Q&A: How AARP Is Working to Fix America’s Retirement Crisis

The idea that your entire Social Security money could get lost in an afternoon is terrifying. The whole reason Social Security was created in 1935 was because the stock market had crashed and better protections were needed. Just look at history and you can see that privatization shouldn’t even be a conversation. We 100 percent agree that everyone should also have private retirement savings, but that should be entirely separate from Social Security.

Chad Mullen: Also, Social Security is the only form of retirement savings that’s inflation-protected. AARP fought to make the COLA indexed to inflation a long time ago, in 1972, and that is a huge factor in keeping your retirement more secure. And you’d no longer have that type of security if you privatized. 

Bill, you said everyone should have private retirement savings and Social Security. Why?

Sweeney: Sometimes lawmakers in Washington get into this debate around whether America should have Social Security or private retirement savings, as if it’s a question of either/or. But, of course, we need both. You’re not going to retire securely with just one or the other. It’s essential that Social Security is there as a backstop, but relying solely on it is not a good way to retire — it’s not enough. Of course, you need private savings as well. But that part of our message sometimes gets lost or misconstrued at these moments when we’re really focusing in on Social Security.

Social Security has always been just one element of a secure retirement. Back in the ’70s and ’80s, AARP talked about the three-legged stool. The three legs of the stool were your pension, your Social Security and your private savings. Well, one of those legs — the pension — basically got sawed off. Only a small percentage of people get pensions these days. And so now, for most, it’s a two-legged stool. One of those legs is Social Security, and the other is private savings.

How is America performing when it comes to private savings?

Mullen: The short answer is not very good. One big issue is that nearly half of all Americans have no access to retirement savings at work, meaning they don’t have any way to save automatically through their jobs. If you don’t have that access, it’s totally incumbent upon you to go out and set up a retirement account. Talk to banks, swing by a financial planner, have all these technical terms thrown at you, then try to decide what to do.

I’ve worked in a factory, and when you work 40 hours a week getting sweaty and dirty every day, the last thing you want to do once you get off work is swing by your local financial planning firm and talk about target date index funds. It’s scary, it’s overwhelming, and it’s not necessarily the most welcoming of environments to everyday Americans. So you put it off, you don’t save while at work, then suddenly you’re very near retirement age with very limited time to start saving money. And the statistics tell this story, with 43 percent of Americans ages 50 through 64 having no retirement savings at all.

The other big issue is that even among the folks who’ve had the opportunity to save while at work, most still lack enough funds to get them all the way through retirement securely. The median balance of retirement accounts across the country right now is only $88,000. For those who are in their 50s or 60s, that average balance is between $115,000 and $200,000, depending on how you measure it, but any which way, that’s not going to be enough to support you through 25 or 30 years of retirement. Costs continually go up, and inflation eats away at these account balances while your budget stays fixed. So certainly I think we’re in a situation where we’re not faring too good.

Sweeney: And our new survey on Social Security just demonstrated that. There was a jump in the number of people who say how important Social Security is to their retirement, because most people just don’t have enough private savings. So, for a growing number of people, their retirement stool is basically one-legged, which obviously isn’t secure at all. 

How is AARP working to address that insecurity?

Mullen: We’re doing a lot of things. First and foremost, we’re fighting to protect and strengthen Social Security, like we have always and will continue to do. It’s a vitally important part of the retirement mix for most folks, and it’s the only inflation-protected source of retirement income. So we want to make sure that Social Security continues to be there throughout your whole retirement and your kids’ and grandkids’ entire retirements too.

The second major thing we’re doing is closing that access gap by helping people who don’t have a way to save at work save at work. In 17 states, we’ve helped pass legislation that establishes state programs that allow workers to easily save for retirement through regular and automatic deductions from their paychecks. All an employer really has to do is check a box on a form, and then the employee can contribute to this savings account, which is typically a Roth IRA, although a couple of states are looking at some different investment options.

It’s a great way for folks to start a nest egg, and it’s portable, meaning if you go from one job to another and your new employer also doesn’t have a retirement savings account for you, you can use this existing one. That is an important part of this, because rolling over retirement accounts is a notoriously time-consuming process with lots of paperwork and big, scary checks involved, plus tax penalties and all these warnings about what’s going to happen with the IRS if you don’t do it right. It’s nerve-racking, so people put it off for years and don’t have their savings in one place, but these work and save programs, which have different names across the states, help avoid that.

How is the uptake of these programs?

Mullen: Today, we have roughly 1,050,000 enrollees nationwide who have saved over $2 billion combined. These are folks who, in most cases, would not have set up an account on their own and made those deposits. But they’re now seeing their nest eggs grow and are getting more excited, involved and educated about the retirement-saving process.

The third thing AARP is doing is making sure that the hard-earned money you’ve saved is protected. This generation of folks that are retiring right now, or about to retire, is probably the first generation that has had to figure out how to manage and invest the majority of their retirement income on their own. In the past, when the stool was firmly three-legged, companies managed pension investments. So you got your pension check, your Social Security check, and then you maybe had to manage only about a third of your retirement.

Today, for most people, the 401(k) is going to be a much larger proportion of their retirement income. And managing a private account like this is a bit of a gamble, right? So we’ve been working with Congress on bills like SECURE and SECURE 2.0 that put in better guard rails for plan providers to make sure they’re putting money in the right places and giving you good advice. We were very involved in the [Labor Department’s] Retirement Security Rule last year to make sure that when you get to that point in your life, where you have this big nest egg built up, that whatever you do with it next, the person that you work with is doing that in your best interest and protecting your savings.

 Sweeney: These bills Chad just mentioned get hardly any media attention because they’re kind of boring and technical. Fiduciary rules and the minutiae of retirement savings aren’t exactly the kind of big breaking news that makes it onto Fox or MSNBC, but it’s really, really important in making sure that your investments are safe.

Is there anything else you’d like to add about AARP’s strategy to improve retirees’ financial security?

Sweeney: It all goes back to what we started with: the three-legged stool. If you’re lucky enough to have a pension, we’re fighting for you to keep that. We’re fighting to give you the ability to save some money on the side for retirement, whether it’s in a 401(k) or a work and save auto-IRA or some other kind of vehicle. And we’re fighting every day, always and forever, for Social Security to be there as the bedrock of all of that. It’s an all-of-the-above strategy, and if there’s anything more we can do to give people the ability to have a more financially secure retirement, we’re going to do that too.

This interview has been edited for length and clarity.

Visit AARP’s Retirement hub for a wealth of resources on planning and saving for a financially secure retirement, including calculators, smart guides, advice columns and more. Visit AARP’s Advocacy hub to find out how we are fighting for your financial security and other issues important to older Americans every day.