03/06/2014 12:25 pm ET Updated May 06, 2014

Expanding Retirement Security for All Workers: A Simple 3-Step Plan

How many of us want to retire with $3,000 in savings? That's the median level of retirement savings held by American households. Not $3,000 a month. Not even $3,000 a year. $3,000 total.

Yes, this is a crisis. Social Security will help millions of Americans maintain financial security through their twilight years. But Social Security is not enough. Americans also need personal retirement savings to keep out of poverty as they age. By and large, working Americans just don't have this savings. They're in trouble.

Some social commentators argue that failure to save for retirement is a personal failure. They insist that the millions of non-savers are simply irresponsible and shortsighted.

But such analysis conveniently forgets the huge role federal policy plays in helping predominantly high-income households build retirement savings, while leaving behind the vast majority of working families.

It's really not that complicated to expand retirement security for low- and moderate-income families. A new Federal Policy Brief from CFED lays out three simple steps.

First, provide working families with access to low-cost savings products. Fully half of all workers don't have access to an employer-sponsored retirement plan. This means they're pushed into the private plan market, where high opening balance requirements make it nearly impossible for millions of working families to even open an account. These families need an option that works for them.

The Obama administration's recent myRA proposal fits the bill. myRA removes barriers by creating a basic, no-fee Treasury bond purchased directly through a worker's payroll deductions. In short, myRA functions like a simple, safe and affordable Roth IRA. The proposal is being launched this year as a national pilot. Success could lead to broad public access to myRA in the future.

Second, saving for retirement needs to be automatic. Do-it-yourself retirement planning is a daunting task for all but the most dedicated retirement savings wonks. Before an account can even be opened, employees have to calculate percentages of their income, determine their risk profile and research and select investment funds. Those saving in private IRAs must do all that without the support of a human resources department or benefits broker.

Automatic enrollment in retirement savings removes the hassle while allowing folks to opt out. And, the good news is that we know this works, especially for working families. Studies show that given the option to opt into retirement savings, about four in 10 low-income households (the bottom 25 percent) will do so. When enrollment is made automatic with the option to opt out, that number changes, and more than nine in 10 of those households save for retirement. This isn't just an academic study -- states like California and Illinois are considering large-scale automatic retirement savings policies.

Third, offer savings incentives that help working families build their nest eggs. The good news is that the federal government spent $137 billion through the tax code to help folks save for retirement last year. The bad news is that almost none of that support went to low- and moderate-income workers. In fact, the top one percent of earners received $19.2 billion -- double the amount of the entire bottom 40 percent of workers combined.

A tax reform plan released last week by Rep. Dave Camp (R-MI) included a number of retirement-related proposals. But the plan took no steps to turn this fundamentally upside-down picture right-side up. We cannot expect low- and moderate-income workers to save for retirement at the same rate as high-income households if we refuse to provide them with a similar level of support. Let's change this picture by expanding and improving the Saver's Credit, a good policy that could be even better were it to be made refundable. Making the Saver's Credit refundable would mean money in the pockets of the lowest-income earners who have zero tax liability come April 15.

Taken together, these three steps -- creating accessible, affordable savings products, ensuring automatic enrollment and providing more effective incentives to save -- would vastly expand retirement security for our nation's working families. High-income households have benefited from these supports for years. It's high time they became available to everyone else.

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