How Congress’ latest bid to help Americans save for retirement falls short

Among the items on Congress’ end-of-year to-do list are several proposals to improve Americans’ retirement savings. Multiple bills at various stages of approval in the House and Senate are being lumped together as Secure Act 2.0. The name is a reference to the legislation they’re building on: the Secure Act 1.0, which passed in 2019 during the Donald Trump administration. These proposals have bipartisan support and actually stand a good chance of passing in some form, perhaps as part of the government funding bill. This latest package might be most beneficial to those who are already saving something for retirement but not enough, said Steven Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center. “It’s oriented to giving incentives to those who have the money to participate,” he said. Several of the bills’ provisions are aimed at widening tax benefits for people who are able to put money away for the future. But some proposals could help the 1 in 4 Americans who aren’t saving anything, per Alicia Munnell, director of the Center for Retirement Research at Boston College. One would automatically enroll qualifying employees in new 401(k)-type plans unless they opt out. “No one can say, ‘Oh, I’m going to put aside some money each month,’ because there’s always some expense set that seems more pressing,” she said. There’s also a proposal for tax credits for low-income workers who are making contributions. But Munnell said the legislation fails to address the biggest challenge to retirement security in the U.S.: “Coverage, coverage, coverage.” About half of all workers have no access to employer-sponsored retirement plans. While the bills aim to provide easier and cheaper ways for businesses to offer retirement plans, many in the greatest need can’t afford to deduct anything from their paychecks, said Richard Johnson, a senior fellow at the Urban Institute. “Those who lack a plan tend to be lower-educated workers, lower-income workers, part-time workers, disproportionately people of color.” They’re more likely to rely on Social Security, which is headed for depletion starting in 2035.