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Jim Lentini: The latest news from Washington

Posted: February 23, 2009 7:14 p.m.
Updated: February 24, 2009 4:55 a.m.
A recent article in SmartMoney magazine talked about Congress taking aim at retirement by trying to revamp 401(k) and IRA plans.

It stated that even before the market crashed, many experts were arguing that Americans hadn't been saving enough for retirement.

And by decimating nest eggs, the financial crisis made a bad situation worse. No one is surprised since most of their retirement plans have lost substantial values.

So, it is your local congressman who thinks he can come to the rescue of millions of struggling future retirees.

In proposals steeped with good intentions, lawmakers are looking for ways to make it easier to save for the golden years. Tinkering with retirement savings is a touchy subject.

Many experts feel most Americans like their retirement plans the way they are. With our current crisis, the biggest problem is being concerned with being able to continue contributing to our plans.

Many workers already save and invest for retirement via a plan offered through their employers, like a 401(k), in part because the automatic payroll deduction is so convenient. In fact, the latest report from Callan Associates states that almost three out of every four employer-sponsored 401(k) plans (73 percent) do not expect to make any changes to their matching contribution level during calendar year 2009.

The question is, what, if anything, should be done to help the 47 million people whose employers don't sponsor a plan?

One solution: create a program that makes it easier to fund Individual Retirement Accounts (IRA) from work.

Bipartisan legislation was introduced in the House and the Senate in 2007 that would have required employers to allow employees to automatically funnel a portion of their paychecks into IRAs. The bills died in committee, but experts expect the idea to be revived in the new Congress.

Another proposal would boost the retirement savings of middle class investors by expanding the so-called Saver's Tax Credit, a tax break for retirement savings contributions. As of now the credit is available to taxpayers with less than $52,000 in adjusted gross income (for those who are married and filing jointly). Proposed changes, both by then Senator Obama and Senator Max Baucus, chairman of the Senate Finance Committee, would extend the credit to families making up to $75,000, not only cutting their taxes, but potentially boosting their refund. It is a popular proposal, but it would slice into tax revenue, which means Congress would have to cut spending or raise taxes elsewhere.

What really gets people fired up are ideas like forcing employers or workers to contribute to retirement plans. While those proposals aren't likely to gain much traction in Washington anytime soon, critics worry that a government-mandated savings plan is just one step closer to a nationalized system.

Of course, with our stimulus package paramount in our legislator's minds and actions and what it will cost us "poor taxpayers," I don't foresee any help in the near future helping either employers or workers to save more money. Taxpayers are going to be concerned with protecting their retirement plans, being able to continue contributions, and being prepared for what the "bail out" will cost us.

Jim Lentini, CLU, ChFC, IAR is President of Lentini Insurance & Investments, Inc. He can be reached at (661) 254-7633. His column reflects his own views and not necessarily those of The Signal.


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