Retirement. It is a life stage toward which we all strive, typically with a dream of leisure, travel and the ability to enjoy family and friends as we wave goodbye to a lifetime of work and associated stress. Unfortunately, this is a dream that many Americans never realize.
Retirement anxiety is increasing. Research by the National Institute on Retirement Security found that two-thirds of workers say the nation faces a retirement crisis. More than half – 56 percent – are concerned that they will not achieve a financially secure retirement.
Another survey, Fidelity Investments’ 2021 State of Retirement Planning Study, found that more than 8 in 10 Americans say the pandemic hurt their retirement plans. One-third estimate it will take up to three years to get back on track as workers lost jobs and access to retirement plans, even tapping retirement accounts to pay bills today with money meant for tomorrow.
Our nation faces a retirement crisis because too few individuals have the means to sufficiently save for their golden years. As private-sector pension plans decrease in favor of 401(k) plans and Individual Retirement Accounts, workers feel the burden of accumulating savings to produce sustainable, lifetime retirement income.
Fortunately, help is on the way: Comprehensive, bipartisan legislation, the Securing a Strong Retirement Act, was introduced by House Ways and Means Committee Chairman Rep. Richard Neal (D-Mass.) and Ranking Member Rep. Kevin Brady (R-Texas).
The bipartisan duo is working together again after a successful partnership to enact the Setting Every Community Up for Retirement Enhancement Act in 2019. That measure created incentives for small employers to offer workplace retirement plans to give more workers retirement savings opportunities. It also expanded access to lifetime income products within retirement plans to reduce retirees’ risk of outliving their savings.
The new legislation builds upon the SECURE Act’s success and will put the prospect of building retirement savings in reach for millions more workers. A key feature is an automatic enrollment provision for new employer-provided retirement plans. Auto-enrollment is a proven method for increasing worker participation. Employees who are automatically enrolled can opt out at any time, but most do not as they watch their retirement savings grow over time. The measure also clarifies tax incentives for small business owners to encourage them to offer a retirement plan.
Another provision addresses the plight of mostly younger workers with limited financial resources and significant student debt. It would permit employers to contribute to a workplace retirement plan for employees making student loan payments.
For older workers, the legislation allows for larger catch-up contributions for baby boomers close to retirement. The legislation also increases the age at which retirees must take minimum distributions from retirement accounts, allowing more time for savings to grow. Other provisions facilitate the use of lifetime income solutions.
Today, there is a nearly 50 percent chance of one member of a 65-year-old couple living to at least age 90. This means that retirement savings may need to last 30 years or longer. As a result, workers and retirees need tools to plan for sustainable income that lasts as long as they live. Lifetime income products like annuities are the only solution that can provide protected monthly income that traditional pensions have provided.
The Neal-Brady legislation will allow greater use of Qualified Longevity Annuity Contracts to insure against the risk of outliving retirement savings. These products also allow individuals to keep more of their tax-deferred savings longer while also receiving an income stream throughout their lifetime.
Despite a deep political divide on many issues, retirement security remains bipartisan. The SECURE Act was a first step. But much more needs to be done to help people build economic equity, strengthen financial security and protect income in a way that can sustain them throughout their retirement years.
We know the problem, and we have a bipartisan solution. Congress should now make a bold leap forward and pass the Securing a Stronger Retirement Act to relieve the anxiety of millions of Americans who want to live the dream of a financially secure and dignified retirement.
Wayne Chopus is president and CEO of the Insured Retirement Institute.
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