The Tax Cuts and Jobs Act has unleashed historic economic growth for millions of Americans. Now is the time for Congress to act to consolidate these economic gains by securing retirement benefits for current and future retirees.
According to a recent study from the Federal Reserve Board, only 36% of Americans believe they are on the right path for retirement. At the same time, Social Security faces long-term funding shortfalls. In 2034, the program's reserves are projected to be depleted.
With few saving and Social Security's pessimistic future, far too many Americans view retirement security as nothing but a pipe dream.
Meanwhile, some politicans argue higher taxes are the answer. The Ways and Means Committee recently held a hearing on a Social Security proposal from Rep. John Larson, D-Conn., that hurts small businesses and workers through a 19% payroll tax increase.
As a member of the Ways and Means Subcommittee on Social Security, I believe we should reward work instead of taxing it, relieve budgetary pressures on the program by setting priorities and making hard choices — which is what real American families and businesses do — and use the billions of dollars that Washington wastes to help secure retirement for America's seniors and near-retirees.
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Congress must do everything we can to encourage Americans to save for retirement with their own dollars. Currently, more than 80 million Americans are already participating in a retirement plan where they work. However, nearly 5 million employers do not provide a plan to workers, leaving more than 28 million full-time employees and 15 million part-time employees without access to a retirement plan at their job.
We must work to close this gap. Data show that access to an employer retirement plan significantly increases participation and savings, especially for middle-class workers. Workers earning between $30,000 and $50,000 are 12 times more likely to save for retirement if given access to a 401(k) at work, while 68% of participants in 401(k) plans make less than $100,000 per year.
Giving more middle-class workers access to retirement plans is why the U.S. House recently passed the SECURE Act. This bill makes it easier for smaller employers to join multiple employer plans to offer retirement plans to their employees. This was a great start and deserves swift passage in the Senate.
An additional way to boost savings is to encourage automatic enrollment in employer-sponsored retirement plans with the ability to opt out. Currently, just 27% of retirement plans with fewer than 50 participants provide for automatic enrollment, while 70% of plans with 200 or more participants automatically enroll.
We also need to offer incentives for small businesses to offer retirement plans to more employees utilizing the private sector. States are getting in the retirement business by offering plans. But more government-run retirement plans should not be the solution as they are often unsustainable.
As the only former state treasurer serving in the House, I know this firsthand. When I was sworn in as state treasurer, Kansas had the second worst-funded public pension in the nation. Following significant reforms, Kansas became 67% funded and ranked 29th nationally.
Unfortunately, some politicians are determined to jeopardize retirement for millions of Americans through massive government bailouts for insolvent pension plans and harmful taxes like the Wall Street Tax Act. The bill imposes a financial transactions tax on the sale of stocks and bonds, affecting many pension and 401(k) plans.
According to the Investment Company Institute, this would mean an across-the-board 31% fee increase on 401(k) plans for hardworking Americans. This isn't a tax on Wall Street. It's a tax on Main Street.
Instead of increased taxes and expanding government-run retirement, Americans deserve access to retirement plans that allow them to save and grow their hard-earned money in private, tax-advantaged accounts.
By passing proposals like the SECURE Act that would encourage more companies to offer retirement options and automatic enrollment, retirement security can go from pipe dream to reality for millions of Americans.
Ron Estes is a Republican representing Kansas' 4th Congressional District in the U.S. House of Representatives.