Great Letter to Editor

Toward a More Secure Retirement

(Published: January 31, 2009)

Re “From Here to Retirement” (editorial, Jan. 26):

The financial crisis and the decision by some companies to cut matching contributions to their 401(k) plans highlight the need to think anew about how Americans achieve lifetime financial security and the mechanisms in place to help them do so. The 401(k) plans upon which most workers now rely were never conceived as a holistic retirement system.

What is needed is a retirement system that combines the best of portable, individually owned accounts with guarantees to help make sure that individuals do not outlive their savings. The system would automatically enroll workers, tie savings increases to raises, include provisions for health care needs, offer objective investment advice to help them plan, and assure a lifelong income base by automatically converting some of their savings to a low-cost annuity at retirement.

Such protections, while not shielding individuals from investment risk, would significantly bolster Americans’ economic security.

Roger W. Ferguson Jr.
New York, Jan. 26, 2009

The writer is president and chief executive of TIAA-CREF, which manages retirement savings on behalf of 3.6 million individuals and 15,000 institutions, and a former vice chairman of the Federal Reserve. He is a member of President Obama’s Transition Economic Advisory Board.--NYT

I am particularly interested by the comment about annuities, which would probably need some Federal support to be viable. On the one hand, I wish I had converted some of my assets into annuities when I went into semi-retirement (I investigated them but was discouraged by very high fees). On the other, one has to wonder how well annuity structures might've survived the recent financial holocaust. Still, the author expresses an important point, one that will become central to future economic planning discussions.