Obama focuses on retirement savings

President Barack Obama is launching an effort to help Americans save more for retirement, hoping a government nudge or two can get them to do what many are unable to do on their own.

The package includes programs to guarantee all workers access to a retirement plan through their jobs; expand the tax credits that reward saving for retirement; and tighten 401(k) regulations to make them safer and more efficient.

Most of the proposals have broad support at a time when retirement security is increasingly in jeopardy. Pensions are rapidly disappearing, 401(k) balances have taken hits and nearly half the work force has no way to save at work.

The centerpiece of the push, the so-called automatic IRA, appears to have particularly strong backing. This would require employers who do not offer a retirement plan to enroll their employees in a direct-deposit individual retirement account unless the employee opts out.

Other elements are sure to run into resistance. The most likely to be controversial is a proposal to encourage people to turn over part of their retirement savings in order to get an annuity or some other form of guaranteed lifetime income. The total costs to the government, not yet known, could be an issue too.

No one questions the urgency of Americans needing to put aside more for retirement. The personal savings rate has been declining for two decades, dropping to nearly zero before the 2008 meltdown prompted an uptick that may or may not last. Many families are finding it especially hard to save in economically turbulent times.

“It’s not just lower-income people whom we need to provide incentives or help for,” said Annamaria Lusardi, director of the Financial Literacy Center at Dartmouth College. “The shrinking middle class also finds it difficult to afford a comfortable retirement. These initiatives should help both.”

The White House circulated the proposals last week, and the president touted them briefly in the State of the Union address. He pledged that the administration will make it “easier to save for retirement by giving access to every worker a retirement account and expanding the tax credit for those who start a nest egg.”

Architects of the automatic individual retirement account plan said it will be included in Obama’s proposed budget this week and could be adopted quickly. It targets the approximately 78 million workers whose employers don’t offer them a retirement plan.