If you have been on this earth for six or seven decades, then you have experienced both volatile times and unexpected crises.
so it's important to stay grounded and carefully examine election year proposals that will impact your family's life. Retirement security of both old and young is at stake.When it comes to thinking about your future prosperity, this election will only bring us more uncertainty, doubt and chaos
The Biden campaign has floated its ideas about changing Social Security. These adjustments would include increasing payroll taxes and the cap for wealthy income earners but less discussed are his intentions for other areas of retirement security.
Biden's recent policy changes for retirement plans have been under the radar screen. Let's take good look under the hood of these ideas to make sure your or your loved ones are not disadvantaged by them.
In a significant transformation to savings programs like 401(k)s, Biden would standardize existing retirement savings programs by replacing the variable amounts of tax-deductible contributions made by employees with a uniform tax credit. Team Biden says the intent is to "level the playing field" to help people grow their retirement assets.
Higher earners generally make larger contributions in addition to receiving higher after tax benefits. This enables them to accumulate more funds than lower wage employees.
An employee in the 35% tax bracket receives $350 tax savings for every $1,000 contributed to an employer's retirement plan such as a 401(k).
Workers in a lower bracket, say 20% have $200 tax savings for every $1,000 in savings to a retirement plan.
The Biden team proposes that everyone apply the same tax credit amount to retirement savings.
Changing this system will not incentivize low income earners to save more — despite tax credits. For that we need more workplace education and encouragement.
However, It will likely reduce contributions from higher earners leading to significant declines in household retirement savings.
Proposals that result in the wealthy saving less in retirement vehicles does not motivate lower income earners to save more.
Team Biden needs to clarify details on how it would work for tens of millions of existing fund plans because too many unanswered questions remain.
Does the credit apply to all retirement plans including pension plans? A savings credit already exists to help people in lower income brackets build nest eggs.
What happens as low-wage earners increase their compensation over the years? A flat tax credit prevents these workers from enhancing savings contributions as they climb the income ladder.
And what of millennials who want to save more for retirement to afford a comfortable standard of living? Might they be the biggest loser in this plan?
Millennials generally start working at lower earnings. This demographic will likely experience an incredible lifespan expansion due to technology innovations moving at increasing speed. Young people today need to finance this lifespan well beyond "retirement years" that may exceed 100.
We can not limit the potential for Millennials to contribute and grow their retirement savings. They deserve the same advantages Baby Boomers and GenX'ers have enjoyed.
We have already saddled younger generations with tens of trillions of federal debt.
Our retirement system has generously benefited tens of millions of American seniors and near-seniors. Future generations should be allowed to flourish in the same way.
Clara Del Villar is Director of Senior Initiatives at FreedomWorks Foundation. Her financial industry career included senior roles in Investment Management, Private Asset Management, and Capital Markets. Her entrepreneurial ventures involved digital media as Founder, CEO of The Hispanic Post; energy tech as founder of InEnergy and health tech. She is a former advisor at 60Plus Foundation. Currently, she is a Board Director at General American Investors Co. and Executive Committee of Weill Cornell Women's Health Symposium. She earned a BSFS at Georgetown University. Read Clara Del Villar's Reports — More Here.
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