Why it’s so hard for Americans to save for retirement

More than 35 years after he revolutionized the way Americans plan for retirement, Ted Benna is still trying to make it easier for people to save.

Benna, who is sometimes called the father of the 401(k), has lamented the shortfalls of the system he helped create when he pointed employers to a provision in the tax code that allows workers to set aside pretax earnings for retirement.

Today too many people are reaching retirement age with a paltry account balance that is unlikely to carry them through their later years. Illness, job loss and other emergencies can force people to tap their nest eggs sooner than expected. And millions of Americans, about one in two workers, still don’t have an easy way to save for retirement.

With his latest work, Benna, 75, is trying to tackle the issue of access. The former benefits consultant has released a guide for small-business owners that points them to little-known tools to make it easier for employees to save for retirement — all while keeping their costs and liabilities low.

His efforts are playing out as House Republicans are considering a key change to 401(k)s as part of their tax overhaul package: Taxing the money that workers place in their savings plans upfront instead of years later when they take it out in retirement.

Meanwhile, lawmakers, states and small businesses are experimenting with ways to expand access to retirement accounts, which some say is the biggest obstacle of people saving enough for retirement.

Why is it still so hard for Americans to save for retirement?

Benna and other experts who have studied ways to help Americans feel financially secure in retirement shared their view. We spoke with Mark Iwry, a former Treasury official who helped define programs meant to encourage people to save through auto-enrollment in retirement plans. Teresa Ghilarducci, an economics professor at the New School for Social Research in New York and a longtime consumer advocate, says the current system needs to be replaced with something that reduces the burden on workers.

– The Washington Post

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