Latest news with #RSAA
Yahoo
17-04-2025
- Business
- Yahoo
Bipartisan bill would create retirement plans for those with no 401(k)
A shrinking but persistent share of America's workforce lacks access to employer-provided retirement plans, research shows. Now, a bipartisan bill introduced in Congress earlier this month looks to close that access gap. The Retirement Savings for Americans Act (RSAA), introduced by Republican Rep. Lloyd Smucker of Pennsylvania, would create a new program called the American Worker Retirement Plan. The tax-advantaged retirement savings accounts, similar to the federal government's Thrift Savings Plan, would be for workers who currently lack access to workplace retirement accounts. If enacted, the RSAA would enable the federal government to match contributions of up to 5% for low- and middle-income workers — comprising a 1% non-elective contribution and a 4% safe harbor match — with the match gradually phasing out at the median income level. READ MORE: Maximizing IRAs, 401(k)s in a fast-shifting retirement space This marks the third time that the RSAA has been introduced to Congress. Democratic Sen. John Hickenlooper of Colorado first introduced the bill in 2022, and did so again in 2023 along with Republican Sen. Thom Tillis of North Carolina. Roughly 69 million workers, 55.5% of the U.S. workforce, lacked access to employer-provided retirement plans in 2021, according to an analysis of Bureau of Labor Statistics data conducted by the Economic Innovation Group, a bipartisan public policy organization. Secure 2.0 helped expand access to 401(k)s for some part-time workers, but experts say it falls short of addressing the larger gaps in access. Financial advisors say that 401(k)s and other employer-provided accounts are powerful tools for retirement planning. However, research shows that access to such accounts is disproportionately limited in rural and low-income populations. READ MORE: Forget the 4% rule: Why fixed-rate retirement withdrawals fall short A new study from the Economic Innovation Group found that half of Americans in rural areas lack access to a retirement savings plan through their employer, compared to 41% in urban areas. After accounting for differences in things like education, income and company size, researchers found that a typical rural worker is 13% less likely to have access to an employer-provided retirement plan than an equivalent urban worker. As a result, rural workers have nearly half the average retirement savings of urban workers, data shows. Factors like income, the industry a person works in and the size of their company can go a long way toward shrinking the access gap between urban and rural workers, researchers found. Income played one of the most influential roles in determining access to an employer-provided retirement plan. Holding all other factors constant, rural workers in the highest income decile actually have greater retirement plan access than their urban counterparts. The industry in which a person works plays a similar role. The entertainment, accommodation and food services industries have the lowest rates of retirement plan access, while the finance, insurance and real estate industries have the best access. Among workers in these "best plan access" industries, the urban-rural divide shrinks from 13 percentage points down to just 2 percentage points. Still, there's no doubt that "living in a rural area is generally associated with having restricted access to retirement savings plans for many different kinds of workers," the researchers wrote. The Economic Innovation Group has lobbied for the RSAA, arguing that while the "legislation would benefit workers everywhere, our findings suggest that the access and incentives provided by RSAA would disproportionately benefit rural workers." But short of major policy changes, what can be done to improve retirement savings for workers who lack access to employer-provided plans? According to financial advisors, quite a lot. Retirement planning without access to retirement accounts like 401(k)s is far from ideal, but financial advisors say it's still possible. "Not having access to a 401(k) plan doesn't really mean you can't build a solid retirement plan," said Chuck Cavanaugh, head of financial planning for Citi U.S. Consumer Wealth Management. "It just means you have to get a little creative and proactive." READ MORE: Crafting the perfect retirement portfolio: A financial advisor's dilemma For most workers, saving for retirement without a 401(k) means opening a traditional or Roth IRA. These accounts offer many of the same benefits as 401(k)s, but advisors say they also have one major drawback: contribution limits. After a worker maxes out their annual IRA contributions, advisors point to a few other strategies they can use to help clients maximize their retirement savings. "If someone owns a small business, they can open a SEP IRA or a SIMPLE IRA," said Margaret Doviak, founder of DM Wealth Management in Norman, Oklahoma. "If they have employees, a SIMPLE will likely create less funding liability with higher deferral limits than an IRA." SIMPLE IRAs strike a middle ground in terms of retirement account contribution limits, allowing employees, sole proprietors and self-employed workers to contribute up to $16,500 a year. Annuities and whole life insurance policies can also be useful retirement savings vehicles for clients who lack access to employer-provided accounts, but their use cases are not as broadly applicable as simple investment accounts like an IRA, advisors say. "401k plans are just one of many ways to save and invest for retirement," said Nancy Listiawan, founder of Vera Wealth in Pasadena, California. "What matters most isn't the specific investment vehicle, but rather your consistent saving habits and discipline over time."
Yahoo
22-02-2025
- Business
- Yahoo
"We are listening now": Democrats' path forward leads back to the economy
As Democrats look ahead to rebuilding and focus on elections in 2026 and 2028, party leadership has an urgent responsibility to regain footing with critical constituencies like working class voters and, in some cases, relearn how to communicate with critical voting blocs. On this score, the economy stands out. President Donald Trump's win was driven in part by his ability to connect with voters on economic issues. Democrats, meanwhile, faced skepticism about their capacity to deliver financial security, with only 45 percent of voters believing the Democratic Party was better equipped to manage the economy. Regaining economic credibility with voters will require addressing the deep insecurities felt by a large share of workers and families. Democrats should start by fighting to give them access to the tools they need to build wealth and achieve financial stability and security. Consider retirement savings, which are the number one source of wealth for American households. According to the Federal Reserve, over one-quarter of non-retired adults have zero saved for retirement. This is in large part because more than 50 million Americans – many of whom are lower and middle income -– lack access to employer-sponsored retirement plans. Lawmakers who want to tackle this challenge and create an opportunity for real bipartisan policy innovation should look no further than the Retirement Savings for Americans Act (RSAA). This legislation would provide tens of millions of workers who are being left behind today with access to a plan and incentives nearly identical to the retirement benefits enjoyed by members of Congress and their staff. The RSAA has already garnered bipartisan support in both the Senate and the House of Representatives, as well as endorsements from a wide range of nonpartisan and bipartisan experts and organizations. The bill exemplifies the type of cross-party collaboration that voters increasingly demand. In an era of political polarization, Americans are hungry for pragmatic solutions that transcend partisan gridlock. Championing RSAA will provide Democrats with a tangible, bipartisan policy achievement to present to voters. Of course, Democrats have long been champions of social safety net programs like Social Security and shouldn't give an inch in fighting to preserve the future of those vital programs. But Democrats must also work to take the pressure off the safety net by expanding access to the wealth-building tools and incentives that upper-income Americans have long taken for granted. This is particularly important as Democrats work to rebuild trust with voters who may have felt disillusioned in 2024. By supporting policies like the RSAA, Democrats can reinforce their party's commitment to creating economic opportunities – especially for low- and middle-income workers who are largely excluded from traditional retirement savings programs. Such an approach can reinvigorate Democrats' appeal to moderates and independents, who simply want Washington to work on their behalf, not get mired in ideological someone who has long served as a Democratic Party surrogate and spokesperson on the Harris, Biden, and Clinton presidential campaigns the past three presidential cycles, I've seen firsthand the power of policies that resonate with working-class Americans. Whether it was championing better wages, expanding healthcare access, or protecting Social Security, our campaigns emphasized the Democratic Party's enduring commitment to lifting up hardworking families. Closing the gap in the U.S. retirement savings system would build on that legacy, providing greater economic stability for millions of Americans who are working tirelessly to secure a better future for themselves and their children. The stakes could not be higher. While President Biden's administration achieved historic legislative successes on major economic bills that helped achieve record job growth, many Americans were still dealing with the effects of high costs and inflation. Many Democrats, frankly, weren't listening to their concerns. We are now, and we've got to show it. The path forward is clear, and Democrats have a lot of work to do. It's time to seize the initiative, address voter concerns about financial security, and rebuild trust as the party that delivers on its promises for American workers.
