When it comes to saving for retirement, it’s easy to put it off when our golden years seem far off. While putting money away isn’t easy, especially during financially stressful times, it’s absolutely necessary. Saving is imperative for comfortable retirement considering that Social Security will be teetering with insolvency over the next decade. That’s a financial reality too real to ignore.
Most Americans are concerned about being able to afford retirement. These concerns are well founded. Compared to 50 years ago, life expectancy has risen over eight years, and more years of retirement will require more savings. While inflation and the high costs of living continue to impact consumers’ wallets, millions of Americans are facing retirement without any savings.
Optimistically, a survey conducted by Blackrock found that confidence among those with retirement plans increased by 12 percentage points in the last year. However, many people, from Baby Boomers to Gen Z, reported being confused about how to save and how much to save.
The report underscored that savers want to find solutions to retirement insecurity – and employers know there is a need to act. Almost 100 percent of plan sponsors feel responsible for helping their employees generate income in retirement, with 72 percent feeling that the risk of outliving retirement savings has become an increasing concern.
Retirement insecurity has long been an issue facing the American public. Many consumers want to continue living their standard of living as they enter retirement. According to the survey, 93 percent of respondents agreed that having a source of guaranteed retirement income would ease their concerns.
As consumers try to mitigate a retirement crisis and consider relying less on Social Security, they must have access to the proper tools and information necessary to make the retirement decisions that work best for them.
Over half of working Americans do not have access to a retirement plan through their job. For these individual savers, there are options to save for retirement, including Target Date Exchange-Traded Funds which hold stocks and bonds, are simple, easily accessible, and professionally managed, allowing savers to feel confident in their investment decisions.
Another option is an Individual Retirement Account, which is a long-term, tax-advantaged savings account. Money in these accounts cannot be withdrawn before reaching 59½ years old without facing a 10 percent tax penalty, which guarantees that, exemptions aside, users of this plan will have savings that are only accessible as they near retirement.
Additionally, Congress recognizes the ongoing challenge of working people having enough to retire, which is why in recent years they have enacted sweeping changes to the laws that govern employee-sponsored retirement plans.
In 2022, Congress passed the SECURE 2.0 Act – building off the 2019 law -- to increase enrollment in retirement plans and bolster retirement savings. For many workers with access to a work-sponsored plan, the enrollment process may seem complicated or time-consuming. The SECURE 2.0 Act establishes that employers must automatically enroll new employees in their retirement plan, which simplifies the process and easily allows workers access to retirement savings accounts.
The SECURE 2.0 Act also replaces the tax refund into a federal matchmaking contribution that is required to be placed in an IRA or retirement account, which increases retirement savings without taxpayers having to put aside any extra money. These changes are a strong starting point, but more work must be done to bolster retirement security for all Americans.
In a time when nearly half of Americans over the age of 55 have no retirement savings, and the majority of those 65 and older are living on less than $30,000 annually, with one in four surviving on less than $15,000 per year, retirement planning is essential. Increased private and public participation in education around retirement savings options is key to bettering the country’s future and ensuring that consumers know all options available to them to save for their futures.
Congress has made bipartisan retirement legislation a priority in the past, and looking forward, they should double down on their progress this year. The American people deserve to live comfortably in their golden years, and the time to act is now.
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