NCPA - National Center for Policy Analysis


March 23, 2006

As 77 million members of the Baby Boom generation begin to retire, America is about to experience one of the most dramatic economic, sociological and demographic changes in its history. The institutions we have relied upon in the past are completely unprepared for what lies ahead, says the National Center for Policy Analysis (NCPA).

What steps can be taken to secure the retirement of baby boomers and future generations of retirees?

Improve traditional pension plans:

  • The current system encourages employers to unload unfunded pension obligations on the federal government's pension insurance agency -- resulting in smaller retiree benefits and potentially large burdens for taxpayers.
  • Clearly, corporations should be required to fully fund their own pension plans; we also need to encourage immediate vesting and full portability of those benefits.

Improve 401(k) plans:

  • More than half of all workers invest in a 401(k) or similar savings vehicle, but not enough people are investing appropriately for their future; they either do not invest enough or they pursue investment strategies that will not provide an adequate retirement income.
  • To correct this problem, employers should be given a safe harbor against lawsuits and receive other regulatory relief if they automatically enroll employees, escalate the employees' contributions over time, invest in diversified portfolios, follow an investment strategy that becomes more conservative as the employee ages, and convert the funds into an annuity at retirement -- unless the employee specifically opts out.

These steps and others would allow the baby boomers -- and the generations that follow them -- to better prepare for their retirement years, says the NCPA.

Source: John C. Goodman, Devon Herrick and Matt Moore, "Ten Steps to Reforming Baby Boomer Retirement," National Center for Policy Analysis, Policy Report No. 283, March 2006.


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