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Obama Budget Recognizes the Need for More Retirement Savings
Posted By David C. John On February 26, 2009 @ 5:28 pm In Economics | Comments Disabled
While many aspects of the Obama budget are questionable and just plain wrong, they recognize the need for more Americans to be able to save for retirement. The budget includes the Automatic IRA, a cross-ideological proposal developed jointly by The Heritage Foundation and the Brookings Institution which will give up to 80 million workers a simple and easy way to save for retirement. It also has support from publications as diverse as National Review and the New York Times.
The Auto IRA allows employees who don’t have any other types of pension or retirement savings plan to be automatically enrolled into a payroll deduction IRA. If they want to participate, they don’t have to do anything more; they will be enrolled into an IRA that is invested in a balanced lifetime account. If they don’t want to save for retirement, all they have to do is to say no.
While 401k plans have been available for several decades, less than half of employed Americans work at a company that offers them or a traditional pension plan. The other half of the workforce doesn’t have that option. Saving is especially important because the very act of doing so changes behavior. People become more connected to their communities and think more about the future when they save. In short, saving builds conservative values.
The Auto IRA is a simple way for those who are not saving for retirement now to begin to do so. That is why it has such broad, bipartisan, cross-ideological support. For instance economist Martin Feldstein said “I am a great enthusiast of automatic enrollment IRAs. I think as a policy, it’s a no-brainer. I think the legislation should be enacted. I can’t imagine why there would be any significant opposition from political players on either side of the aisle.” Whatever else is in the Obama budget, the administration got this one right.
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