I am Pamela Villarreal, a senior fellow at the National Center for Policy Analysis. For several years, I have explored and written about the importance of individuals and families saving for retirement as a supplement to Social Security benefits. Policymakers, retirement researchers and financial experts have conducted numerous studies only to find that most adults soon to be approaching retirement are not ready for retirement, and a majority will depend on Social Security for most of their income.
According to the Employee Benefit Research Institute (EBRI):
- 6 in 10 workers have, at some point in time, saved for retirement and 56 percent of workers are currently saving for retirement.
- Workers who participate in a formal retirement plan are more likely to save than those who do not.
- 73 percent of workers report having been offered a retirement plan by their employer, and of those who have access to one, 80 percent are participating.
- 46 percent of workers are saving into an IRA plan.
Furthermore, 60 percent feel somewhat or very confident that they will have enough money for a comfortable retirement, however, this confidence level has declined from a year ago.
While one could argue that the participation rate could be much higher, it does not necessarily mean that access is the problem. Between 401(k) plans, SEP plans, traditional and Roth IRA plans and the new MyRA accounts, anybody who earns at least the amount in wages that they plan on contributing to a retirement account can start and contribute to some type of retirement savings vehicle. But merely increasing access to retirement accounts does not mean that households will contribute to them. A variety of rules and regulations pertaining to retirement savings could impede the ability of workers to save.
Unequal treatment of IRAs and Employer-sponsored plans under the tax code. IRAs are not given same and equal treatment as employer-sponsored plans. For example, workers who do not have access to 401(k) or 403(b) type plans from their employers are limited to annual IRA contributions ($5,500 in 2017) that are less than half of the contribution limits of an employer-provided plan ($18,000 in 2017). When adding in “catch up” contributions for workers age 50 and over, employer-sponsored 401(k) ad 403(b) plans allow $24,000 in annual contributions in 2017, compared to just $12,000 in annual contributions for traditional or Roth IRA accounts.