October 17, 2011 - Washington, DC - Last week, the New America Foundation hosted a briefing on alternative approaches to saving for retirement. The briefing, entitled “Facing Up to the Retirement Savings Deficit: From 401(k)s to Universal and Automatic Accounts,” hosted a panel of recognizable names in the realm of retirement saving reform.
From Theresa Ghilarducci, whose guaranteed retirement accounts proposal got a lot of play in the last Congress, to Dr. William Gale, who recently testified before the Senate Finance Committee on his plan to replace the tax deduction for retirement savings with a flat, refundable tax credit that would be deposited directly into individual savings accounts. Also on the panel were Mark Iwry, Senior Advisor to the Secretary and Deputy Assistant Secretary (Retirement and Health Policy), U.S. Department of the Treasury and initiator of and advocate for the President’s automatic IRA plan and New America Foundation’s Mark Calabrese who recently published a paper that makes suggestions on how to improve the plan.
As in previous panels on overhauling retirement savings plans in the US, the panel was adamant that existing plans for retirement savings are not enough to ensure Americans save adequately for retirement. The point that all panelists made was that saving for retirement should be automatic; the decision whether or not to save should not be left up to individuals. At the same time, all panelists agreed that the act of saving for retirement should be more rewarding for those who do save, whether it is by restructuring the tax deduction for saving so that it is a refundable credit or through a guaranteed rate of return.
It’s very unlikely that any of these proposals will get anywhere in the current legislative climate. Although the President has included the automatic IRA in his 2012 budget proposal, this will be the third year in a row it’s been proposed. The automatic IRA proposal has also been introduced as a bill in Congress, but it is the only of the proposals to be formally introduced. All of this is to say that, while the conversation will continue around this topic, it may be a while before we see any action. What are your thoughts on these proposals?
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