We Need to Help Americans Save More for Retirement
Wednesday May 07, 2003
Retirement security is one of those cliches that everyone knows is important but not enough people do much about. For many years, I have joined with Rep. Rob Portman, R-OH, in authoring legislation that has become law that makes it easier for individuals to save for their retirement.
Over the next decade, we as a nation will face a retirement crisis. Starting in 2010, 70 million baby boomers will begin to retire, placing enormous strains on traditional retirement programs such as Social Security.
Millions of Americans have failed to prepare -- financially -- for retirement. According to a 2000 study, more than 41% of Americans were solely dependent on Social Security income during retirement. Unfortunately, the average annual income from Social Security was only $8,617. It's clear that we need to do more to encourage people to increase their retirement savings.
The first step is to ensure that every American has access to a pension plan. Of the 151 million U.S. workers in 2001, only 65 million participated in an employer or union-sponsored pension or retirement plan. For small businesses – those with fewer than 25 workers – only 20% offer retirement plans.
That needs to change, and quickly. Recently, I introduced the Pension Preservation and Savings Expansion Act, which builds on an earlier pension and retirement savings law that I authored with Rep. Portman. This new bill will provide individuals and families with new savings opportunities, improve and expand employer-sponsored retirement plans and provide important new protections to workers participating in retirement savings plans.
Several of the important provisions include:
- Accelerating the amount Americans can save in 401(k) plans from $13,000 to $15,000. People over 50 would be able to save an additional $6,000 in IRAs.
- Increasing the required minimum distribution from age 70-1/2 to 75, reflecting the increase in life expectancy since it was first enacted in 1962.
- Making permanent many retirement savings provisions and pension reforms in the 2001 tax relief act which are scheduled to end in 2010. It also would make permanent the saver tax credit for low and moderate-income Americans and expand the amount of the credit so that more middle-income Americans would be eligible to participate.
- Providing better protection for retirement plans by giving workers new rights to diversify company stock that is contributed to their 401(k) accounts. It also would create new tax incentives to help employees pay for retirement advice and counseling.
- Assisting retirees with health care expenses by allowing retirees to use pre-tax income from their retirement savings account to pay for health care premiums.
The average American worker today changes jobs between four to eight times during the course of his or her career. This new measure would improve portability of retirement savings. It would ensure an employee's ability to roll over after-tax contributions and permit direct rollovers from workplace retirement plans to Roth IRAs. It also would allow rollovers directly to a spouse's retirement plan, allowing couples to balance their savings and act more as a single financial unit.
While Social Security is one of our most successful social programs, it was never intended to be the sole source of retirement income. We need to make retirement savings and security a national priority. That means providing Americans with the tools they need so they can plan for their financial future.
