THE HILL, BY CINDY HOUNSELL, OPINION CONTRIBUTOR – 04/19/22
The U.S. House of Representatives took a major step recently toward helping millions of Americans whose retirement savings have been impacted by the double hit of COVID and inflation.
The Securing a Strong Retirement Act, a bill that targets student loan borrowers, military spouses and low-income earners, among others, for help planning and saving for retirement, passed by a 414-5 vote on March 29.
Also known as “SECURE 2.0,” the bill builds upon the SECURE Act which passed in 2019, expanding access to workplace retirement plans. SECURE 2.0 reforms would especially benefit women as they represent the majority of each of these targeted groups.
Even so, the retirement story for many working women remains bleak.
Their household income in retirement is less than men’s. And a recent TIAA survey found that only about one in three women (31 percent) are saving for retirement.
The pandemic has exacerbated this problem. Between February 2020 and January 2022, nearly 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.
SECURE 2.0 addresses this by extending the age at which women and all retirees are required to begin taking money from their 401(k)s and other retirement savings accounts.
Current law requires withdrawals to begin at age 72. Under SECURE 2.0, people can delay distributions until age 75. Some critics find this provision as only benefitting those with higher income, allowing more time to protect their savings from being taxed. We see this as a helpful policy, considering the need for so many people to keep working well into their 70s and providing them extra time to catch up on retirement savings.
The student loan provision will help those saddled with debt to save for retirement, many of whom are young women who have had to choose between loan repayments and retirement contributions. SECURE 2.0 would enable employers to contribute a “match” to an employee’s 401(k) account based on their student loan repayments.
Additionally, military spouses, most times women, frequently 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 for small employers that make military spouses eligible for their retirement plan within two months of hire; provide a matching or non-elective contribution to the plan; and ensure these spouses are 100 percent vested in all employer contributions within the same time frame.
The Saver’s Credit, which provides lower income earners a tax credit as an incentive to save, also would receive a boost. SECURE 2.0 would simplify access to the credit and promote greater awareness and use among women with low- and moderate-incomes.
Moreover, SECURE 2.0 would help alleviate a concern of many women —outliving their savings. Indeed, an Allianz Life study found that more than 6 in 10 non-retirees fear running out of money in retirement more than death. SECURE 2.0 would make it easier for employers to offer a later annuity payout option in a 401(k) or similar plan — and as women do typically outlive men — they can choose a source of income that will be available later in life.
Other important provisions in the bill would make auto-enrollment, a powerful tool to help get people to start saving, a key feature of newly created private-sector retirement plans. SECURE 2.0 also encourages small businesses to start retirement plans by increasing tax credits for costs associated with their formation.
Taken together, the improvements in SECURE 2.0 advance 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 still must act and send the bill to the president’s desk.
For the sake of improving retirement security for working women as well as for the sake of all Americans — let’s hope that happens soon.
Cindy Hounsell is president of Women’s Institute for a Secure Retirement (WISER).