Our nation is facing a retirement savings crisis.
One in three Americans is now 50 or older, and by the year 2030, one in five will be 65 or older, according to the AARP. Yet at the same time, one-third of Americans report they have no retirement savings and 56 percent have less than $10,000 saved for their retirement.
Without profound shifts in policy, the number of low-income retirees will nearly triple to 25 million people by the year 2050 — poverty rates that haven’t been seen in this country since the Great Depression. Additionally, the rising costs of health care, child care, and higher education are putting added pressure on families’ budgets, making it all the more difficult, and important, to save for retirement.
The message is crystal clear: America’s retirement security must be front and center as the new Congress and Administration begin reforming the tax code, which they have indicated will be a top priority in the first quarter.
In the lead-up to the recent presidential election, conversations around federal tax reform centered on lowering income tax rates and simplifying the tax code. We at AXA support these goals, which would let families keep more of their own hard-earned money, create jobs and boost economic growth that benefits all Americans. But we want to ensure that Americans’ ability to save for their retirement is not unintentionally harmed in the process.
A revised tax code that reduces retirement savings opportunities would have serious consequences for the economy in the long term. We believe that bipartisan solutions that avoid this outcome are necessary and possible.
The complexity and importance of this issue demand a multi-faceted approach to reform that focuses on, among other things:
- Preserving or expanding incentives for individuals to save for retirement earlier and at higher levels;
- Ensuring that a wide variety of retirement savings products — particularly those that provide guaranteed lifetime income — are available at a reasonable price; and
- Educating Americans about the importance of retirement planning through financial literacy programs and guidance from professional financial advisors.
If we fail to take action in these areas, an ever-increasing portion of the cost of caring for our country’s retirees will ultimately have to be funded by taxpayers. With the viability of Social Security already under strain, this would be an additional burden that the next generation of hardworking Americans cannot afford to bear.
First, savings incentives that are built into the U.S. tax code provide critical support for millions of Americans trying to save for retirement.
Policymakers should preserve and enhance tax policies that encourage long-term savings and ensure that people have access to high-quality retirement services. When it comes to planning for a dignified retirement, Americans want and deserve a system that provides access to a broad array of investment choices and personalized financial advice not only for the wealthy, but also for savers who are younger or of more modest means.
Future endeavors to create a fair and equitable tax code should reflect an earnest effort to ensure affordable retirement security is attainable by all Americans.
Second, it is in everyone’s interest to craft tax rules that allow financial services companies to offer affordable retirement products.
Prior tax reform proposals have included revenue-raising provisions that disproportionately targeted life insurance companies, the primary providers of retirement products that offer guaranteed lifetime income.Imposing a higher tax burden on life insurers would ultimately make retirement products and services more expensive for savers.
As Congress considers future proposals, Republicans and Democrats should avoid making the same mistake and recognize the urgent need to make retirement solutions more affordable, not less.
Last June, House Republicans introduced their blueprint for tax reform, which appears to recognize the importance of retirement savings incentives. As the House Ways & Means Committee begins to work through the details of the blueprint, we hope they will continue to advance our shared goal of making it easier for all Americans to save for retirement.
While solving the retirement crisis will not be easy, enhancing Americans’ ability to save for retirement is critical for our society, and surely an issue where Democrats and Republicans can find common ground. We look forward to working with Congress to make retirement security a top priority in the tax reform process.
Mark Pearson is the President and Chief Executive Officer of AXA Financial, a leading financial protection company and one of the nation’s premier providers of life insurance and annuity products for individuals and business owners.