Mr. Chairman and distinguished members of the committee, on behalf of Americans for
Secure  Retirement  (ASR),  I welcome  the  opportunity  to  submit  for  the  record  our
statement on policy recommendations to help Americans plan and save for their golden
years.
 
ASR is a broad-based coalition of life insurance companies, industry groups, and non-
profit organizations -- including women, farmers, Hispanic-American and small business
groups -- committed to promoting  policies that  provide  Americans with  a more  secure
and stable retirement.  We are pleased that this committee recognizes the importance of
helping Americans effectively manage their assets throughout retirement to ensure that
they do not outlive their savings. 
 
This  management  side  of  the  retirement  policy  equation  has  received  relatively  little
attention, but it is an increasing concern for many Americans.  In fact, a recent poll ASR
commissioned found that half of American voters between 50-70 years old are actually
more concerned about managing their savings so they do not outlive them, than actually
just saving before  retirement.  These poll findings show that  this hearing  is both timely
and  of  great  interest  to  the  77  million  baby  boomers  who  will  soon rely  on  America‘s
retirement system.
 
There  are  a  number of  important  factors  contributing  to  the  conundrum  many  face in
planning  for  retirement,  including  increased  longevity,  a  decreased  ability  to  rely  on
regular monthly income from Social Security and pensions and, for many, no access or
participation in any kind of employer-sponsored retirement plan.  The question, then, for
policymakers  is  how  to  encourage  Americans  to  adequately  save  and  manage  those
savings  so  they  last for 20 to 30 years in retirement.  For the reasons outlined below,
ASR believes one important policy prescription is to promote individuals‘ —annuitization“
of savings, specifically through lifetime annuities which would ensure a steady —paycheck
for life.“
 
All Americans at some risk

In policy circles, the notion of the —three legged stool“ of retirement security is commonly
used  to  illustrate  the  basic  components  necessary  for  maintaining  a  healthy  living
standard throughout retirement. The traditional means of financial security in retirement
for  Americans  rested  on  Social  Security,  employer  based  retirement  plans  such  as
pensions,  and  personal  savings.  With  the  national  savings  rate  at  an  all  time  low  of
negative 1.6%, and the other two legs less stable, that stool is now very wobbly.
 
For many of the upcoming baby boomer generation retirees, Social Security will be the
main  source  of  income  in  retirement.    Unfortunately,  while  there  is  no  denying  the
importance  of  this  program,  the  fact  is  that  on  average,  Social  Security  currently
replaces  only  about  42  percent  of  pre-retirement  income.    And  for  those  who  retire
before  age 65 œwhich  is more  than 75 percent of  retirees today-  benefits  are reduced

and  Social  Security  replaces  even  less.  Financial  planners  have  traditionally
recommended at least 70-80 percent to maintain a retiree‘s standard of living.
 
Similarly,  the  second  leg  of  that  stool  œ  employer-based  retirement  programs  œ  now
supports  less  than  half  of  all  working  Americans.  Historically,  many  retirees  have
depended on pension plans to supplement their Social Security benefits.  Participation in
traditional defined benefit plans,  which were a staple  of retirement benefits in the past,
has  decreased  sharply  in  recent  years.  The  percentage  of  full-time  employees  in
medium and large private establishments who are covered by defined benefit plans has
fallen from 80 percent in 1985 to just 36 percent in 2000 as the trend shifts from offering
defined benefit plans to defined contribution plans (e.g. 401(k) plans). Even  taking into
consideration 401(k)s, more than half of American workers -- around 88 million -- do not
have access to or participate in any sort of employer based retirement plan. To put this
in perspective,  the  number  of  Americans  without  employer-based  plans  is  double  the
number of Americans without health insurance in the United States.
 
According to Dr. Jeffrey Brown, a former senior economist for the White House Council
of  Economic  Advisers  and  author  of  The  New  Retirement Challenge,  —these  [pension
plan] changes represent an historic shift in our retirement landscape, and together place
more responsibility on individuals to manage their savings so that they last for a lifetime. 
It is important for us, as a nation, to find ways to encourage retirees to secure additional
and  reliable  sources  of  lifelong  income  so  that  they  can  achieve  lifelong  financial
security.“ 
 
The shift in demographics in our country means that there is an  even  greater  need for
new policies that help Americans ensure a steady income throughout retirement. Today,
the life expectancy of a 65-year-old is close to age 83, more than four years longer than
in  1960.  In  fact,  half  of  all  retirees  will  live  beyond  average  life  expectancy.  And,
unprecedented numbers will be living into their 90s and past 100. The likelihood of living
longer compounds both the savings and financial management challenge for individuals
and  families:  retirees  not  only  need  to  save  more,  they  also  need  to  manage  these
resources effectively so they provide a sufficient income to sustain a steady standard of
living for 20 to 30 or more years. 
 
Some Americans are more at risk than others

There  are  certain  segments  of  the  American  population  that  face  more  difficult
challenges  in  retirement.  Women,  minorities,  small  business  owners,  and  farmers
generally  have  less  access  to,  and  lower  participation  rates  in  employer-based
retirement plans. 
 
As  this  committee  has  observed,  women  live  longer  than  men,  spend  more  time  in
retirement  and  are  widowed  more  frequently.  A  typical  65-year-old  woman  has  a  31
percent chance of living to age 90 or older, as compared to only 18 percent for a typical
65-year-old male. Today,  nearly 60  percent of  older  American  women  are single, with
more than 45 percent widowed.  Furthermore, many women work part time for all or part
of their working years and therefore accrue less Social Security benefits, and fewer still
participate in employer-provided retirement plans. 
 
Minority groups, such as Hispanics, also face significant challenges. Hispanic-Americans
have  less  workplace  pension  coverage  than  workers  overall.  Only  22  percent  have