Minnesota Law Review

The Perfect Storm of Retirement Insecurity: Fixing the Three-Legged Stool of Social Security, Pensions, and Personal Savings

This Article provides a unique, wide-angle view of the looming crisis in retirement security. The impending confluence of a burgeoning retiree cohort and a diminishing resource base threatens to wreak havoc on the financial well-being of the coming generation of retirees. This Article first reviews the current status of retirement security in the United States and finds that all three legs of the retirement stool—Social Security, pensions, and private savings—are projected to fall short of contributing adequate resources for future retirees. The Article then turns toward a discussion of the possible responses for averting this potential crisis. After exploring various alternatives and reviewing the principal changes wrought by the Pension Protection Act of 2006, the Article sets out a three-step reform plan that addresses each leg of the retirement stool. First, the Article suggests that the Social Security system could be saved from insolvency through a mix of relatively small payroll tax hikes and benefit reductions, including a slight increase in the retirement age. Second, with defined contribution plans becoming the new pension norm, changes in account default options could encourage both greater plan participation and improved plan security. Third, the Article recommends the adoption of a modest refundable tax credit designed to encourage low- and middle-income earners to build their own supplemental nest eggs.

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