Democrats call for retirement savings reform

One of the linchpins of the Obama Administration’s Middle Class Task Force report, released late in January, is retirement savings reform – and there are signs that reform is sorely needed.

U.S. Senator Kirsten Gillibrand said this week that $2 trillion in investor wealth was eliminated by the stock market’s downturn in late 2008 and early 2009. And the market’s recent spikes and downturns are making investors increasingly gun-shy: A recent survey conducted by the American Institute of Certified Public Accountants found that a majority of financial planners’ clients have become more risk-averse in the past year.

Seventy-four percent of planners said their clients were avoiding risk as a result of the shaky stock market.

Many people haven’t saved enough for retirement, and there are concerns that the recent market volatility will scare away potential investors. In a bid to make Americans more confident in investing and more likely to save for their later years, the Obama Administration proposed specific reforms in its task report.

So-called 401(k) plans – which let workers save in accounts set up by their employers – would see an overhaul under the administration’s proposal. Fees on the plans would be made more transparent, and the report encourages plan administrators to make financial advice available to accountholders.

A tax credit for retirement savers would match 50 percent of the first $1,000 invested for households earning up to $65,000.

And, in perhaps the most significant reform, retirement plan enrollment would be made automatic for workers whose employers did not provide a 401(k). The enrollment process would be streamlined at workplaces that already offer savings plans, as well.

"The initiatives make it easier to save for retirement," the task force report said.

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