If the SECURE 2.0 bill currently being finalized on Capitol Hill becomes law by the end of the year as expected, the American Retirement Association says two key provisions within it would expand retirement savings opportunities for more than 100 million Americans.
In a statement today, the ARA said the two provisions could help close the retirement savings opportunity gap for moderate income Americans. “The first is a Saver’s Match Program that would incentivize retirement savings by providing a 50% matching contribution on up to $2,000 in retirement savings annually. Lower- and middle-income Americans would be eligible for this federal government matching contribution regardless of tax liability,” the statement said. “Over 108 million Americans would be eligible for the Saver’s Match that would be directly deposited into their retirement account—boosting the savings of moderate-income earners.”
ARA cites estimates prepared by Judy Xanthopoulos, Ph.D., of Quantria Strategies, based on 2019 IRS, SOI W-2 Data in arriving at that figure.
“The expanded and enhanced Saver’s Match would both encourage saving and help moderate income earners build wealth by providing an immediate, meaningful return on personal retirement contributions,” said ARA CEO and NAPA Executive Director Brian Graff.
The second provision would provide more than 19 million new American workers with access to the workplace-based retirement system through the “Starter K”—a brand new super simple safe harbor 401k plan—alongside enhanced retirement plan startup tax credits for employers.
Data shows that Americans are 12-15 times more likely to save for retirement if they have access to a retirement savings plan at work. Unfortunately, far too many Americans still don’t have that access—and are missing out on the opportunity to save for retirement—an “opportunity gap” particularly pronounced in the Black and Hispanic communities, ARA says.
“The aggregate impact of expanding access to these programs alongside the powerful financial incentives of the enhanced Saver’s Match is profound.”
Brian Graff
Fortunately, data also shows that when moderate income workers are automatically enrolled in a workplace retirement plan there is no racial disparity in retirement savings participation with roughly 80% of Black, Hispanic, and White Americans all participating in these programs—a key aspect of this new plan type.
“The Starter K plan makes it easier for small business owners to provide a meaningful benefit to their workers; and when coupled with automatic enrollment, it provides a significant step toward closing not only the nation’s retirement opportunity coverage gap, but racial wealth gaps as well,” added Graff. “The aggregate impact of expanding access to these programs alongside the powerful financial incentives of the enhanced Saver’s Match is profound.
A white paper outlining the findings, alongside a state-by-state impact can be found at https://araadvocacy.org/secure-report/
Encouraging non-savers to save
Graff caught the attention of Senate Finance Committee Chairman Ron Wyden (D-OR) back in July 2021 by sharing some eye-opening projections about a couple of retirement reform bills then being considered during his testimony before the committee.
“The potential results of Congress tackling the two biggest challenges in the retirement savings policy space—closing the retirement coverage gap and directly contributing to and incentivizing the retirement savings of moderate-income workers—are extraordinary,” Graff testified. “Estimates show that enactment of the combination of the Automatic IRA Act and the Encouraging Americans to Save Act would create 51 million new individuals now saving for retirement and would add an additional $6.2 trillion in retirement savings over a 10-year period. Nearly all—98%—of these 51 million new savers earn less than $100,000 per year.”
Wyden responded, “What you’re saying is that if you encourage non-savers to save, and those with limited savings to save more, that can really be a loadstar for America’s future with respect to retirement savings?”
Graff said it would have a tremendous impact on the potential for a comfortable retirement for tens of millions of Americans who currently don’t have access. “We know that getting access to [retirement savings plans in] the workplace as well as auto-enrollment—which is part of these proposals—works. The data is absolutely, positively clear,” Graff said during his testimony, adding that scaling auto-enrollment at a national level would be a huge difference-maker.
SEE ALSO:
• Industry to Congress: Pass SECURE 2.0 Already!
• SECURE 2.0 Update: Where It Stands, What’s Likely to be Included