Obama Announces Steps to Boost Retirement Savings
One is DOL guidance to help small businesses enroll workers automatically in 401(k) or individual retirement accounts. Another is making it possible for employees to put money for unused vacation and sick days into their retirement plans. The steps do not require congressional approval.
Saturday's radio address from President Barack Obama focused on retirement savings and Labor Day. He outlined four actions to raise American workers' retirement nest eggs, saying the moves will make it easier to participate in retirement savings plans and also help more than 100 million families save some or all of their tax refunds. Letting workers turn their unused vacation or sick leave into retirement savings is one of the measures, which do not require congressional action or approval. To hear the speech, click here.
Obama began by discussing Friday's unemployment report, which showed job losses slowing, and encouraging manufacturing sector gains reported earlier in the week. "But even as we take aggressive steps to put people back to work, it is also important that we keep faith with men and women looking back on a lifetime of labor; hard-working Americans who deserve to know that their efforts have resulted in a secure future, including a secure retirement," he said. "For this recession has not only led to the loss of jobs, but also the loss of savings. The drop in home values, for example, has also meant a drop in the value of the largest single investment most families have. And the decline in the financial markets has led to a decline in the value of 401(k)s and other sources of savings and retirement security. As a result, over the past two years, the American people have lost about $2 trillion in retirement savings. . . . The fact is, even before this recession hit, the savings rate was essentially zero, while borrowing had risen and credit card debt had increased. Many were simply struggling to stay afloat as incomes were stagnant or falling and jobs were scarce. That's important to remember. But there were also those who spent beyond their means. And more broadly, tens of millions of families have been, for a variety of reasons, unable to put away enough money for a secure retirement. Half of America's workforce doesn’t have access to a retirement plan at work. And fewer than 10 percent of those without workplace retirement plans have one of their own."
He announced these four actions:
"First, we're going to make it easier for small businesses to do what large businesses do: allow workers to automatically enroll in a 401(k) or an individual retirement account. We know that automatic enrollment has made a big difference in participation rates by making it simpler for workers to save -– and that's why we're going to expand it to more people.
"Second, we'll make it easier for people to save their federal tax refunds, which 100 million families receive. Today, if you have a retirement account, you can have your refund deposited directly into your account. With this change, we'll make it easier for those without retirement plans to save their refunds, as well. You'll be able to check a box on your tax return to receive your refund as a savings bond.
"Third, we'll make it possible for employees to put payments for unused vacation and sick days into their retirement plan if they wish. Right now, most workers don't have that option.
"And fourth, the IRS and the Treasury Department are creating a plain-English, easy-to-follow guide, as well as a Web site, to help folks navigate what are often very complicated waters, especially for workers changing jobs who often are unsure how best to continue saving for retirement. Because the rules ought to be written to encourage people to save, instead of discouraging them."
He then said his administration will build on these four steps by working with Congress to enact a measure Obama submitted in his budget: a plan to make it possible for workers to automatically enroll in IRAs through payroll contributions and a tax credit matching half of a family's savings, up to $1,000 per year, and placing it in a retirement account.