SEC Commissioner Kara M. Stein warned of a fast-approaching retirement crisis and suggested ways in which the agency and investors can act to ensure that Americans approaching retirement have adequate savings.

In remarks at the Brookings Institution, Ms. Stein stated that a retirement crisis is building around the depleting Social Security trust fund and the declining availability of employer-sponsored pensions. She urged regulators and investors to take steps to mitigate the damage. Ms. Stein called for:

  • educational programs on investment;
  • regulations ensuring that advisers are putting their clients' interests first when giving investment advice;
  • continuing incentives for savings, along with a regular review of the effectiveness of the incentives;
  • pursuing enforcement actions against fraudsters;
  • ensuring that markets are "fair and efficient;" and
  • the creation of a Presidential Working Group on Retirement Security.

Commentary / Conor Almquist

Commissioner Stein warns of a crisis that may begin with the depletion of the Social Security trust fund by 2034. The factors she discusses are largely beyond the SEC's purview, such as the fact that median retirement savings for Americans nearing retirement age the median savings is currently at zero, but she offers creative and interesting suggestions as to how the SEC can ameliorate this imminent crisis. Such suggestions include (i) creating financial literacy curriculums, (ii) sponsoring spelling bee-style finance competitions for middle schoolers, (iii) creating an app to teach kids and adults how to invest, and (iv) creating online tools to help investors understand choices. Commissioner Stein draws comparisons to regulation of other industries, stating that "[i]f we can simplify food labels, we can simplify investment disclosures." She similarly notes that "[i]f we can compare toasters online, we should also be able to compare stocks, mutual funds, and other investments." The comparison of toasters to treasuries may seem tenuous, but it emphasizes Commissioner Stein's approach of protecting investors through simplification.

Commissioner Stein briefly raises the related issue of investor misunderstanding of conduct standards (suggesting requiring all advisers to put client interests first and remain unconflicted). Commissioner Stein also raises the issue of elder exploitation, a problem that drains billions from retirees each year and impacts nearly one in five Americans 65 or older. She notes recent actions the SEC has taken to help firms suspicious of potential elder exploitation protect their investors. Lastly, she calls on the President to issue an executive order creating a Presidential Working Group on Retirement Security to address these issues.

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