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Nov. 9, 2020, 9:28 a.m. EST

Here’s what a President Joe Biden would mean for Americans’ retirement savings

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By Alessandra Malito

According to projections by the Associated Press and other leading news organizations, Joe Biden will be the next president of the United States , resulting in January in a partisan changeover at the White House — and perhaps in the direction of retirement security for Americans across the country.

Biden has promised to address a broad range of issues as president, one of which includes older Americans’ retirement security and dignity as they age.  He has disclosed proposals to slow the rise in prescription drug prices, enact changes to Social Security for the sake of its solvency and combat age discrimination on behalf of older Americans looking to stay in the workforce. “There’s more information available based on what a Biden administration would want to do for retirement security versus the current administration,” said Bridget Early, executive director of the National Public Pension Coalition, an advocacy group. 

See: 5 election results you might have missed while watching the presidential result  

Saving for retirement 

Workers get tax benefits when participating in defined-contribution plans, like the 401(k) plan. As it stands, the system is preferential to upper-class families, who receive a “stronger tax break for saving,” compared with middle- and lower-income workers, Biden said on his campaign site . Biden said he would “equalize” these benefits. 

One way to do that is by using flat-tax credits for each dollar saved, compared with the current system, which gives higher earners a “bigger break,” said Stephen Miller, manager and editor of online content of compensation and benefits at the Society for Human Resource Management (SHRM).

Here’s an example, provided by congressional news and data site Roll Call : A single filer in the top 37% tax bracket earning $600,000 currently gets a tax deduction of $370 for each $1,000 she contributes to a 401(k) plan, compared with a single filer earning $60,000 and in the 22% tax bracket, who only gets a $220 tax deduction for every $1,000 contributed. With a flat tax credit, using the same example as before, the individuals who earn $600,000 and $60,000 would both get a $260 tax credit for that $1,000 contribution.  

Biden has also said family caregivers should be allowed to make “catch-up” contributions to retirement accounts, as their careers and retirement savings journeys are often disrupted when they leave the workforce to care for a sick or elderly loved one. Workers who take on these familial responsibilities face numerous hurdles, including pausing or reducing their own income, which could also mean losing access to a workplace retirement plan. Biden said they should be able to make “catch-up” contributions even if they aren’t “earning income in the formal labor market” — a proposal introduced with bipartisan support by Democratic Rep. Harley Rouda and Republican Rep. Jackie Walorski. His plan also mentions tax credit for informal caregiving and tax benefits for older Americans who buy long-term care insurance.

Lastly, Biden’s site mentions giving small businesses a tax break for providing their employees retirement benefits, such as tax credits to offset the costs associated with starting a plan. Biden mentioned that anyone without a retirement plan would also have access to an “automatic 401(k),” so that they can begin saving for their futures. His campaign did not provide more detail on what that type of account would entail. 

Also see: Here’s what we know about the 5 states whose Electoral College votes haven’t been called  

In retirement 

Social Security isn’t often discussed on the debate stage, partially because of how controversial proposals to fix it could be, but it’s a crucial aspect of retirement security. Millions of Americans rely on the program for a portion of their retirement income, and for others, it’s their largest source. Biden has said he would improve Social Security by increasing payroll taxes for people who earn more than $400,000, compared with the current limit at $137,700. Doing so would likely result in political pushback, as it requires only higher earners to make “additional sacrifices,” according to an analysis from the Urban Institute and Brookings Institution’s Tax Policy Center .

Earners in between these thresholds would still be exempt in the immediate future, though that “ donut hole ” as it is referred to would disappear over time, according to the Wharton School at the University of Pennsylvania. The gap between these two amounts would narrow because the $400,000 figure would stay fixed while the average wage growth (currently $137,700 in 2020) would continue to grow every year.

Biden has also suggested there be a minimum benefit, where all beneficiaries who have worked 30 years, get no less than 125% of the federal poverty level. His plan has also addressed people with restrictions to Social Security, including teachers and other public-sector workers. 

Many analysts praise the candidate for listing ways to fix the program, but others say more details need to emerge . There should also be a focus on “simplifying” the system, said analyst Brenton Smith, as well as finding ways to reform the system — not just expand it. 

What might happen next

Of course, retirement security was on some legislators’ minds before the election. The Ways and Means Committee introduced bipartisan legislation last month called the Securing a Strong Retirement Act of 2020, which builds upon the Secure Act passed in December. The bill includes allowing individuals to pay down student loans but still get an employer match toward their retirement accounts; making it easier for military spouses to save for retirement when they may not always have access to a steady job; and creating a national database for Americans to find lost retirement accounts. Before the election results were announced, Miller said, “Whether it’s a Trump administration or a Biden administration, it is going to get through Congress. Something will be passed.”

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