On Sunday, the Telegraph Herald business section carried an encouraging Associated Press article. It reported that, despite a rough 2018 on Wall Street, workers in the first quarter of 2019 upped their investments in their 401(k) retirement investment accounts.
On Monday, Wall Street took a deep dive — the Dow suffered a one-day drop of 2.45%, its worst showing in four months — in apparent reaction to China’s retaliatory action in its trade and tariff war with the U.S.
On Tuesday, Chuck Grassley, who chairs the U.S. Senate Finance Committee, scheduled a committee hearing, “Challenges in the Retirement System.” Grassley, an Iowa Republican, and Ron Wyden, an Oregon Democrat, last month jointly introduced legislation to promote citizens saving toward retirement.
If there is a takeaway from the previous three paragraphs, it could be simply this: Markets will go up, markets will go down. But the need to have one’s own retirement savings will never go down. Indeed, considering the challenges involving Social Security, Medicare, the budget deficit and the federal debt, the need for personal resources is likely to only go up.
Retirement saving requires a long-term view, not a short-term reaction to events such as Monday’s market drop or even the recession of 2008. Savers need to buckle up and anticipate many rises and falls on the long road to retirement.
Building a personal portfolio, and starting it early in one’s working career, are vitally important. It only makes sense for government to smooth the way for workers looking to build their nest eggs — and for employers to help them do it.
Grassley and Wyden’s bill, called the Retirement Enhancement and Savings Act, like similar (not identical) legislation alive in the House, is not particularly groundbreaking. Rather, it aggregates bits and pieces of various ideas that have been before Congress previously — as long as a dozen years previously.
“It’s simplification and access in small, sort of chippy ways,” Diane Thompson, an attorney specializing in benefits and executive compensation, told Roll Call last month. “But the cumulative effect ... could be significant.”
Despite the previously mentioned recent upturn in 401(k) set-asides, Americans are still failing to save enough — for retirement and for virtually all other needs (as opposed to wants).
How bad is it? The Insured Retirement Institute — it represents major insurers, banks and broker-dealers — estimates that 42% of Baby Boomers have this much saved for retirement: Nothing. That’s right. Zero. Nada. A Government Accountability Office analysis in 2017 reported that the median (as opposed to average) retirement savings for Americans ages 55 to 64 was $107,000. While that is $107,000 better than zero, that’s still not that much set aside for years of retirement living.
Improving this picture needs a priorities adjustment among workers. But government can help nudge them along.
According to Grassley, the Retirement Enhancement and Savings Act would, among other things:
• Lower the obstacles preventing small employers from going together to sponsor a single retirement plan for their workers. That would help more employees save more and permit employers to spread out the burden of plan-administration costs.
• Make it easier for employers to offer retirement plans that include lifetime-income arrangements, such as annuities.
• Smooth the way for Americans changing jobs to transfer retirement plan assets.
• Encourage automatic increases in employees’ contributions to 401(k) plans.
• Make sure that workers receive estimates of how much their accounts would provide during retirement if they were invested in an annuity.
Make sense? Seems so. However, it also seems that Washington is where good ideas go to die.
These sorts of proposals have enjoyed bipartisan support among lawmakers in the past — under Republican control and under Democratic control — only to wither under the hot heat of partisanship.
It’s long past time for today’s lawmakers to get past all that. They can be partisan about the Mueller Report, certain politicians’ latest tweets and access to Trumps’ tax returns, if they must. But Americans’ retirement programs should not be held hostage or fall victim. Retirement savings reform is needed now.