Fodder for Congress

The effect of stock market volatility on families' retirement savings is just one issue that Congress should be concerned about, according to a report issued July 14 by the Congressional Research Service in Washington. The report, which cited 2007 data, listed seven major policy issues that it said Congress needs to address: • Access to employer-sponsored plans. Just 61% of employees in the private sector were offered a retirement plan of any kind at work. • Lack of participation. Between 20% and 25% of workers whose employers offered defined contribution plans didn't participate, with workers under 35 less likely than older workers to join the plans. • Low contribution rates. Contributions to 401(k)s averaged just 6% of pay. • Lack of diversification and high risk. Fully 78% of DC plan assets were invested in stocks and mutual funds, a ratio that varied little by age. • Confusion about fee disclosures and providers. • Lack of information about pre-retirement withdrawals, which can have adverse long-term effects on retirement income. • Lack of support for the use of annuities, which can protect retirees from some risks of outliving assets or investment losses Congress should consider providing tax incentives targeted to low- and middle-income workers, the report suggested. Higher-income earners would continue to save much of their income even without tax incentives, according to the report.