In a recent press release as well as a speech reported on by Investment News (3/8/11) Senator Tom Harkin of Iowa, expressed interest in creating a new retirement system with responsibility shared among employers, government, and individuals. I applaud the Senator’s call for a focused, national approach, but in my view the quickest path to that end involves evolutionary, not revolutionary, change.

When you look across the full range of public and private retirement “systems” already in place, it becomes clear that most if not all of the solutions Senator Harkin’s approach would require, already exist in various forms.

Perhaps the two biggest challenges, however, in achieving this vision are: today’s lack of coordination among the systems, which lead to inefficiency and confusion; and, the scale that a national system must operate on to meet the retirement investment needs of average investors, both before and during retirement.

Given the rapid growth of the ranks of retirees at all levels of wealth, we need to view Social Security as only one (very important) component among a host of solutions, which include the 401(k), 403(b), and IRA plans, and a set of private-sector financial instruments, all of which provide, directly or indirectly, mechanisms for generating cost-effective lifetime income for average investors.

My point is that we’re much closer to achieving Senator Harkin’s goals than many of us may realize. However, as an example of what must change, today’s qualified and non-qualified plans typically offer professional management of underlying mutual funds; yet, access to personal investment advice is often not available for the average investor, or only at a substantial cost. This barrier is set, in part, by the continued use of inefficient processes that lead to professional advisors seeking out only the high net worth investor.

This is where internet-enabled technology, robust advisor and investor education, and other cost-efficient approaches can help create affordable access to the personal retirement strategies average investors need most. is in the early stages of bringing advisory services to the average investor.

In addition, innovation, and there’s lots of it, usually starts in the private system (and not with government or employer plans), and therefore tends to delivered through higher cost channels. Adoption of reforms by employers is often slow — and too late for those nearest to retirement. Innovation within Social Security is virtually impossible, because it represents the third rail of politics.

Senator Harkin is correct in calling attention to a system that isn’t working well. But before we look to create an entirely new retirement system, we should start by making the most of the current one and focus on education, innovation, and efficiency, as well as better integration of what we have today.

Jerry Golden
Golden Retirement, LLC