COVID-19 Magnifies Retirement Savings Gap, Emphasizes Need to Act
The economic slowdown prompted by the COVID-19 pandemic has affected millions of Americans.
It has also intensified the importance of finding solutions to the retirement savings gap faced by so many Americans. One-third reaching retirement age have $25,000 or less saved.
Last year, the U.S. Congress took an important step forward by passing the SECURE Act. The law now makes it easier for small businesses to set up 401(k) plans for their employees, among other things.
ACLI was a big supporter of the SECURE Act and led a broad coalition of more than 20 different groups to advocate passage. I discussed our efforts on a recent podcast with the American Society of Association Executives, which honored ACLI with its ASAE Power of A Summit Award for our leadership.
What’s next? Important, additional legislation is pending in Congress that will go further to help lessen the retirement savings gap. These measures are all the more important with the coronavirus dampening the nation’s economy.
The Retirement Security and Savings Act, introduced by Sens. Rob Portman (R-Ohio) and Ben Cardin (D-Md.), would help people plan and prepare for retirement in valuable ways.
One provision would help people with student loans. It would let employers make retirement plan contributions beyond what’s permitted now, equal to what an employee pays on their loans. Another would create additional opportunities for workers and retirees to establish a source of lifetime income. Life insurers offer annuities, the only product that provides guaranteed income for life by letting savers effectively establish their own pensions.
The bill would also create a new incentive for employers to offer a more generous automatic enrollment plan. This is huge because retirement plans that automatically enroll have seen upwards of 90% employee participation, compared with only 50% participation for plans with voluntary enrollment.
The Portman-Cardin initiative is smart, practical legislation that will help lessen the retirement savings gap. It also serves as a sensible nonpartisan guidepost for future legislative efforts. Now more than ever, Congress should keep pressing and working to find ways to support Americans saving for retirement.