It’s no great revelation that most Americans are not saving enough for retirement. The problem is getting the average American to do something about it.
As producers are well aware, the typical American consumer does not exactly behave proactively when it comes to making important decisions about purchasing life insurance, long-term care insurance, disability insurance or saving for retirement. They are more likely to actively research the better deal between cable and satellite TV.
We know we’re approaching the precipice of a major retirement funding crisis, as tens of millions of aging Americans will have to postpone retirement – if they can afford to ever retire at all. Or they live in a dream world where “things will all work out.” Recent statistics in The Wall Street Journal reported that half of all U.S. families currently have no retirement savings whatsoever, and among those who do have retirement savings, less than half of those people have saved even $25,000. And the average annual Social Security payout is about $11,000.
Certainly there’s no easy fix, and a number of effective initiatives would need to be implemented to minimize the widespread impact of the impending crisis.
Enter the Automatic IRA Act of 2010, which was formally proposed in Congress last Friday by Sen. Jeff Bingaman, D-N.M. Under provisions of the bill, employers that do not offer a retirement plan and have more than 10 employees would be required to offer an automatic IRA plan through payroll deductions. Employers would not contribute anything to the accounts, but would receive a $250 tax credit in each of the first two years of the plan. Employees would be allowed to opt out of the program, but enrollment would be the default option.