Saving for retirement, especially for younger generations, too often doesn’t factor into monthly household budgets. Putting away that first dollar can be the hardest one to save.
Living paycheck-to-paycheck makes it difficult to carve out a portion of income for retirement. But considering the unbridled growth in health care costs, living standard expectations and longevity on the rise, Americans can’t afford not to save for their income needs in retirement.
As a federal lawmaker, I see retirement security as a cornerstone of America’s social responsibility. Policymakers need to hammer out accessible, portable and robust savings systems that will help to address the significant savings gap facing millions when it comes to a secure retirement.
Altogether, America’s anti-poverty safety net for the elderly includes Social Security, personal savings and employer-based pension programs. It’s often referred to as a three-legged stool.
The President has worked at length to educate the American public about the financing shortfalls facing Social Security.
And although the policy solutions for saving Social Security remain gridlocked, I hope public awareness will continue to move forward so that the issue once again will return to the front burner in Washington.
The Social Security leg needs fixing to give 21st century retirees monthly benefits they can count on once they leave the workforce.
Uncle Sam is the not the only one facing financial problems when it comes to keeping pension commitments. Many of America’s biggest corporations and state, county and city governments are wrestling with the growing burden of making good on the promises made to current and future retirees.
When the likes of Enron or United Airlines default on their pension promises, it undermines public confidence in corporate America, burdens the taxpaying public and creates a bleak retirement picture for employees.
As corporations have moved away from traditional defined benefit plans to portable savings vehicles that include 401 (k)s, 457s, 403 (b)s, workers today have greater flexibility to bring their retirement packages from job to job.
At the same time, workers also shoulder greater responsibility to manage their accounts and play a decision-making role in their retirement investment strategies.
As chairman of the Senate Finance Committee, I’m working in Congress to broker a bi-partisan, bicameral legislative agreement that would help workers by improving retirement savings tools, encouraging universal participation in workplace savings programs, protecting existing workplace retirement benefits and simplifying rules to encourage employers to offer pension plans, especially small businesses.
In November, the Senate approved my pension reform legislation that is designed to keep the airline industry and others with under-funded plans from terminating their retiree benefits. It also addressed the growing burden shouldered by the Pension Benefit Guarantee Corporation.
The PBGC assumes pension payments for retirees whose companies are no longer able to meet their obligations. Without legislative changes, the PBGC faces a significant financing shortfall and will be unable to pay all of the claims it has assumed. In its annual report, the PBGC reports $56.5 billion in assets to cover $79.2 billion in pension liabilities. Congress needs to act sooner rather than later. Otherwise, the situation could eventually lead to an expensive bail-out paid for by taxpayers.
In an effort to narrow the retirement savings gap facing Americans, my bill also would promote automatic enrollment in 401(k) plans for eligible workers. Making workers opt out instead of opting in ought to help younger generations get a head start on retirement readiness. These pre-tax savings tools offered through employers often come with matched contributions. It adds up to a salary increase, and we need more American workers to take advantage of the savings opportunity.
I’m also seeking to extend savings opportunities for lower-income workers through the federal tax code. I helped secure a $2,000 nonrefundable tax credit in the 2001 tax laws. It is set to expire in 2006. Taxpayers with adjusted gross income of $25,000 or less ($50,000 for married couples) are eligible for the credit. The new tax relief bill approved by the Senate in November extends the provision through 2009. Nearly 100,000 lower-income taxpayers in Iowa benefit from this pro-savings, pro-worker tax credit.
From my leadership position in the U.S. Senate, I will continue advancing tax and pension policies that work to narrow the retirement savings gap for millions of hard-working Americans. After spending a lifetime in the labor force, I want to help make sure people are prepared to afford a comfortable lifestyle in retirement.