Will the SECURE Act Actually Bring Security to Older Americans?

May 10, 2019 / Amanda Chase, Horsesmouth Assistant Editor

For the 75 million boomers marching into old age and the Generation X cohort that follows, the future looks bleak. One in five working-age Americans has no savings, and another 10% have squirreled away less than $5,000 for retirement. The retirement income crisis has spurred Congress into action; both the House and Senate introduced bills which would provide U.S. workers with expanded opportunities to participate in employer-provided retirement plans. Beltway insiders say the SECURE Act is on track to become law. So, will it provide financial security to boomers and Generation X in their retirement years? The answer is yes and no.

Those in good health, with stable well-paying jobs and a modest financial cushion are most likely to benefit. Unhealthy workers, those with sporadic employment and workers living paycheck to paycheck are less likely to be winners. More specifically:

  • The opportunity to contribute to one’s retirement plan past age 70 benefits those fortunate enough to live and work into their 70s and beyond. Lower-income Americans, especially those with physically taxing jobs tend to have shorter lives and exit the labor market in their 60s or younger due to health problems that are incompatible with demanding jobs.
  • The opportunity to contribute up to 15% of a paycheck to a 401(k) or participate in the workplace retirement plan set up by your small employer also may be especially appealing to workers who have the financial wherewithal to sock away money for retirement. Lower-income workers with more immediate and pressing financial concerns, however, might not contribute to their 401(k) as much or as often as needed to amass a secure nest egg.
  • The most promising aspect of the SECURE Act is employer-sponsored retirement plans for part-time and temporary workers. More than 27 million Americans are part-time workers, many of whom are women caring for children or aging parents and retirees who returned to work out of financial necessity.
  • Automatic enrollment may be the key to getting workers to encouraging savings, even among those who live paycheck to paycheck. Setting contributions to a default rate as low as 3%, with the opportunity to opt out or increase contributions may be especially helpful to lower-income workers.

Find the full article at Next Avenue.

 

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