Opinion

Time for Congress to Protect Private-Sector Safety Net

I offer you a scenario and a question. Joe makes a salary of $250,000. Kate makes a salary of $60,000. Who is more financially secure?

You might have answered Joe. The truth is, we can’t answer the question based on salary information alone. That’s because income alone does not make you financially secure. In fact, new research shows that some higher-income households are financially insecure, while many households of modest income are in good financial shape.

When think tanks, research groups, and media report on the state of Americans’ financial preparedness, they often focus on how much money people earn. To be sure, it’s often the first thing American families think about when they consider financial security. Likewise, when addressing Americans’ financial security, Congress often focuses on ways to put more money in Americans’ pocketbooks.

However, income alone does not result in financial security. And if Washington stops there, it will fail to help Americans find firm financial footing.

The American Council of Life Insurers analyzed data from 4,500 households, exploring family finances at four different stages of life, providing a high-level snapshot of Americans’ current state of financial and retirement security. We found that 25 percent of “financially secure” households earn $50,000 or less. Conversely, of those households that earn $72,000 or more, 25 percent need significant financial improvements.

Financial security is built by consistently practicing good financial habits, contributing to retirement accounts, actively managing debt and building emergency savings — financial habits many of us were taught by our parents or learned the hard way on our own.

Financial security is also achieved by taking smart steps to protect what you’ve built from life’s uncertainties. This includes life insurance to protect your family’s financial future, disability income insurance to provide a paycheck if a sudden illness or injury prevents you from working, long-term care insurance to protect savings from being depleted by the high cost of long-term care, and annuities that guarantee a lifetime stream of retirement income. In fact, households with annuities are more financially secure and express higher confidence in a secure retirement.

When it comes to addressing financial and retirement security, leaders in Washington need to focus on all the components that provide financial security. They’d be wise to do so, because the stakes are higher now than ever.

That’s because Americans are living longer. Roughly one third of the typical adult life will be spent in retirement. This is happening at the same time an American institution, Social Security, is struggling under the weight of an aging population.

Right now, Congress is debating the federal government’s budget and potential tax reform legislation in the context of a 10-year baseline budget window. Just a few years after this budget window expires, the last of the Baby Boomers will be transitioning into retirement. Already, notifications sent to Social Security recipients state that “the law governing benefit amounts may change because, by 2034, the payroll taxes collected will be enough to pay only about 79 percent of scheduled benefits.” The latest report released in July notes an even greater reduction in benefits, 23 percent across the board.

Social Security was never intended to be someone’s sole source of retirement income, but in reality, it has become that for many people. The burden is increasingly on individuals to make smart financial choices, or be left with a future that doesn’t feel like the life they once led.

In this way, Americans are vulnerable, but they are not defenseless. Our analysis showed that 65 percent of Americans are on track or nearly on track to be financially secure. They are financially secure because they’ve made smart choices, and many have done so as early and consistently as possible. They practice good financial habits, have a financial plan, use products that help them accumulate savings, maintain an emergency fund, manage risk and debt, and have a retirement strategy that includes guaranteed lifetime income they cannot outlive.

This is good news, but their ability to achieve financial security rests on their ability to continue to access products and services that help them meet this goal.

So what’s Washington’s role in all of this?

First, don’t damage the industry that offers a private-sector solution to financial and retirement security. Life insurers provide financial security and peace of mind to millions of American families. Congress should ensure policies do not hinder access to, or the availability and affordability of, life, disability and long-term care insurance. Sound federal policies should also preserve tax incentives for retirement savings, expand employee access to employer-sponsored retirement plans and increase participation in these plans, and facilitate access to and information about annuities.

Second, the administration, state insurance regulators, Congress and the private sector should collaborate on reasonable policies that recognize the importance of financial planning and education. Making a holistic commitment to Americans’ financial security will require holistic collaboration.

From our early scenario, Kate, on her $60,000 salary, can take steps to ensure financial peace of mind and dignity throughout life – if she has access to the products and financial education she needs and practices good financial habits.

The nation’s private-sector financial and retirement solutions are the key to Americans’ financial and retirement security. It’s vital that Washington fight to protect them.


Dirk Kempthorne is president and CEO of the American Council of Life Insurers. He is also a former U.S. Interior secretary, Idaho governor and U.S. senator.

Morning Consult welcomes op-ed submissions on policy, politics and business strategy in our coverage areas. Updated submission guidelines can be found here.