WASHINGTON (AP)—The recession has eaten into people’s nest eggs so the government is promoting ways to make it easier to save for retirement.
One initiative that President Barack Obama outlined in his weekly radio and Internet address Saturday will allow people to have their federal tax refunds sent as savings bonds. Others are meant to require workers to take action to stay out of an employer-run savings program rather than having to take action to join it.
|PROMOTING WAYS TO SAVE— President Barack Obama arrives on the South Lawn of the White House in Washington, Sept. 7.
“We know that automatic enrollment has made a big difference in participation rates by making it simpler for workers to save,” Obama said. “That’s why we’re going to expand it to more people.”
The new federal steps, which do not require congressional action, include:
•Making it easier for small companies to set up 401(k) retirement savings plans in which all workers are automatically enrolled unless they ask to be omitted. Employers can set default amounts of each worker’s pay—perhaps 3 percent—to automatically be deposited into the accounts without being taxed. Workers can raise or lower the contribution levels, and they choose how to invest the money. They will pay taxes on the money only when they withdraw it as retirees, when their tax rates are likely to be lower than when they are working full-time. A similar process would apply to savings plans called SIMPLE-IRAs.
•Allowing such plans to automatically increase the amount that workers save over time unless the workers object.
•Allowing people to check a box on their federal tax returns asking that any refund be sent as a savings bond. More than 100 million U.S. households receive refund checks each year, and many are promptly cashed and spent.
•Allowing workers, when leaving a job, to direct unused vacation pay to a retirement savings account rather than taking it in cash.
“This recession has not only led to the loss of jobs, but also the loss of savings,” Obama said, citing declines in home values as well as sources of retirement income.
“If you work hard and meet your responsibilities, this country is going to honor our collective responsibility to you: to ensure that you can save and secure your retirement. That is why we are announcing several common sense changes that will help families put away money for the future,” Obama said.
The administration earlier asked Congress to make it easier to set up retirement accounts for people whose workplaces do not offer them. No legislation has moved thus far.
“Tens of millions of families have been, for a variety of reasons, unable to put away enough money for a secure retirement,” Obama said. “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.”
Nearly half of the U.S. workforce has little or nothing beyond Social Security benefits to get by on in old age, Treasury Secretary Timothy Geithner said.
“Just as the administration is dedicated to reviving the economy and getting people back to work, so too it is dedicated to helping put retirement security within the reach of all Americans,” Geithner said in a statement.
While saving for retirement is universally seen as a good idea, any increase in savings rates could somewhat slow the nation’s rebound from the economic recession.
(Charles Babington is an Associated Press Writer.)