President Barack Obama will propose in his upcoming budget measures to help more than 30 million Americans save for retirement, such as automatically enrolling workers in Individual Retirement Accounts and making it easier for workers to keep savings when they switch jobs, according to the country’s labor secretary.
Labor Secretary Tom Perez unveiled parts of the plan on Monday before heading to California’s Silicon Valley to meet with venture capitalists and technology executives about bolstering retirement savings.
Obama will present a spending plan Feb. 9 to Congress that serves as an outline of political priorities but very rarely comes to fruition. This budget, proposed in the final year of Obama’s presidency, is expected to hit a dead end.
The proposal would also allow smaller employers to create pooled 401(k) plans.
The U.S. workplace is undergoing a transformation, especially with the rise of the “on-demand” economy, which will lead workers to change jobs more frequently and face new challenges in saving for retirement, Perez said. Up-and-coming companies that provide goods and services on demand through phone apps mostly rely on freelancers who are not tied to jobs and traditional employer-sponsored retirement accounts.
Perez said the IRA suggestion, which has been offered in Obama’s previous budgets dating back to 2010, may have a chance. States have recently created similar programs and fueled some employers’ interest in a national plan, he said.
In a traditional IRA, investors only pay taxes when they retire and cash in holdings. In a “Roth” IRA, they pay taxes on the money they contribute but not when they withdraw funds for retirement. Under what Obama calls “MyRA” employers with more than 10 workers that do not offer retirement plans would have to automatically enroll workers in IRAs.
Perez said the department received hundreds of thousands of comments on another effort related to retirement – a “fiduciary” standard that would require brokers offering retirement advice to put clients’ financial interests first. He said he expects the final rule to be released in upcoming months.
The fiduciary standard has roiled the financial services industry for half a decade, and the department had to withdraw an initial draft of the rule in 2011. It is intended to end potential conflicts of interest and protect consumers from being sold investment products that do more to line their brokers’ pockets than meet their financial needs.