Reader View: WA leaders can promote equity in the retirement system
As the election season heats up, the future of retirement is at the forefront of everyday Americans’ minds. While there are concerns about the state of Social Security, the broader retirement system is at stake, and that includes the 401(k)s that many of us rely on. Coupled with Social Security benefits, these accounts have helped millions retire with dignity. But most Americans agree that reforms are needed to support the system for future generations.
That starts with fixing the cost-of-living challenges and economic disparities that disproportionately affect marginalized communities.
Right now, an uncertain economy is making it especially difficult for these households to plan for the future. Here in Washington State, we are seeing the rising cost of everyday essentials consume a larger portion of household budgets, leaving less room for retirement savings. As a result, many of us are wondering if we’ll be able to make ends meet in our golden years. National leaders need to tame inflation once and for all to help working families get back on the path to retirement.
Research from Payscale reveals that people of color make significantly less than their white counterparts. Black men on average earn 87 cents for every dollar of their white peers, while Hispanics make around 91 cents per dollar. Women also continue to earn less than their male counterparts, especially women of color who make only 63 cents for every dollar earned by their white peers. Fixing those disparities would go a long way toward closing the gaps in our retirement system.
While tackling those issues, we can also make sure that more working families have easy access to retirement plans. For instance, the SECURE 2.0 Act, a bipartisan bill signed into law by President Biden, expands automatic enrollment in 401(k) plans. It also makes it possible for companies to match employees’ 401(k) contributions based on their student loan payments. Those are important reforms, and we should continue that progress through further savings incentives.
Some lawmakers may be tempted to promote traditional pension plans that were once seen as a reliable retirement option. But in today’s job market, where career changes are increasingly common as workers look to take advantage of better opportunities, traditional pensions, with many years of service required to vest, just aren’t practical in most cases. And they usually don’t help people working multiple part-time jobs.
That’s why it’s important to continue to expand access to retirement accounts and investment funds, which diverse communities are increasingly embracing. Recent data shows that nearly 40% of mutual fund−owning households who purchased their first fund after 2019 are people of color — more than double the percentage of those that bought their first fund before 1990. This aligns with data from FINRA (a nonprofit organization that promotes fair financial markets), which shows that the main reason 95% of Blacks, 95% of Asian-American Pacific Islanders, and 98% of Hispanics are investing is to save for the long term.
By expanding and enhancing 401(k)s and IRAs even further, we can provide personalized options that align with diverse career paths and financial needs, promoting greater financial equity and offering more adaptability for all workers. And while these accounts can help people meet their own retirement needs, they can also be vehicles for families to build generational wealth.
It’s my hope that the members of our congressional delegation, including Sen. Patty Murray (D-WA) and Congresswoman Suzan DelBene (D-WA), understand the issues at stake. They are uniquely situated to advocate for reform. But they must first recognize that in addition to keeping Social Security afloat, we need to tackle the broader economic inequities that undermine the retirement system’s effectiveness. From conquering inflation to closing wage gaps to expanding savings and investment opportunities, we can help build a more equitable retirement system. This will better serve today’s diverse workforce and provide a solid foundation for future generations.
Empowering Washingtonians to save for retirement is all about ensuring that everyone, regardless of background, has the opportunity to retire with dignity and financial security. With the leadership of our congressional delegation in Washington, we can create a fairer, more inclusive system. That starts with creating an economy that allows anyone to prepare for and thrive during their retirement years.
— By David Applbaum
David Applbaum is a physician assistant in Edmonds.