The road to retirement hinges on two distinct paths: building upon the progress we've achieved over the past 50 years or transitioning to a fully government-run system. Americans have suffered in recent years with less money in their pockets amid a struggling economy, and with that struggle comes strong uncertainty about the future of their retirement.
The media has painted a grim picture of America's retirement prospects despite the fact that Baby Boomers are the richest retiring generation in U.S. history, and young people are saving earlier than any generation before them. Far-left politicians like Senator Bernie Sanders (I-VT) are capitalizing on the fear-mongering to push a partisan agenda demanding greater government control of Americans’ pocketbooks and trying to hamstring Americans’ 401(k)s. Senator Sanders even held a congressional hearing recently where he bemoaned the state of our retirement system, praised old-school pensions, and suggested a federally-controlled Thrift Savings Plan-like (TSP – the government employees’ retirement system) approach as the solution.
Traditional pensions, however, are no longer realistic for most American workers. Research has found that American workers tend to change jobs about every four years. For those who remain in the same job for decades, pensions work just fine. But they do not suit the current job market. Pensions also pose a risk because their funds are directly tied to employers vs a third party. If the company were to go out of business, an employee could see their benefits disappear. For public-sector employees who rely on pensions for their retirement needs, these plans may also raise financial uncertainty over the long run, since many of them are meaningfully underfunded.
Proposals such as those creating a new TSP-like program for the private sector would introduce another government-sponsored program vulnerable to political influence. This raises critical questions: would politicians favor certain companies, restrict choices, or impose controversial standards such as mandatory environmental, social or governance (ESG) criteria? Could they force divestment from industries they oppose, such as fossil fuels or tech platforms? History shows the potential for politicians to raid funds, as seen with Social Security, where funds have been diverted with IOUs to the American people.
We’ve already seen the government challenged in administering Social Security and the current TSP system. Social Security is a constant nightmare for the government, with younger generations fearing it won’t exist for them in the future. Significantly, the Government Accountability Office found major problems in TSP’s administration of its program in August. Do we really think the federal government should increase its role in the private-sector retirement savings system?
Ensuring a secure retirement for all requires careful consideration of these issues to avoid repeating past mistakes.
Above all, Americans have made clear that they want authority over their own financial future. Research has found nine in ten Americans want to control their retirement funds, instead of leaving it in the hands of an anonymous pension manager.
Make no mistake, more government control is not the answer to raising Americans’ retirement savings. Considering how the federal government has handled Social Security and TSP, can we really trust the bureaucracy to responsibly handle more of our hard-earned money?
Instead, we must pass pro-growth legislation to support our economy so that Americans have more freedom to save however is best for them and their family. Inflation has devastated families’ pocketbooks, and too many are forced to dip into savings to get by. Those who took hardship withdrawals from their 401(k)s hit a record 3.6%, up from 2.8% in 2022. Nearly 40% of those withdrawals were to avoid home foreclosure or eviction.
Americans have a startling low faith in the long-term solvency of Social Security, which is set to reduce benefits in 2035, making clear that very few trust the government to ensure their ability to retire comfortably. Instead of trying to rip away 401(k)s in favor of a federally controlled system, politicians should get out of their own way, and allow Americans to save for retirement as they see fit. We should be promoting and expanding access to 401(k)s, which are a tried and tested program that has delivered the results of the free market to our accounts for generations.
As we approach November, we must continue to encourage policymakers to protect Americans' ability to independently ensure the best outcomes for their golden years now and for generations to come, without a thumb on the scale.
Matt Mackowiak is the president of Potomac Strategy Group, served in the Bush administration at the U.S. Department of Homeland Security, on the Bush-Cheney re-election campaign, and was a senior communications aide to two U.S. Senators and a Governor.