Retirement Planning with the Biden Plan for Older Americans
Joe Biden accepted the Democratic Presidential nomination earlier this week and named Kamala Harris as his running mate. It is time to look at his retirement policies in the Biden Plan for Older Americans, specifically those related to Social Security and 401(k)-type plans.
While Biden believes that Social Security is one of the United States’ greatest public policy successes, he concedes that in the “modern retirement landscape, a sound retirement begins with years of diligent saving.”
A Path Forward for Social Security
Social Security has been central to retirement savings, with 90% of retirement-age Americans receiving the benefit and one in four of them using it as their sole income. Furthermore, for quite some time, Social Security has been in trouble, with funds due to dry up by 2035 and possibly even sooner due to the COVID-19 pandemic. Biden’s plan emphasizes the importance of Social Security for millions of Americans while acknowledging the challenges that the program faces. He proposes keeping Social Security inherently the same, with some fundamental changes that would set the program towards long-term solvency. His plan would keep existing assets in the current government bonds structure, rather than a privatized option. He also rejects the idea of making it “means-tested,” which would only qualify lower-income Americans, claiming that this would jeopardize the program’s universal nature.
- • Ask high-wage earners to pay tax towards Social Security.
- • Increase benefits for individuals who have been retired for over 20 years.
- • Implement a minimum benefit for lifelong workers with low incomes that is at least 125% of the poverty level.
- • Protect widows and widowers from a steep cut in benefits by allowing surviving spouses to keep a higher share of benefits.
Saving for a Sound Retirement
While Biden believes that Social Security is one of the United States’ greatest public policy successes, he admits that in the “modern retirement landscape, a sound retirement begins with years of diligent saving.” Under current law, the tax code affords people over $200 billion each year in retirement benefits. These accounts can include 401(k)-type accounts, such as Individual Retirement Accounts (IRAs) and Health Savings Accounts (HSAs). Biden recognizes that these retirement accounts remain out of reach for many, and proposes changes that will allow workers in all income brackets to save for a stable retirement.
- • Incentivize small businesses through tax credits to create retirement plans for their employees.
- • Encourage savings through an “automatic-401(k)” for employees who don’t have access to an employer-sponsored program.
- • Equalize the tax benefit across the income scales, so that low- and middle- income earners also receive tax savings.
- • Raising the annual contribution limit for caregivers who need to leave the workforce