Speeches by Secretary Elaine L. Chao
Archived Speech — Caution: Information may be out of date.
Secretary of Labor Elaine L. Chao
American Savings Education Council (ASEC) “RetireMint” Conference
New York City Hilton, NY
May 17, 2002
Thank you Dallas. Your organization and your quarter- of- a -century leadership have had a tremendous impact on the whole field of retirement security and pension benefits.
I’m pleased to see Commissioner Jo Anne Barnhart of the U.S. Social Security Administration at this conference.
It is wonderful to see so many of you take the time to come to this conference. It will be well worth it!
This conference comes at a very important time. There’s been a tremendous amount of attention paid to retirement security in the last few years, and for good reason. The savings rate is far too low for many Americans – especially women and minorities.
The fact is that even though all Americans know that they should save, they don’t always act on that knowledge. Which is why we’re pleased to join with the Social Security Administration and the American Savings Education Council as the first federal cosponsor of national “save-for-your-future” month.
There are a lot of federal and private sector saver campaigns out there. It’s time we made a coordinated effort – this is a great first step.
Retirement security is a top concern of President George W. Bush and the US Department of Labor.
Whatever kind of retirement plan a worker has -- whether it’s a 401 (k) or a corporate or union pension plan – the Department’s mission is to protect their savings so they can look forward to their retirement with confidence and hope.
Our goal actually goes beyond protecting working Americans hard-earned pensions.We also encourage businesses to make retirement opportunities available to their employees, and help motivate them to contribute.
The Department has hosted two National Summits on Retirement Savings – with the American Savings Education Council helping to launch the very first one.
Our most recent summit brought together a bipartisan group of experts from across the country. Their task was to develop new saver strategies that will appeal to every generation of Americans – from teens to aging Baby boomers. Our findings should be made available very soon.
This morning, I would like to share with you some of my ideas on how personal savings have changed, and how everyone – from families to employers to the US Department of Labor –has a role to play in furthering retirement savings.
I’m sure we would all agree that getting Americans to spend is easy. Getting them to consistently save for retirement, that’s the hard part.
Yet I am optimistic that we can turn this situation around.
Americans have a tradition of planning for the future. Half of us now own stock, and two-thirds of us own our own homes. We invest in the future when we retrain for a job, open a business, or help our children go to college.
Young Americans and recent immigrants are especially attuned to saving for the future. My family and I are immigrants to this country. I remember how hard my parents worked to make a new life in America. Yet, from our meager weekly budget, they always managed to put some savings away for the future.
One of the reasons why people are having a difficult time developing a savings strategy is that today’s world is rapidly changing. New industries have literally arisen overnight, business competition has sped up, and information technology has brought us a global market that never closes.
Where once people worked a lifetime for one employer, today’s 32-year olds have already worked for an average of nine different companies.
And just look at all the new vehicles for investment savings – they range from thousands of mutual funds to traditional savings bonds. Bookstore shelves and bets-seller lists are awash with how-to information to help you get through the modern maze of investment options.
In a world of constant change, we need to re-learn how to save in the same way that the changing workplace has required most of us to undergo retraining in new job skills.
To meet this challenge successfully, people first need access to the instruments to save. Second, they need specific information to manage their investments. Third, they need confidence that their savings are protected and secure.
The first goal is to create more opportunities for workers to participate in employer-based pension plans. For example, only a third of today’s small businesses offer retirement savings plans.
The good news is that President George W. Bush’s tax reform bill passed through Congress last year contains numerous incentives for retirement plan sponsors. It allows small businesses to take a tax credit of up to 50 percent for the start-up costs of creating and running a new retirement plan.
The not so good news, as the Employee Benefits Research Institute points out, is that nearly 90 percent of small-employers without pension plans were unaware of the new tax incentives.
To assist small -businesses owners, the Department has a number of resources available right now.
We offer an interactive website, developed with the US Chamber of Commerce, the Small Business Administration and Merrill Lynch, to help small employers choose the most appropriate type of retirement plan for your company. We also developed a joint publication, “Easy Retirement Solutions for Small Businesses,” which is now available on our website.
This is e-government at it’s best!
The President’s tax reform law also encourages Americans 50 and older to make “catch up” contributions to their IRAs and 401 (k) plans. The law also increased the annual contribution limits for IRAs from $2000 to $5000, and annual 401 (k) limits from $10,000 to $15,000 – all which should stimulate individual investing.
Providing incentives for employers to offer pensions is a necessary first step. Now comes the second and equally challenging part, finding good investment advice.Already, some 60 million Americans have self-directed contribution plans of some sort.
The fact is, most people simply don’t have the time or inclination to become experts in managing financial portfolios, even their own. They have jobs to do, children to take care of, and bills to pay. Especially in these economic times, people require retirement strategies that will respond quickly to new and changing investment realities.
To all the financial planners in the audience, you have your job cut out for you! People want informed explanations of where to invest, how to diversify, and what types of risks and opportunities are involved with each investment option.
And to encourage more financial planners to reach out to company employees, the Administration’s new pension security legislation would fix outdated federal rules that discourage employers from giving workers access to responsible, professional investment advice. It has passed the House and is now being debated in the Senate.
Even when people have the information they need to manage their savings wisely, the question on everyone’s mind is just how safe are our pensions?
It’s my job and the Department of Labor’s responsibility, to protect America’s pension system from fraud or abuse. The billions of dollars saved in worker pensions are not just statistics; we understand that they represent the hopes and aspirations of millions of Americans for a decent retirement.
As a member of the President’s Task Force on Retirement Security, I have been in the forefront of the Administration’s efforts to protect American pensions. Our actions have been guided by three basic principles – choice, control and confidence.
We strongly believe that workers should have the choice of how to invest their retirement savings in ways that work best for them and their families – which means giving workers the ability to diversify their retirement savings. I’ve said it before: It’s the employees’ money. They’ve earned it, they sacrificed to save it, and they have the right to decide how to invest it!
We also want workers to have the same degree of control over their investments that corporate officers enjoy – which means the same rules should apply from the top floor to the shop floor.
And we want workers to have confidence in their investment decisions -- which comes from getting that reliable professional advice I just talked about.
These principles are the driving force behind President Bush’s recent legislative actions to strengthen workers 401 (k) plans. It’s our way of keeping workers investments both secure and mobile enough to keep up with the rapidly changing financial environment.
Businesses can create pension plans.Professional investment managers can provide expert advice. The government can monitor pension plans and enforce the law.But individuals must first make an effort to contribute savings.
Ultimately, the responsibility for retirement security lies with each person, and with each family.It’s up to all of us to build the foundation that will provide us financial freedom in our retirement years.
The speakers, breakout sessions and exhibits are a good place for you to get some creative ideas on what you need to do.So, learn as much as you can over the next two days, and sit down and review your retirement goals, and make the needed adjustments.
Make a promise to yourself that you will make life-long independence a reality by increasing your retirement savings in the years ahead.
Thank you …
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Archived Speech — Caution: Information may be out of date.
