The United States House of Representatives recently took an important step to help millions of Americans whose retirement savings have been hit by the double whammy of COVID and inflation.
Solid Retirement Guarantee Act, a bill that targets student borrowers, military spouses and low-income people, among others, to help them plan and save for retirement, passed by a vote of 414 to 5 on March 29.
Also known as “SECURE 2.0,” the bill builds on the SECURE Act passed in 2019, expanding access to workplace pensions. The SECURE 2.0 reforms would particularly benefit women as they represent the majority of each of these target groups.
Even so, the retirement story of many working women remains grim.
Their household income in retirement is lower than that of men. And a recent TIAA survey found that only about one in three women (31%) are saving for retirement.
The pandemic has exacerbated this problem. Between February 2020 and January 2022, almost 2 million women left the workforce to care for a loved one. The lost wages and savings for many of them will be difficult, if not impossible, to make up for.
SECURE 2.0 solves this problem by extending the age at which women and all retirees are required to begin withdrawing money from their 401(k) and other retirement savings accounts.
Current law requires withdrawals to begin at age 72. Under SECURE 2.0, people can delay distributions for up to 75 years. Some critics find that this provision only benefits people with higher incomes, allowing more time to protect their savings against tax. We see this as a useful policy, given the need for so many people to continue working until age 70 and give them more time to catch up on their retirement savings.
The student loan provision will help people in debt save for retirement, many of whom are young women who have had to choose between loan repayment and retirement contributions. SECURE 2.0 would allow employers to “match” an employee’s 401(k) account based on their student loan repayments.
In addition, military spouses, mostly women, often sacrifice their own career aspirations and their ability to save for their own retirement. Understanding this challenge, SECURE 2.0 would provide a tax credit to small employers who make military spouses eligible for their retirement plan within two months of hiring; make a matching or non-optional contribution to the plan; and ensure that these spouses are invested 100% of all employer contributions within the same time frame.
The Savings Credit, which offers low-income people a tax credit to encourage them to save, would also get a boost. SECURE 2.0 would simplify access to credit and promote greater awareness and use among low- and middle-income women.
Additionally, SECURE 2.0 would help alleviate a concern many women have — outliving their savings. In fact, a study by Allianz Life found that more than 6 in 10 non-retirees are more worried about running out of money in retirement than dying. SECURE 2.0 would make it easier for employers to offer a later annuity payment option in a 401(k) plan or similar – and since women typically outlive men – they can choose a source of income that will be available later in the life. life.
Other important provisions of the bill would make automatic enrollment, a powerful tool to help people start saving, a key feature of new private sector pension plans. SECURE 2.0 also encourages small businesses to start retirement plans by increasing tax credits for costs associated with their training.
Together, the enhancements to SECURE 2.0 bring the nation’s retirement security system into the 21st century. And while the overwhelming bipartisan vote in the House is a positive sign, the Senate has yet to act and send the bill to the president’s office.
In the interest of improving retirement security for working women as well as for the good of all Americans, let’s hope this happens soon.
Cindy Hounsell is president of the Women’s Institute for a Secure Retirement (WISER).