Automatic individual retirement accounts (IRAs) could significantly boost retirement savings for millions of low- and moderate-wage workers. A proposal embraced by the Obama administration would require most employers that do not offer retirement plans to establish IRAs for their employees and automatically direct a portion of pay into the accounts, unless employees opt out. Our results, based on the Urban Institute's microsimulation model, show that automatic IRAs would boost retirement incomes for as many as half of low-income retirees and three-fifths of moderate-income retirees. For both groups, mean age-70 incomes among those who gain would increase by nearly a fifth.

Social Security faces a $5.4 trillion shortfall over the next 75 years, but modest adjustments can halt that slide. Some argue that those adjustments should go beyond solvency, to improve the adequacy and equity of benefits, better protect vulnerable workers, and encourage work at older ages. Although the how and when are still up for debate, policymakers can address these problems without removing the basic protections provided by one of the nation's most popular and successful programs. This brief, which summarizes three Urban Institute events on Capitol Hill, lays out central points of the Social Security debate and options for reform.

This brief examines different price indices that might be used to adjust Social Security benefits for changes in the cost of living. The currently used consumer price index for wage and clerical workers (CPI-W) is probably biased upward. A new experimental "chain" index removes some of the upward bias and therefore rises more slowly. Using it would help solve some of Social Security's long-run financial problems. Another candidate is an experimental index designed to reflect the purchases of the elderly. Largely because it heavily weights health costs, it is likely to rise faster than the CPI-W.

Low Social Security benefits are strongly related to individual characteristics and earnings histories. These associations suggest ways of shoring up Social Security and adopting other policies to help low-wage, low-skilled workers achieve more labor market success and greater retirement security. Social Security enhancements to aid beneficiaries with intermittent histories include caregiver credits or a minimum benefit that integrates caregiving, unemployment, and disability credits. To meet long-term, low-wage workers' needs, policymakers could adjust Social Security's bend points or replacement percentages; create a new minimum benefit; or adjust current law's special minimum benefit so it provides support greater than the poverty level.

Both adverse and investment events can trigger early withdrawals from retirement accounts. About 40 percent of retirement savings losses can be linked to these types of events, which include unemployment, the onset of poor health, primary home purchases, and college expenses. Unfortunately, lower-income families less often have retirement savings and more often tap into these savings when faced with life-changing events. The results call for an integrated savings policy that encourages savings for both pre-retirement and retirement needs.