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Herdt: Fixing a failed retirement experiment

Last week a state board that is beyond obscure held its initial meeting. The board has no state funding, will have to beat the bushes for private grants to conduct its business and has no guarantee that the work it will do will ever amount to anything.

But the work of California Secure Choice Retirement Savings Investment Board could be of momentous consequence. It is charged with creating a first-in-the-nation program to address what is arguably the most worrisome financial crisis in America — a retirement savings fiasco that threatens to condemn tens of millions of workers to living their final years in poverty.

As a report from the New America Foundation concluded earlier this year, the nation's transition from pension-based retirement benefits to a 401(k)-based system "is on its way to becoming a failed social experiment." Here are some numbers to back up that assertion:

; About half of all workers in the private sector work for companies that do not provide any defined-contribution retirement savings plan.

; The Census Bureau reports that the median retirement savings for the 29 million American workers ages 50-64 in the bottom half of income-earners is zero. For the 14.5 million in the 50th to 75th percentile in income, the median is $6,500.

All these people will discover in a few short years the hard, month-to-month reality of what they already know: Social Security alone will not be enough.

A great many thoughtful economists have examined this situation and sounded an alarm about the impending retirement-security crisis. To date, only one government entity — the state of California — has taken even a baby step toward addressing it.

Last year, Gov. Jerry Brown signed a bill by Sen. Kevin De Leon, D-Los Angeles, to start testing the waters for a process that could provide universal access to a tax-deferred retirement savings plan.

The new plan would be available only to those workers who now have neither a pension nor access to a 401(k) plan, so it would by definition target workers with modest incomes.

The idea is to provide something that is more reliable than a traditional 401(k). Unless they opted out, workers would have 3 percent of their pay withheld and deposited into an individual retirement account.


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