Next year is no time for a tax increase that would harm Americans’ ability to save for retirement, but the possibility is something that should deeply concern workplace retirement savers. That was a central message from Investment Company Institute President & CEO Eric J. Pan in addressing the audience at the ICI Tax and Accounting Conference Tuesday in Boca Raton, Fla.
“The nearly 100 million U.S. households with tax-advantaged retirement savings should be deeply worried.”
ICI’s Eric J. Pan
“Regardless of which party wins the White House and Congress this November, taxes will dominate D.C. come 2025. Key parts of the 2017 tax-reform law will expire at the end of next year, and Washington will spend all year debating what to do,” Pan told the audience.
“The retirement system, and long-term investing as a whole, will be central to the debate,” Pan continued. “One or both parties likely will push for sweeping changes to tax policy. And that’s the problem. They’re probably going to consider changes that could harm Americans’ ability to achieve their savings goals and retire with dignity. The nearly 100 million U.S. households with tax-advantaged retirement savings should be deeply worried. So should everyone who invests in the capital markets.”
He added that ICI stands ready to defend American families and the American economy from harmful tax hikes.
“Our top priority in the coming year is promoting common-sense tax policies that help individual investors use IRAs, 401(k)s, and other plans that make up our country’s voluntary retirement system,” Pan said.
He noted that the U.S. retirement system isn’t a “mishmash of policies.” Rather, policymakers have spent decades “painstakingly and expertly crafting a superior system” that benefits Americans. From Social Security to ERISA to SECURE 2.0, Democrats and Republicans alike have championed smart reforms to give Americans a secure retirement.
Policymakers, Pan said, need to realize that mutual funds and other registered investment funds direct trillions of dollars to their highest use, turning breakthrough ideas into commercial successes and making thriving companies even better. “Investment funds have helped make America the world’s economic leader,” Pan stated.
“We’re already telling policymakers on both sides of the aisle that this is no time for a retirement tax hike. Actually, we’re telling them there’s never a time for a retirement tax hike. Few policies would do so much damage to so many Americans.”
• Read Pan’s full remarks here.
U.S. retirement system working
A new LinkedIn article from ICI takes a quick look at how the U.S. retirement system is working for millions of Americans, and takes issue with recent opinion pieces with cherry-picked data suggesting that American retirees are on the brink of financial disaster.
The article stresses that Americans are saving for retirement:
- With more than $25 trillion in assets, IRAs, 401(k)s, and similar retirement accounts are a growing source of financial security for everyday Americans. Balances in these accounts have climbed to or near record highs, helping the average long-term saver build a meaningful nest egg.
- Despite lingering inflation pressures on households and businesses, retirement savings trends are moving in the right direction. Employers are doing their part too, with 90% of 401(k) participants in plans featuring employer contributions.
- Among households nearing retirement, more than two-thirds have retirement assets and the median balance was $185,000, more than double some numbers ICI has seen cited recently.
- The combination of mandatory Social Security and voluntary retirement plans has enabled millions of American retirees to maintain the standard of living they had while working.
- Contrary to the claims that most retirees rely on Social Security alone, ICI economists found that three out of four Americans receive retirement plan distributions at age 72.
- Although the importance of retirement plans varies with each worker’s lifetime earnings, most Americans maintain a high share of their spendable income in retirement. In fact, those who had lower income in their late 50s typically replace a higher share of their spendable income in retirement, despite being more reliant on Social Security.
The article goes on to note that elderly poverty in the U.S. has fallen in recent decades, and Gen Z households in 2022 had two-and-a-half times more asset in their DC plans (adjusted for inflation) than Gen Xers has in 1989 at the same age.
SEE ALSO:
• U.S. Retirement Assets Hit $40T
• Retirement Savings Trends on the Upswing: ICI
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
