TIAA-CREF CEO Roger Ferguson Outlines Measures to Improve Retirement Security
New York, February 03, 2010
TIAA-CREF chief executive Roger W. Ferguson, Jr. called for "a holistic system to ensure Americans can enjoy adequate and secure retirement income" in a speech yesterday to the National Institute on Retirement Security's "Raising the Bar" conference in Washington, D.C.
"What we're really after is retirement security, and how to achieve it in a sustainable way," said Mr. Ferguson. "A holistic retirement system would combine the best practices of defined benefit and defined contribution plans."
TIAA-CREF is America's largest private retirement system and manages retirement savings on behalf of 3.6 million Americans in the academic, research, medical and cultural fields.
As envisioned by Mr. Ferguson, a holistic retirement system would:
- Ensure full participation and sufficient funding. Employees would be enrolled automatically on their first day of work. The system would provide incentives for employers and employees that encourage total contributions between 10% and 14% to help retirees replace 70% of their pre-retirement income.
- Help employees manage risk by offering a menu of 15 to 20 investment options to provide sufficient diversification without presenting an overwhelming number of choices.
- Give workers financial education and objective, non-commissioned advice to help them build a portfolio that reflects their goals and risk-tolerances.
- Provide opportunities and incentives to save for retirement medical expenses.
- Provide lifetime income, via a series of monthly payments that continues for the life of the retiree and, if applicable, a surviving spouse, partner or dependent.1
"The holistic system I've described is designed to help people through 30 years of retirement, not just 30 years of work," Mr. Ferguson said.
Mr. Ferguson cited research from McKinsey & Company, which finds that the average American family currently faces a savings gap of $250,000 at the time of retirement.2
He also reviewed some policy questions that underpin a holistic retirement system. They include assuring savings adequacy, assessing retirement plans based on how effectively they encourage long-term saving, distributing risks equitably between employers and employees, and ensuring that federal tax subsidies for retirement enable workers to achieve lifetime financial security.
On the question of affordability, Mr. Ferguson observed that the federal government's commitment to retirement security exceeds $1.2 trillion, as measured by tax subsidies for 401(k)s and other retirement accounts, and government spending on Social Security and Medicare.3 "Public policy must ensure that existing retirement tax subsidies are enabling workers to achieve lifetime financial security," said Mr. Ferguson. "For $1.2 trillion in subsidies, we can see to it that the average American family won't be $250,000 short of what they'll need in retirement."
TIAA-CREF (www.tiaa-cref.org) is a national financial services organization with more than $402 billion in combined assets under management (9/30/09) and the leading provider of retirement services in the academic, research, medical and cultural fields.
Chad Peterson, Director, Corporate Media Relations
firstname.lastname@example.org, 704 988-6811 Cell: 917 715-9083
1 Lifetime income is a guarantee subject to the claims paying ability of the issuing insurance company.
2 "Restoring Americans' Financial Security: A Shared Responsibility,' McKinsey & Company, October 19, 2009.
3 2009 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds. May 12, 2009.
TIAA-CREF Individual & Institutional Services, LLC and Teachers Personal Investors Services, Inc., members FINRA, distribute securities products.