Yet until this spring, this appreciation hadn’t translated into concrete efforts by Congress to help older people live comfortably in retirement. Thankfully, last month, the House approved the Setting Every Community Up for Retirement Enhancement (SECURE) Act on a 417-3 vote. The lopsided approval reflected recognition of the fact that nearly half of U.S. households in which the primary wage earner is 55 or older had no retirement savings, according to a 2016 Government Accountability Office report. Senate Finance Chairman Chuck Grassley, R-Iowa, expects quick approval by the Senate, and the White House appears supportive as well.
Among the measure’s many provisions, here are the most important:
It would give employers, in particular small businesses, modest financial incentives to offer 401(k) retirement plans to employees, including potentially millions of part-time workers. It would make it easier for small firms to save money by joining in pools with other small companies to jointly offer these plans. It would also give smaller companies a tax credit to encourage them to automatically enroll workers in 401(k)s, a policy with a great record of pushing Americans to save for retirement.
It would scrap rules that create disincentives for older Americans to keep working. Under current law, individuals who reach the age of 70½ can no longer make contributions to Individual Retirement Accounts (IRAs) and must begin to take distributions from such accounts. The House bill would end any age limits on IRA contributions and raise the age to 72 for mandatory IRA distributions. Some senators think the age for mandatory IRA distributions should be raised to 75. Given the good health of millions of seniors, that makes sense.
It would make technical changes related to 401(k) plans’ liability risks that would encourage them to offer annuities — fixed regular payments to retirees that bring a comforting certitude to monthly budgeting.
The SECURE Act would also fix a glitch in the GOP’s 2017 tax cut law that sharply increased taxes on benefits given to “Gold Star” families in which a member died while serving in the military. This should have been remedied the day it was noticed, but at least Congress is getting around to it now.
While the bill is highly constructive, it should only be a start to a broader, long-term federal effort to promote retirement security. There needs to be a concerted push to create incentives for — and make it easier for — lower-income Americans to invest in retirement plans — especially less affluent minorities and those with jobs in the “gig” economy. The large majority of tax incentives to promote retirement saving go to wealthy families — those who least need the help. That doesn’t make sense.
With America on track for one-fifth of its population to be 65 or older by 2030 — an all-time high — retirement security needs to be recognized as a crucial national issue. Congress and the Trump administration must rise to the occasion.
— The San Diego Union-Tribune (TNS)
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