Democratic Senator Proposes New Type Of Retirement Plan

Our guest blogger is David Madland, Director of the American Worker Project at the Center for American Progress Action Fund.

Sen. Tom Harkin (D-IA)

Senator Tom Harkin (D-IA) outlined the principles for a new type of retirement plan in a report released today. This sort of plan is sorely needed given the current state of retirement savings.

The latest figures from the Federal Reserve’s Survey of Consumer Finances show that the typical American near retirement age has accumulated enough money in her 401(k) account to receive monthly payments of just $575. This is a particularly damning figure given that this group of near-retirees is dependent on 401(k)s, while previous cohorts commonly also had a pension.

Currently, retirement prospects are bleak for far too many Americans: estimates indicate that more than 50 percent of middle-class retirees are likely to outlive their retirement savings. Half of all workers don’t even have a retirement plan at work. And the few pensions remaining are under threat, as even profitable companies like Caterpillar are trying to eliminate them.

Harkin’s new USA Retirement Funds — based in part on a forthcoming Center for American Progress proposal, as well as the work of the Pension Rights Center — combines some of the best elements of defined-contribution plans and defined-benefit plans to deliver a portable, cost-effective, and stable level of benefits for retirees at a constant cost to employers.

Though the proposal is unlikely to become law anytime soon, it is still a big step towards solving the pending retirement crisis, because it offers the kind of solution that can appeal both to workers and employers.