[Congressional Record Volume 149, Number 170 (Friday, November 21, 2003)]
[Senate]
[Pages S15401-S15402]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   NATIONAL RETIREMENT PLANNING WEEK

  Mr. AKAKA. Mr. President, I rise today to illuminate the merits of 
National Retirement Planning Week, which is currently underway. 
National Retirement Planning Week is organized by a coalition of 
financial industry and advocacy organizations to raise the awareness of 
the importance of retirement planning. I applaud the coalition for its 
efforts to increase public awareness of this critical topic.
  The need to adequately prepare for retirement has significantly 
increased due to the growth in life expectancy and reduction in 
employer-provided retirement health benefits. In addition, increasing 
debt burdens confronting many families will make a comfortable 
retirement more difficult to achieve.
  Americans are living longer. According to the U.S. National Center 
for Health Statistics, in 1950, an individual 65 years of age was 
expected to live an additional 13.9 years. This grew to 17.9 years by 
2000. These additional years, many or most in retirement, will require 
Americans to have saved and invested additional financial resources to 
help meet their living expenses in retirement. Furthermore, the fastest 
growing segment of the population is made up of those 85 years and 
older, according to the Bureau of Labor Statistics.
  While Americans have been living longer, employers have been reducing 
the health benefits provided to retirees. According to the Kaiser 
Family Foundation and Health Research and Education Trust, 38 percent 
of all large firms offer retirement benefits in 2003. This is a 
significant reduction from the 66 percent that offered retiree coverage 
in 1988. As employers continue to stop providing coverage and as health 
care costs continue to increase, proper planning is imperative for 
individuals to pay for healthcare expenses that may not be covered by 
Medicare.
  In addition, another important component of preparing for retirement 
is to effectively manage and pay down debt. According to the Federal 
Reserve, consumer borrowing through auto loans, credit cards, and other 
debt increased by $15.1 billion in September, which brings the total 
consumer debt to $1.97 trillion. Substantial consumer debt will likely 
result in individuals having to work additional years beyond their 
preferred retirement age in order to pay off their credit cards and 
other consumer debts.
  Obtaining home equity loans and refinancing mortgages to take cash 
out of homes may make it harder for working Americans to retire at the 
age and with quality of life they desire. Thirty-two percent of all 
mortgage refinancings in the third quarter of this year involved cash-
outs of additional money beyond the existing loan balance, according to 
Freddie Mac. Although this is significantly lower than the record 93 
percent in 1989, the additional debt brought on by these refinancings 
can significantly extend the time and cost of paying off a mortgage.
  There is a greater need for larger nest eggs and better debt 
management. Unfortunately, defined benefit pension plans have become 
much less common and are not available for most working Americans to 
help meet these increasing costs. According to the Congressional 
Research Service, 72 percent of pension plan assets were held by 
defined benefit plans in 1975. Unfortunately, by 1998, this percentage 
fell to 48 percent. Changes in the contributions to pension plans and 
benefit payments between 1975 and 1998 also reflect the significant 
shift towards defined contribution retirement plans. Defined 
contribution plans require that employees be much more involved in 
their preparation for retirement. Employees must be aware of their 
alternatives in participating in their employer's plan. The matching 
contributions made by employers can provide employees with an immediate 
return on their investment. Employees must fully understand the 
importance of planning for retirement and the significance of 
participating in tax-advantaged employer plans and investment options 
that can be used, such as Individual Retirement Accounts, IRAs, to 
ensure that they will have sufficient resources for retirement. In 
addition, defined contribution plans require employees to manage their 
investments and make important asset allocation decisions. If employees 
do not have a sufficient level of financial literacy they will not be 
able to adequately manage their retirement portfolio.
  Despite the need to ensure that employees have adequate resources for 
retirement, fewer employers are sponsoring plans and fewer employees 
are participating in employer-sponsored plans. According to a 
Congressional Research Service analysis of the Census Bureau's Current 
Population survey, the number of 25-to 64-year old, full-time employees 
in the private sector whose employer sponsored a retirement plan fell 
from 45.1 million in 2001 to 42.8 million in 2002. The survey also 
indicated that, among this population, participation in an employer 
sponsored retirement plan fell from 55.8 percent in 2001 to 53.5 
percent in 2002. More employers must sponsor retirement plans and more 
employees need to participate in them. Working Americans will be in a 
better position to retire on their terms by starting to prepare for 
retirement early and utilizing investment vehicles that have 
preferential tax treatment such as 401(k) plans and Individual 
Retirement Accounts. A long-term time horizon allows investors to reap 
greater benefit from the compounding of their returns.
  An important component of retirement security is financial and 
economic literacy, which should be at higher levels in our country. We 
must do more throughout the lives of individuals to ensure that they 
are financially and economically literate and can make informed 
financial decisions and participate effectively in the modern economy. 
Without a sufficient understanding of economics and personal finance, 
individuals will not be able to appropriately manage their finances, 
evaluate their credit opportunities, and successfully invest for their 
long-term financial goals.

[[Page S15402]]

  Starting with our youth, it is necessary to fund the Excellence in 
Economic Education, EEE, Act, which provides resources for teacher 
training, evaluations, research, and other activities in K-12 
education. There is no better time to instill in individuals the 
knowledge and skills that they need to make good decisions throughout 
their lives than during their years in elementary and secondary 
education.
  I have also introduced S. 1800, the College LIFE, or Literacy in 
Finance and Economics Act, to address needs in this area for the 
college population. We must give students access to the tools that they 
need to make sound economic and financial decisions once they are on 
campus. Without an understanding of finance and economics, college 
students are not able to effectively evaluate credit alternatives, 
manage their debt, and prepare for long-term financial goals, such as 
saving for a home or retirement. I am working with my colleagues on 
both sides of the aisle to come up with a package based on S. 1800 that 
can be included in the Higher Education Act.
  I also appreciate the work done by my colleague from New Jersey, 
Senator Corzine, in developing and introducing S. 386, the Education 
for Retirement Security Act of 2003. The legislation authorizes grants 
for financial education programs targeted towards mid-life and older 
Americans to increase financial and retirement knowledge and reduce 
their vulnerability to financial abuse and fraud. I am a cosponsor of 
this legislation which will help Americans prepare for retirement.
  I look forward to continuing to work with my colleagues to improve 
economic and financial literacy. I also want to express my appreciation 
for the significant efforts made by Senators Sarbanes, Enzi, Corzine, 
Allen, Stabenow, and Fitzgerald to improve economic and financial 
literacy. Our efforts need to continue so that individuals will be able 
to make informed decisions and be able to pursue their long-term 
financial goals, particularly into their golden years of retirement.

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