Between Social Security and Medicare changes, long-term care insurance complications and lingering uncertainties regarding the Affordable Care Act, helping clients to prepare for retirement didn’t get any easier in 2013. Fortunately, potential legislation in this year may help retirees to better plan for prosperity in their golden years.
These changes won’t likely come in the form of tax breaks, budget cuts or benefits increases, however. “With the recent budget agreement and 2014 being an election year, it’s highly unlikely we’ll see massive tax reform,” according to Bob Kaplan, national training consultant at ING US Retirement. Instead, budget mandates, rules changes and fiduciary reform could help pre-retirees to make more accurate predictions as to how much they’ll need to save and invest to preserve their living standards for the long haul.
Automatic IRA Enrollment
The April 2014 Obama budget contained an automatic IRA enrollment provision for workers at companies with 10 or fewer employees, and Congressman Richard Neal (D-MA) recently put forth the same idea in standalone bill H.R. 2035. Congress has been considering the measure since 2009, and if it passes, it could greatly increase the coverage and availability of workplace retirement savings.
While automatic enrollment might not confer any additional funds unto participants—and while some advisers have criticized the proposal for the additional requirements it would place upon their firms—it could encourage workers to save far more and far earlier than they would otherwise. “Studies have shown people are 14 to 15 times as likely to save for retirement if they can save in the workplace,” said Kaplan.
Greater Retirement Readiness