By: Parker Mills

Former Union County Commissioner and owner of Mills Cleaners 

Inflation has left many North Carolinian families to make difficult short-term spending decisions, but what about long-term financial planning, like retirement? Consider this - from April 2021 to April 2023, American workers suffered two straight years of negative real wage growth, according to ZipRecruiter’s chief economist, meaning Americans got a pay cut every month. North Carolina has especially felt the strain with inflation outpacing the national average. Despite these and other financial challenges, one bright spot is a positive trend in retirement savings.

Bloomberg recently reported that 401(k) contributions reached an all-time high. They also reported that 43% of savers hiked their contribution rate last year, meaning that people are optimistic for a better financial future, thanks in part to the control they have over their savings. Retirement plans like 401(k)s and individual retirement accounts (IRAs) were created by Congress not to mandate how and where to put your money, but rather to give tax incentives to invest your own money. This has proven to be a great complement to the Social Security system that pays a set rate through retirement.

Unfortunately, some politicians are pushing proposals that will give more power over an individual’s retirement savings to the government. Senator Bernie Sanders, for example, held a hearing on retirement issues in February where he argued that the 401(k) system has failed us. He insists that the only way to ensure a secure retirement for all Americans is to empower the government to control the savings of Americans and implement a federally controlled savings program. Giving the government more control of retirement eliminates choice and subjects your savings to the whims of agenda-driven politicians.

Look at the state of Social Security—a vital program whose future has been left in doubt by political uncertainty. Estimates show that Social Security reserves could be gone by 2035. A study by Nationwide shows that 45% of Gen Z and 39% of Millennials think they’ll never see a dime from Social Security because the entire system will be bankrupt by the time they retire. 

By comparison, Goldman Sachs Asset Management recently issued its annual retirement report, showing 69% of Millennials and 68% of Gen Z report their savings are ahead of schedule or on track, versus 45% for older generations. Younger Americans’ confidence in their ability to save is outpacing their confidence in the government’s ability to help.

While there is plenty of room to make improvements to make sure no one is left behind, the system is making retirement accessible to more people than ever. For example, retirement assets per household are more than seven times what they were 50 years ago. Adjusted for inflation and taxes, the average 72-year-old is able to replace 90% of their working-age income, largely thanks to the combination of their 401(k) and Social Security. And recent surveys report that Americans have near-record-high confidence in having enough money to live comfortably through retirement.

Improving retirement for Americans should start by building upon the success of a system that puts them in control. The 401(k) system has been developed over generations, and it has been improved over time with bipartisan support. In 2019, President Donald Trump signed the bipartisan Setting Every Community Up for Retirement Enhancement Act (SECURE Act) to repeal the maximum age for making traditional IRA contributions and increase the age required for mandatory distributions to better match the increased life expectancy. In 2022, President Joe Biden signed SECURE 2.0, which promoted automatic enrollment to help raise participation rates in 401(k) and 403(b) retirement savings plans, which are available to nonprofit employees and teachers.

North Carolina is considered one of the best states in which to retire. We must work to keep it that way. Before stripping Americans of the tried and true 401(k) system, we must address the root causes of a struggling economy: rising costs, falling wages, and the inability of too many Americans to make ends meet. The answer to any flaws in our retirement system is not handing over more of our hard-earned dollars to government control. Instead, we must hold politicians accountable for the horrendous state of our economy.