2016 News

Brown School scholars discuss lifelong asset building

​Social Security provides an important base of income, and without it about 50 percent of America’s elderly would live in poverty, said David Certner, legislative counsel and legislative policy director for government affairs at AARP.

He was speaking at the policy forum “Social Security and Beyond: Building Financial Capability Across a Lifetime” at the Brown School of Social Work on October 4. The event, hosted by AARP and the Brown School, featured Brown School professors Nancy Morrow-Howell and Timothy McBride, the Center for Social Development’s Margaret Clancy and Certner. Morrow-Howell, director of the Harvey A. Friedman Center for Aging, was the moderator.

Many people believe Social Security will not be available to them, but it will be, Certner said. “The question is how much,” he said. Social Security is underfunded, and something must be done before 2033, he said.

“We’re challenging our presidential candidates to really talk about Social Security,” Certner said, because the issue needs presidential leadership.

The forum was part of Washington University’s lead-up to the 2016 Presidential Debate on campus October 9.

Social Security is “an eminently solvable problem,” said McBride, co-director of the Center for Health Economics and Policy at the Institute for Public Health. “The issue that gets in the way is politics.”

Social Security started running an annual deficit in 2010, he said. Its deficit is 2.66 percent of the taxable payroll. Solutions include raising the payroll tax or cutting benefits.

“Neither option is easy, and they are extreme,” McBride said. Perhaps “we split the solution in half.”

Hillary Clinton has proposals about Social Security on her website, he said, while Donald Trump’s website is silent. But Trump has been quoted as promising not to cut Social Security, he said.

The solution will require a bipartisan commission like the 1983 Social Security Commission that Ronald Reagan created when Social Security was nearing bankruptcy, McBride said.

Clancy, policy director and College Savings Initiative director at the Center for Social Development, discussed options for Americans to build assets.

“Most people accumulate assets because of institutional arrangements that make it easy for people to save,” she said. But an estimated 50 million workers nationwide do not have access to a 401 k or other workplace retirement plan.

She discussed two emerging policies at the state level: automatic IRA retirement plans and Child Development Accounts.

Low- and middle-income workers will benefit most from state-sponsored auto-IRAs, which are scheduled to open in 2017, she said. Illinois is the first state to pass such legislation and California is the largest state to require employers without retirement savings plans to automatically enroll workers in a Roth IRA. Other states will also begin such plans next year, she said.

Child Development Accounts (CDAs) are saving and asset-building accounts initiated by public policy. Ideally, they begin at birth, are for all children and provide greater subsidies for the poorest children, she said. Automatic features—account opening and initial deposit—seem to be the best way for states to set up CDAs, Clancy said. In Maine, for example, the program enrollment rate for 2008-2013 was about 40 percent, and the families who enrolled infants were more financially sophisticated than those who did not. In 2014, Maine began automatically opening accounts for all children at birth.

“Universal, automatic, and progressive CDAs give all children—not just those who are advantaged—the opportunity to benefit,” Clancy said.