The State of the Union address didn't deliver many surprises. It was broadly populist in tone, with promises to rein in a bloated budget through (token) spending freezes and deliver relief to a middle class that's grown disillusioned with an unemployment rate of 10 percent and a still-moribund real-estate market.
The administration's main olive branch is a package of tax cuts, rebates, and policies created by the Joe Biden-led Middle Class Task Force. It's a grab bag of feel-goodies like student loan forgiveness and a larger tax credit for child care. Obama alluded to a few of these in the State of the Union; more detail had already been given at another speech two days earlier.
Several of the proposals touched on last night and outlined in more detail by the Middle Class Task Force are part of a push to improve and standardize American retirement planning. This is where Obama could do the most good"”but whether average workers or financial service firms and insurance companies will be the chief beneficiaries remains to be seen.
Make no mistake, something needs to be done about the state of retirement planning in this country. Since 401(k)s have largely replaced traditional pensions, the financial state of our collective golden years has become precarious. First, not all companies offer retirement plans. Those that do often make them available only to full-time or salaried employees. Workers farther down the income ladder are left out of the loop by design or by their own decision; if they can barely make ends meet, they're not going to voluntarily sock away a chunk of their paycheck. There's also the fact that retirement-benefit plans are complicated, offering a myriad of choices that sometimes freezes would-be participants into inertia.
According to Center for Retirement Research at Boston College, 51 percent of households won't be able to maintain their standard of living after retirement. Even before the financial crisis struck, that number was at a worrisome 43 percent.
The president's plan is to make retirement contributions opt-out: The default will be for employers to enroll their employees in Automatic IRA, the cornerstone of the Retirement Security Project developed by David John of the Heritage Foundation along with Mark Iwry, a former Brookings Institution scholar who decamped to the Treasury Department last year. All but companies with 10 or fewer employees would be required to participate, which John estimates will increase the number of Americans with retirement-plan access to 89 percent, up from roughly 50 percent today.
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