The US House of Representatives recently took a big step to help millions of Americans whose retirement savings have been hit by the double whammy of COVID and inflation.
The Act to Ensure a Strong Retirement, A bill targeting student loan borrowers, military spouses and low-income earners, among others, to help plan and save for retirement passed March 29 by a vote of 414 to 5.
Also known as SECURE 2.0, the bill builds on the SECURE Act passed in 2019 and expands access to workplace retirement plans. SECURE 2.0 reforms would particularly benefit women, as they represent the majority of each of these target groups.
Even so, the retirement story remains bleak for many working women.
Their household income in retirement is lower than that of men. And a recent TIAA survey found that only about one in three women (31 percent) are saving for retirement.
The pandemic has exacerbated this problem. Between February 2020 and January 2022, nearly 2 million women left the workforce to care for a loved one. Lost wages and savings will be difficult, if not impossible, to recover for many of them.
SECURE 2.0 addresses this issue by extending the age at which women and all retirees must withdraw money from their 401(k) accounts and other retirement savings accounts.
Current law requires withdrawals to begin at age 72. Under SECURE 2.0, people can defer withdrawals until the age of 75. Some critics find that this provision only benefits those with higher incomes, giving more time to protect their savings from taxation. We think this is a helpful guideline given that so many people have to work well into their 70s, giving them extra time to catch up on their retirement savings.
The student loan scheme will help those burdened with debt to save for retirement, many of whom are young women who have had to choose between loan repayments and pension contributions. SECURE 2.0 would allow employers to deposit a “match” into an employee’s 401(k) account based on their student loan repayments.
Additionally, military spouses, mostly women, often sacrifice their own career aspirations and ability to save for their own retirement. Faced with this challenge, SECURE 2.0 would provide a tax credit to small employers who qualify military spouses for their retirement plan within two months of enlistment; make an appropriate or non-eligible contribution to the plan; and ensure that those spouses share 100 percent of all employer contributions within the same timeframe.
The savings loan, which offers low-income earners a tax credit as an incentive to save, would also get a boost. SECURE 2.0 would simplify access to credit and increase awareness and usage among low- and middle-income women.
In addition, SECURE 2.0 would help allay a concern many women have – surviving their savings. In fact, a study by Allianz Life found that more than 6 in 10 non-retirees are more afraid of running out of money in retirement than they are of dying. SECURE 2.0 would make it easier for employers to offer a deferred retirement option in a 401(k) or similar plan — and since women typically outlive men — they can choose an income source that will be available later in life.
Other important provisions in the bill would make automatic enrollment, a powerful tool to encourage people to save, a key feature of newly created private-sector pension plans. SECURE 2.0 also encourages small businesses to start retirement plans by increasing tax credits for costs associated with starting them.
Taken together, the improvements in SECURE 2.0 bring the nation’s pension system into the 21st century. And while the overwhelming, bipartisan vote in the House of Representatives is a positive sign, the Senate has yet to act and send the bill to the President’s desk.
In the interest of improving pension security for working women, and in the interests of all Americans, let’s hope that happens soon.
Cindy Hounsell is President of the Women’s Institute for a Secure Retirement (WISER).