[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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