Can those aged 45 to 64 be saved from misery in retirement? How?

This attitude of fatalism, we found, is common. Barbara Butrica, a senior research associate at the Urban Institute, for example, said, “I think most people recognize Social Security is not going to get better; in fact, it’s going to get worse for certain groups.”

Even those who support expansive public policy to counteract the downward trend in retirement security expressed the belief that little will be done for the 55- to 64-year-old cohort. Teresa Ghilarducci said that, aside from forcing themselves to work longer, there are two scenarios in which these citizens could have relatively more secure retirements: “If you’re in your fifties, your only solution is to reduce your living standards by 20 percent and [increase] your savings by 20 percent. You have to start your deprivation early so it doesn’t seem so bad when you get older. Or, the government could decide to boost Social Security benefits.” Ghilarducci never indicated such a boost is likely, however.

Joshua Freedman, a policy analyst in the Economic Growth Program at the New America Foundation, agreed that the current public debate, particularly in the wake of President Obama’s budget proposal, is focused on cutting Social Security. As a result, he believes major legislation that could markedly boost retirement security is unlikely to pass in the near future. However, he thinks it is important that more people begin to identify and talk about the broader issue that “people [won’t] have adequate standards of living in retirement no matter what they do.” If that happens, in the long-term, Freedman said, addressing that broader question would yield “a much more rational and sane look at how we can solve the underlying human problem.”

More room to maneuver for 45 to 54 year olds

For younger workers — those currently 45 to 54 — the future is, potentially, brighter. When asked for ideas on how to help this cohort, experts produced a range of policies that could help them to save enough for retirement to maintain their pre-retirement living standards.

These 45- to 54-year-olds are among a broader group of middle-aged workers who, many believe, have fallen victim to what Eric Kingson described as a “failed private pension system.” Monique Morrissey said that 401(k) plans and other private savings arrangements have failed to adequately prepare workers for retirement: “For many workers, if they’re not getting a tax break and an employer match, a 401(k) might actually be a really bad way to save money…The fees are high. They can easily erode a third of what you accumulate in them.” In addition, she said, private savings plans in general lead people to underestimate how much they will need in retirement. People see a seemingly large lump-sum value in their 401(k) and “think they are rich,” but when spread over decades of retirement, such sums become insubstantial.

According to Dean Baker, co-director of the Center for Economic and Policy Research, the creation of new and better types of retirement savings plans that fix such deficiencies could help 45- to 54-year-olds become more secure in retirement. “They can accumulate something that can provide a boost to their living standards in retirement, so [new forms of retirement savings] would help them,” he said.

What would such plans look like? Monique Morrissey said the hallmark of good retirement savings reform would be the creation of “hybrid multi-employer plans that are easier for employers to fund in advance and that provide steady, decent, and adequate incomes that don’t get capped during downturns, [plans] that people can’t take money out and borrow against.” Two high-profile proposals for a major revamping of the U.S. retirement savings system have been put out in the past year, both of which seem to meet Morrissey’s requirements.

The first of these, proposed by Senator Tom Harkin, is called the “Universal, Secure, and Adaptable” (USA) retirement fund. These funds would be universally available to all who do not already have access to a retirement plan with an automatic payroll deduction and “a minimum level of employer contributions” — though the proposal does not specify that minimum level. Those eligible would take advantage of the existing payroll-withholding system to deduct a specified amount of an employee’s paycheck and place it into the account. This would likely be 3 percent by default, though the employee could increase, decrease, or opt out of the contribution. Employers would be required to “make modest contributions,” but, again, the contribution level is not currently specified in the plan. The plans would be pooled, privately run, and professionally managed by “a board of trustees consisting of qualified employee, retiree, and employer representatives.” They would follow employees throughout their lives, and upon retirement, would pay a monthly annuity (with survivor benefits) just like a traditional pension.

The second proposal, formulated by Teresa Ghilarducci, Robert Hiltonsmith, and Lauren Schmitz, is called the State Guaranteed Retirement Account (State GRA). This plan would require mandatory employee contributions and, according to a working paper authored by the plan’s architects, would “guarantee a return of at least 3 percent, or about 1 percent above inflation.” The plan’s developers assert this rate of return would be naturally achievable, and that projections show “there is very little risk of the rate dropping below 4.9 percent over the long term.” However, they suggest funds should nevertheless take out insurance policies “with either the state or private insurers” to safeguard against shortfalls. Employers could contribute to the State GRA, but would not be required to do so.