The way Americans work and live is changing, but policy around how we save for retirement will not keep pace if the U.S. Senate isn’t able to act on legislation that passed the House in May.
The bipartisan bill — aptly named the Secure Act — expands access to retirement plans for millions of workers. It also allows older workers and retirees to contribute more to their IRAs, increases 401(k) coverage to part-time employees, and helps new parents, including adoptive parents, better manage expenses.
That’s not all. The Secure Act corrects recent inadvertent increases in the taxes Gold Star Families pay on survivor benefits. It prevents benefits cuts to older, longer-service workers in defined benefit pension plans. And it protects defined contribution plans at religiously affiliated organizations.
But it’s not just the sheer number of workers this legislation impacts that makes it significant. It’s who these workers are and how the legislation increases access to them that matters. It’s exactly the kind of good public policy that addresses the issues raised at kitchen tables across America.
For starters, Americans are living longer. Each day, 10,000 Americans turn age 65 and many can expect to live 20 years or longer in retirement. Yet, almost a quarter of adults say they have no retirement savings. Many who will rely solely on Social Security are at risk of living their retirement years — perhaps two or three decades — with a very different lifestyle than they may be accustomed.
Meanwhile, there are generations of workers who are still in the middle of their earning years who have a lot of preparing to do, yet lack access to a workplace retirement plan.
Some estimates show there are as many as 16 million workers in the gig economy. Many of these independent contractors work for small employers who lack the resources to offer 401(k)s and IRAs to their employees on their own, despite their desire to.
These small businesses can play a critical role in closing the retirement savings gap as they employ more women, Asian American, American Indian and Hispanic workers than larger employers. These communities are more at risk for not having enough retirement savings. Yet, small employers are also less likely to offer a workplace retirement savings plan.
Over two-thirds of part-time workers either work for an employer without a defined contribution plan or are not eligible for their employer’s plan. They face unique savings challenges. This is particularly true for women, who make up 64 percent of part-time employees in the United States, and consistently lag behind in retirement savings.
Retirement security is a complex issue, but the access gaps are clear. The Secure Act looks where the gaps are — with small employers, with part-time workers, with middle-income earners — and makes direct efforts to close the coverage gaps.
Fundamentally, we know workplace savings vehicles are one of the best motivators to get people to save for retirement. This is especially true for middle income earners. People earning $30,000 and $50,000 per year are 16 times more likely to save for retirement if they have access to a workplace plan.
Put simply, low- and middle-income Americans struggling to save for retirement lose if the U.S. Senate fails to pass the Secure Act. There’s no time to wait — the time is now.
Susan K. Neely is president and CEO of the American Council of Life Insurers, which represents 280 companies, and 95 percent of assets in the life insurance industry. To learn more, visit www.acli.com.