“Auto-IRA” plans are now in legal limbo for millions of U.S. workers. President Trump recently repealed a 2016 resolution from the U.S. Department of Labor that encouraged states to automatically enroll workers in Individual Retirement Accounts, unless they opt out. The president’s decision affects full- and part-time employees at mostly small businesses who don’t have a retirement savings plan provided by their employer. Reporters can bring this story home by developing one or more of these angles:
Your state’s retirement crisis
The most recent survey from the U.S. Census found that about half—or 55 of 114 million employees—don’t have a retirement savings plan at work. The CFA Institute, an association of financial professionals, puts the number at 63 million. “There is a retirement crisis brewing in America, because workers do not have enough access to retirement savings programs and because there is no retirement system for low-income earners,” said Bob Stammers, the CFA’s head of investor education.
Seven states (California, Illinois, Nevada, New Mexico, New York, North Carolina and Oregon) are scheduled to roll out plans later this year, and at least another 20 have signed legislation in 2017, according to the Center for Retirement Research at Georgetown University. Plans may become stuck in legal limbo, however, if Washington pushes back. You can find details on proposed state retirement plans, including the officials who introduced them, in this comprehensive posting from the Pension Rights Center. Talk with your state’s officials about their plans. Do they intend to move ahead? Also ask small business employers about the benefits, as well as burdens, of providing a workplace retirement plan for their workers.
Explore why U.S. workers don’t save
According to AARP, workers are 15 times more likely to save for retirement if they have access to a plan at work. The U.S. Department of Labor points out that most workers can set up their own IRA—but don’t. In 2015, only 11 percent of U.S. households contributed to IRAs (either traditional or Roth), and very few eligible households made catch-up contributions to either, according to the Investment Company Institute. Talk with a bank, an online broker or a mutual fund company to glean why more workers don’t take advantage of opening an IRA.
Tackle the tax benefits of IRAs
For this angle, turn to a tax accountant in your community, preferably a Certified Financial Planner, who can explain the benefits of saving in an IRA to your readers. For 2016, the annual contribution limit is $5,500, and $6,500 for savers over 50 years old. For the rules, refer to the Internal Revenue Service.
In addition to tax benefits, low- to moderate-income workers may also qualify for the Retirement Savings Contributions Credit, or the Saver’s Tax Credit. In 2016, a worker with an adjusted gross income of less than $61,500 ($30,750 for singles), can reap a tax credit worth up to 50 percent of their first $2,000 in retirement contributions, per person.
• AARP, the Association of Retired Persons (aarp.org) is a nonprofit organization that advocates for 38 million retirees on issues such as health care, employment and income security, and protection from financial abuse.
• The Internal Revenue Service (irs.gov), the nation’s tax collector, regulates the rules regarding Individual Retirement Accounts.
• The American Institute of Certified Public Accountants (aicpa.org) is a trade association for CPAs.