2044: Achieving Retirement Security for the Average American Worker

Based on the average retirement age of 67, the average American worker (aged 42) is expected to retire in the year 2044. The anticipated depletion of the Social Security Trust Fund by 2035 begs the question, how will Americans retire? Comfortably and on our own terms? Or without adequate savings, putting pressure on families, the government, and the economy?

That answer depends on decisions that demand action today. Though it lacks the emotional pull of a partisan soundbite, retirement security is a topic that both sides of the aisle agree needs greater attention and innovation.

On May 23, the House nearly unanimously passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act with a 417-3 vote. The SECURE Act is currently in the hands of the Senate, where it also enjoys overwhelming bipartisan support. I’m encouraged by this show of support for accessible and affordable retirement savings.

If you’ve been following industry news, you’ve no doubt seen the tremendous amount of coverage that the SECURE Act has generated regarding pooled employer plans, or PEPs. While the possibility of PEPs has dominated headlines, it’s important that we keep in mind other features of the SECURE Act important to advisers, their clients, and savers alike, including:

• an increase to the retirement plan start-up credit (from $500 to a maximum of $5,000 per year) that could result in new plan formation and more opportunities for advisors to serve;
• a new tax credit (up to $500 per year) for small employers who implement automatic enrollment that could help plan sponsors with participation efforts; and
• the ability for long-term, part-time employees  to make deferrals that would allow more savers to contribute to their employer’s retirement plan.

Congressional hearings holding larger, global companies accountable for competitive practices are proof to the American public that policy makers on Capitol Hill actually have the interests of small businesses and entrepreneurs in mind. The SECURE Act further complements these actions, in part, by providing incentives for smaller companies competing for talent to establish and operate retirement plans. 

Not only do small businesses exemplify the American proclivity for freedom and innovation, they’re the bedrock of our economy and our communities. According to Census Bureau data, companies with fewer than 20 and fewer than 100 workers make up 89% and 98% of employers in the United States, respectively, and employ over half of the workforce. Nearly one-third of those employers, however, choose not to offer retirement plans to their workers—mainly because of their costs and administrative complexity.

In order for our country to rely on the continued success of small business activity, we must provide the proper framework to support their prosperity. The SECURE Act would help small business by making it easier to establish retirement plans, offering expanded coverage, increasing contributions, and simplifying rules to boost employee participation. Moreover, it would signal to the public the government’s strong commitment to the American worker.

Kudos to Congress for working together to propose meaningful and much-needed retirement reform legislation. We’re almost over the hurdle and on our way to a brighter retirement future for all Americans. To get there, it’s important that Congress keep the big picture in mind and maintain the momentum needed to pass the SECURE Act.

Note from the editor:

David L. Musto is president of Ascensus—an independent retirement administrative services provider, third-party administrator, and government savings facilitator in the United States.

This feature is to provide general information only, does not constitute legal or tax advice, and cannot be used or substituted for legal or tax advice. Any opinions of the author do not necessarily reflect the stance of Institutional Shareholder Services or its affiliates.