer Thasunda Brown Duckett begins her article by suggesting that “a financially secure retirement should not be a dream but a right. Yet, 40 per cent of Americans are projected to run short of money in retirement.”

The system in place in past years, she continues, where most people had workplace pensions and Social Security as reliable sources of retirement income, has changed. “For most workers today, those reliable sources no longer exist or aren’t enough,” she contends.

“Even among those already in retirement, many have encountered financial challenges, especially amid recent high inflation, necessitating a return to work and a pause on their retirement dreams. Still others reach retirement age only to realize they have not saved enough to make ends meet,” she writes.

Further, she notes, “Our current retirement system focuses almost entirely on helping workers save for retirement; it does little to help retirees turn their savings into the income they need, or make sure that income will last as long as they live.”

So what can be done to help fix this situation, and to deliver better retirement security? Duckett offers up four solutions.

The first step is to increase worker access to pension plans.

“Almost half of private-sector workers—more than 55 million—do not have the option of an employer-sponsored retirement plan. That figure is even more alarming for small-business workers:  78 per cent of those who work for companies with less than 10 employees—roughly 20 million Americans—don’t have a workplace retirement plan option. The federal government and more states should create individual retirement accounts (IRA) for workers without employer plans available to them. To date, 19 states have enacted such IRA-for-all plans for private-sector workers, which would require employers that don’t offer retirement plans to allow their workers to be automatically enrolled in plans facilitated by their state.”

Step two, she continues, is automatically enrolling workers in pension plans.

“More employers should adopt auto-enrolment policies for their retirement savings plan to jump-start their employees’ retirement savings and make sure workers are participating in this essential benefit. They should also include measures that enable workers to grow their savings as they advance in their careers and allow them to seamlessly take those savings with them if they change jobs,” she writes.

The third step, Duckett continues, is to boost financial literacy when it comes to retirement savings.

“Every worker should also be provided with clear, simple information to compare savings and income options and make informed choices in order to reach their retirement goals. Employers should implement workplace financial education programs so that employees continue to learn and take action. When we know better, we do better,” she writes.

The final step is helping people with the tricky “decumulation” phase, where retirement savings is turned to retirement income. The goal is to draw down the savings without running out of money while you are still alive.

“We need to adjust our focus from simply helping people save to also making sure those savings last. Every worker should have access to low-cost investment options that provide ample retirement income,” she concludes.

This is a great article. Here in Canada, the Saskatchewan Pension Plan is an example of a pension plan that’s available for those who don’t have a pension at work. Other organizations, such as the College of Applied Arts & Technology Pension Plan, OPTrust, and Common Wealth, are now offering pension coverage to previously uncovered workers.

The idea of auto-enrolment – where you are automatically signed up for the company plan, with the right to opt out – seems preferable to waiting for people to opt in. This idea has been tried out in the U.K. and has boosted pension coverage, so maybe it needs to be seriously considered here.

Financial literacy, particularly around retirement savings, is very important. It is very hard, while working, to visualize how the money might work when you are retired. More information for pre-retirees can only help.

As for decumulation, again, our retirement system seems better at the accumulation phase than at the drawdown stage. People aren’t given guidelines on how to make their money last, and are left to their own devices on how to get there.

So, if you aren’t covered by a workplace plan, consider SPP, an open, voluntary defined contribution plan that currently delivers retirement security to more than 30,000 Canadians. Any Canadian with available registered retirement savings plan room can sign up.

Worried about running out of money in retirement? SPP allows you – without taking money out of the plan – to convert some or all of your savings into a lifetime monthly annuity payment. You will get a payment on the first of every month for the rest of your life.

Great news! SPP’s flexible Variable Benefit option is no longer limited to those members living within the borders of Saskatchewan. Now all retiring SPP members across the country can take advantage of this provision, which puts you in control of how much income you want to withdraw, and when you want to withdraw it. You can also transfer in additional savings from other unlocked registered sources. For full details see SaskPension.com.

Check out SPP today!

Join the Wealthcare Revolution – follow SPP on Facebook!

We all want to be great managers of our money. And the road to great money management must be paved with good intentions. But the “shiny objects” of life distract us from running a tight fiscal ship, so we mostly see a lot more money going out than staying in. Debts mount and the piggy bank remains defiantly empty.

So what are the experts doing that we aren’t? Save with SPP scoured the web to try and find out.

From the Real Simple blog, money management tips include paying bills on time – even tiny bills – and using cheaper, lower-fee online banks.

Time magazine stresses the importance of patience and discipline. “Don’t make major money-related decisions in a hurry or at a time of great emotional stress, such as when the stock markets tank or soon after a loved one has died,” Time advises. Take time to breathe, the magazine suggests.

At the Titan’s Lair blogspot a key bit of advice is “knowing where your money goes.” With a budget, you know where every dollar is going, and that knowledge gives you the power to make savings, the blog advises. Budgeting, the blog adds, helps you stay out of debt and the related pitfalls of high fees and compound interest. As well, it will leave room for retirement saving. “Saving now and managing your money correctly will definitely benefit you in the long run,” the blog advises.

Noted financial guru Suze Orman, quoted on the Mint.com blog, says a key tactic is to “take a hard look” at finances, and to avoid making excuses for what’s not going right. It is important, she notes, to separate what people want from what they need. That will “cut the fat” out of their financial problems, the article states.

So to recap all this advice – don’t let unpaid bills pile up. Pay attention to fees. Take your time with major money decisions. Be aware of where every nickel of your money is going, and cut the fat where you can. Be realistic and separate needs from wants.

Following this more self-disciplined approach will help you tackle any debt you may be carrying, and will free up money for retirement savings. And as we all know, a great way to build those savings is by signing up for the Saskatchewan Pension Plan. Your money will grow, the fees are low, the track record is impressive, and there are many ways to turn your savings into a lifetime income stream.

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22