News & Policies
History & Tours | Kids | Your Government | Appointments | Jobs | Contact | Graphic version
February 28, 2002
Specifics on the The President's Plan to Strengthen Retirement Security
Expanding Ownership of Retirement Assets: The tax relief legislation signed into law by the President provided almost $50 billion dollars of tax relief over the next ten years to strengthen retirement security. This landmark legislation raised the contribution limits for IRA and 401(k) accounts, allowed for additional catch up contributions for workers aged 50 and over, and speeded up the vesting process for employer contributions to 401(k) accounts. The President has also proposed to create, for the first time, the right for every worker to own assets within the Social Security system through personal accounts.
Ensuring Freedom of Choice: The Presidents proposal would ensure that workers who have participated in 401(k) plans for three years are given the freedom to choose where to invest their retirement savings. The President has also proposed that choice be a feature of Social Security itself, allowing individuals to voluntarily invest a portion of their Social Security taxes in personal retirement accounts.
Creating a Society of Stakeholders: President Bush supports the creation of Individual Development Accounts, providing savings matches for low-income Americans to accounts that would grow tax-free. The Presidents Social Security framework would also give all wage earners the opportunity to invest in financial assets, an opportunity that only half of Americans can now afford.
Providing for Equal Treatment of Senior Executives and Rank and File Employees: The Presidents pension reform proposals would provide for equality of opportunity between senior executives and wage owners, precluding senior executives from selling company stock during times when workers are unable to do so.
Minimizing Risk through Diversification: The Presidents proposals would ensure that workers can sell company stock and diversify into other investment options, minimizing their risk. In order to safely prepare for retirement, it is essential to provide workers with the opportunity not to have all of their eggs in one basket. The Presidents Social Security framework would also allow participants to diversify their investments and minimize risks, so that the security of their Social Security benefits can be protected against political manipulation and market swings.
Strengthening Womens Retirement Security: The President signed into law legislation that would allow for catch up contributions to retirement plans, helping millions of American women who took time out from the work force to care for dependent family members. The Presidents Social Security Commission also made a number of recommendations to vastly improve the treatment of women through Social Security, including the creation of property rights in a personal account for every woman who experiences a divorce, expanded benefits for widows, and new anti-poverty benefit guarantees that would disproportionately benefit women. Analysis shows that the Commissions provisions would lift nearly one million low-income Americans out of poverty, a majority of whom would be women, and that two to three million widows would see benefit increases as a result of the Commissions recommendations.
Helping Future Generations to Achieve the American Dream: The President has proposed that, for the first time, in the words of former Senator Daniel P. Moynihan (D-NY), Social Security should be extended to include inheritable assets. This provision would disproportionately assist communities where life expectancies are unfortunately shorter than national averages, including African American households.
Giving Workers Better Information About Their Pensions: To enable workers to make independent, informed decisions, employers will be required to give workers quarterly benefit statements that include information about their individual accounts, including the value of their assets, their rights to diversify, and the importance of maintaining a diversified portfolio. The Secretary of Labor will be given authority to tailor this requirement to the needs of small plans. Under current law employers are only required to make statements available to workers on an annual basis.
Expanding Workers Access to Investment Advice: The President calls on the Senate to pass the Retirement Security Advice Act which passed the House with an overwhelming bipartisan majority. This legislation encourages employers to make investment advice available to workers and allows qualified financial advisors to offer individualized investment advice only if they agree to act solely in the interests of the workers they advise.
Spurring National Saving and Economic Growth: Tax relief legislation signed into law by the President would accelerate economic growth by expanding national saving. A 25-year-old wage earner who saves an additional $1,000 annually in an IRA or a 401(k) plan each year could accumulate an additional $165,000 by age 65, providing an extra $15,000 per year in retirement income. The Presidents Commission to Strengthen Social Security has found that the Presidents Social Security initiative would lead to increased national saving in a way that is necessary to foster long-term economic growth.
Empowering Workers through Enhanced Portability: Tax relief legislation signed into law by the President speeds up the vesting process from 5 years to 3 years for cliff vesting for any employer matching contributions made to 401(k) accounts. Faster vesting increases the pension wealth for individuals who change jobs or leave the workforce for periods of time.
|Email this page to a friend|