April 10 (Bloomberg) -- Fidelity Investments, the largest provider of retirement investment services in the U.S., called on U.S. lawmakers to pass legislation that would push Americans to save more for retirement.
Congress should amend the 2006 Pension Protection Act, to double the default contribution of workers enrolled in savings programs to 6 percent from 3 percent, and make individual retirement accounts available from birth, Ronald P. O’Hanley, head of Fidelity’s investment management unit said today in Washington, according to a prepared text of his remarks.
“Ever increasing numbers of Americans march toward retirement with little hope of maintaining their standard of living,” O’Hanley said in his speech to the U.S. Chamber of Commerce’s Capital Markets Summit. “The impact on our citizens, our economy and our national security could be catastrophic.”
About 10,000 people reach the traditional retirement age of 65 every day in the U.S., according to the Pew Research Center in Washington. Stanley F. Druckenmiller, one of the best-performing hedge-fund managers of the past three decades, warned last month that Social Security, Medicare and Medicaid expenses will bankrupt the nation’s youth and pose a greater threat to the country than its $16 trillion of debt.
O’Hanley praised the impact of the Pension Protection Act, which allowed employers to automatically enroll employees in tax-deferred retirement savings plans unless they opted out, and set an automatic contribution level of 3 percent.
O’Hanley also called for lawmakers and regulators to streamline savings plans to make it easier for employers, especially small employers, to offer and administer them.
For part-time workers and the self-employed, O’Hanley said, rulemakers should do away with restrictions that prevent individuals from opening a retirement savings vehicle until they start working.
“We should enable IRAs to be opened as early as birth and without the requirement of earned income,” he said. Early contributions from family and friends, with added years of potential compounded returns, “would be an enormously powerful tool for generating retirement savings,” he said.
O’Hanley also called for more financial education in schools and in the workplace. While more than $19 trillion is invested in U.S. retirement assets, O’Hanley said 4 in every 10 retiree households don’t have sufficient income to cover their monthly expenses.
Fidelity managed $994.4 billion in retirement assets as of Dec. 31, Vincent Loporchio, a spokesman, said in an e-mail. The company provides retirement-related investment management, administration and record-keeping services for employers and individuals.
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