Retirement savings are key to building wealth, strengthening the middle class, and building a greater measure of financial security for Americans. Current US policies reward employers, financial institutions, and workers for saving, but millions remain outside of the system, resulting in a looming retirement security crisis. For the release of its latest report, "Child Trust Funds: Renewing the Debate for Long-Term Savings Policies," the Aspen Institute Initiative on Financial Security (Aspen IFS) held a congressional briefing on Capitol Hill to examine proposed policies that could enable all Americans to achieve lifelong financial security.
During the event, a bipartisan pair of congressmen, Rep. Joe Crowley (D-NY) and Rep. Tom Petri (R-WI), agreed on the importance of saving as early as birth and increasing the opportunities Americans would have to save. Each also called for using the tax code to strengthen retirement, which came just days after House Committee on Ways and Means Chairman, Rep. Dave Camp (R-MI), released details of a tax reform proposal that included reductions to retirement savings tax incentives.
Here are four policies proposed at the event that could go far in helping Americans save early and often.
- USAccounts: During the event, Crowley announced his intention to introduce new legislation to create a savings program called USAccounts, which would provide every newborn with a savings account in his/her name seeded with500. "My legislation will give every American child, regardless of their economic background, the opportunity to start their financial future on the right foot," Crowley said. This is similar to the Child Trust Fund, as explained in the Aspen IFS report, a program from the British government which endowed each child at birth with a £250 voucher to open a savings account. Read more about Crowley's proposal on his Congressional website.
- My Retirement Account (myRA): This Obama administration initiative is designed to enhance retirement security, as the president announced in his most recent State of the Union address. MyRA is a Treasury Department program that comes at no cost to employers and employees and does not compete with other types of employer-provided savings plans. It permits small contributions and guarantees a positive rate of return. The aim is to instill a lifelong habit of saving for workers and ultimately "graduate" them to savings products offered by the private sector. Interested employees working for companies participating in the pilot version of this program should be able to sign up by the end of this year. Read more about the program on the White House blog.
- Automatic IRAs: "Auto-IRAs" would enable employees working for certain companies which do not provide qualifying retirement plans to automatically save for their retirement with a deduction from every paycheck -- the type of deduction that many workers with 401(k) plans currently use. Track this bill as it moves through Congress.
- Saver's Credit: Expansion of the Saver's Credit -- which currently gives a tax credit to eligible taxpayers who are contributing to an employer-sponsored retirement plan or an IRA -- would expand the credit's availability, make it refundable, and have federal matching contributions be deposited into each taxpayer's retirement savings. Track this bill as it moves through Congress.
Above, watch video of the full session of the Aspen IFS congressional briefing.
This article was written with contributions from Andrew Key and the Aspen Initiative on Financial Security.