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Politicians Not Fixing the Real Problem - Social Security

A recent online article had this to say about what the politicians are doing to fix the up and coming retirement crisis.


U.S. Senators Todd Young (R-IN) and Cory Booker (D-NJ) announced May 14th they have reintroduced the Federal Retirement Commission Act, which calls for the creation of a federal retirement commission.


The commission would review private retirement benefit programs and within two years of formation submit a report to Congress on how to improve private retirement security in the United States. The commission would not review the Social Security program, and would be disbanded after the report is presented.


“We must work to address the shortcomings that have resulted from the shift from defined benefit pensions to defined contribution plans like 401(k) plans,” Senator Booker said. “This bill will advance the conversation on individual retirement savings at a time when far too many have been left without the retirement they’ve planned for.”


Where do I begin but with the obvious. Are these Senators really that removed from reality?  Well, obviously so. They are putting together a commission that over a two year time period is going to make recommendations to fix the retirement crisis by focusing on 401(k) plans.

Let's start with the most disturbing part of that article - "The commission would not review the Social Security program." It is the most broken part of the retirement solution option and the one aspect that the majority of people are counting on. After all, they are paying into the system and should get their benefit. Yet, with it destined to go bankrupt, shouldn't that be the first thing they would fix? Actually, the solution is quite easy. It just doesn't create positive political optics - READ: not good for re-election. Whether people are actively investing into a 401(k) plan or not, they are counting on the program that they paid for - social security.


The politicians want to focus on the 401(k) plan and how it is not available for everyone. I have a real easy fix for that problem. Modify the IRA rules to include max contributions in line with the 401(k) plan. That fixes that problem and we didn't even need 2 years to figure out that problem. Second, give tax incentives for employers to offer it. Make it easy for them.  


Finally, the problem that they are not focused on is participation in retirement plans. People just aren't participating. You can fix the 401(k) access problem all day long. However, if you don't fix the participation problem, it doesn't matter.

Washington needs to stop wasting time with these commission driven ridiculous study groups. Yes, the politicians continue to be out of touch with reality. Of course, the reason why nothing is getting fixed in Washington.