Reynolds, From Here to Security

Robert L. Reynolds, president and CEO of Great-West Financial and Putnam Investments, was a pioneer in the 401(k) business for Fidelity Investments in the 1980s and 1990s. In From Here to Security: How Workplace Savings Can Keep America’s Promise (McGraw-Hill, 2018) he advocates improving and extending workplace savings plans.

First, however, it is imperative to make Social Security—“the country’s largest, most successful, and most popular government program”—solvent over the long term. “As multiple bipartisan commissions have shown in recent years, the compromises needed to restore Social Society to fiscal health are blindingly obvious, namely a balanced combination of revenue increases and benefit cuts.” The problem is that Social Security has long been viewed as the “third rail” of American politics—“Touch it and you die!” Moreover, compromise is not exactly the hallmark of Congress these days.

To supplement Social Security, working Americans traditionally relied on defined benefit pensions. But today pensions are flat-lining. Defined contribution plans are taking their place, extending coverage to more workers and workplaces. Roughly half of American workers have access to 401(k)-type plans. The problem is that, although they serve middle- and upper-income workers well, they don’t reach low-income, part-time, or contingent workers—or those in small firms that have no payroll savings plans at all. This is especially troubling in a gig economy.

Moreover, it is not enough to extend 401(k)-type plans to more workers. Reynolds suggests that the holy grail of the next generation of workplace savings is “to convert accumulated assets into guaranteed lifetime income” so that people won’t run out of money before they run out of time. Annuities are one obvious solution to this problem, although annuities often get a bad rap.

Reynold’s book, which describes where we’ve been and where, in his opinion, we should be going to achieve retirement security for the largest number of American workers, raises policy issues that should definitely get more attention in Washington.