A Good Start

Congress is considering RESA, the Retirement Enhancement and Savings Act, a bill that would represent a massive change to our retirement system, in particular our 401(k) system.  This bill would, among other things,

encourage more small employers to offer retirement savings plans and make it easier for companies to offer annuities that turn workers’ savings into a guaranteed annual income.

Among specific things that the House wants in such a bill are

  • a universal savings account, funded with post-tax dollars but with tax-free earnings and more flexible withdrawal rules than existing retirement accounts.
  • allow[ing] small employers to band together to offer 401(k)-type plans. By joining a so-called multiple-employer plan, or MEP, small companies can spread plan administrative costs over more participants, lowering fees.
  • encourag[ing] 401(k)-style plans to offer annuities, which help participants transform their balances into a lifetime income stream.


[Chairman of the House Ways and Means Committee Kevin (R, TX)] Brady said any new ability for people to tap into tax-preferred savings would be “very limited.”

Despite the support of AARP, the same organization that full-throatedly supported passage of Obamacare, this is a good start.

The ability to convert a retirement savings plan, if left to the option of the saver, can have advantages, even if I do continue to hold that annuities are not as good, in the long run, as investing.  However, once retirement starts, stability and predictability of income becomes important, and the long run will be shorter.

Too, the general moves toward making it easier, mechanically and fiscally, to save for one’s own retirement should be heavily supported.  And controlled to prevent bells and whistles to satisfy this or that Congressman’s (or lobbyist’s) pet wish from being added, cluttering the reform to the point of prevention.  The more we as individuals save for our own futures (and by extension, the futures of our families), the less dependent we’ll be on a failing social “safety” net of Social Security and Medicare.  And the more we’ll be exercising our own responsibilities instead of relying on others.

Finally, as long as we’re modifying our retirement plans, of large importance to me is the removal of existing limits to contributions on IRAs, Roth IRAs, HSAs, and 401(k)s—both traditional and Roth.  Let us put by as much as we want without Government limits.

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