NCPA - National Center for Policy Analysis

Retirement System Needs Reform

April 15, 2004

Our private retirement system does not provide sufficient opportunities to accumulate retirement assets for whole sectors of our population, note the NCPA's Celeste Colgan and John Goodman.

Because of their workforce behavior, women have difficulties amassing enough savings to see them through their retirement years, say Colgan and Goodman:

  • Women are more likely to be employed in industry sectors that provide no or scant retirement benefits; they choose jobs that afford the flexibility that they need to manage their families; these jobs are most generally in retail and service sectors.
  • Women take time out of the workforce to have and rear children; interrupted employment puts them behind in their ability to accumulate retirement savings.
  • Women are more likely to work part-time and are not offered employer-sponsored programs.

According to Colgan and Goodman, reforms should:

  • Create retirement plans that are personal and portable, traveling with people as they move from job to job.
  • Eliminate rules that arbitrarily punish people who work part-time, switch jobs frequently, or move in and out of the labor market.
  • Eliminate arbitrary ceilings on retirement savings plan contributions that unfairly favor people in some industry sectors over others.
  • Establish procedures that encourage people to invest wisely and prudently over the course of a work life.

Some of the reforms contained in the Bush tax cut in 2001 are a step in the right direction. Much more needs to be done.

Source: Celeste Colgan and John Goodman, "Saving and Investing: A Challenge for Women," NCPA Policy Backgrounder No. 161, April 15, 2004, National Center for Policy Analysis.

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