Feel like the United States isn’t saving enough money? Well, so does the current administration. With personal savings rates hovering at a pitiful 4.2% for July, (compared to almost 50% for China) it seems like a reasonable proposal. So, what will some of the new programs to increase savings look like?
Retirement Plan Fun
Since 2006, companies have been able to automatically enroll employees into 401(k) plans. Of course, with the reduced amount of hiring (and entrenchment at current jobs), this rule probably hasn’t been fully worked out. New rules for saving should also make it easier. According to the CNN article, currently companies are put off by the onerous forms and compliance rules for auto-enrollment. Hopefully this will make it easier.
Additionally, workers will be able to roll unused sick days and vacation days directly into their workplace retirement plans. Of course, in some states there is no requirement for companies to roll over vacation days, so policies at these companies will not be changed. However, I feel that these two developments are positive. Inertia should allow some people to amass larger savings in the case of the first rule, and maybe some people will opt to put their ‘found money’ (in the form of days off) into their funds. Of course, California’s public employees already have the ability to roll unused vacation days into their pensions; this is just leveling the playing fields some.
Tax Refund Chicanery
Count this one as a development I’m not as big a fan of- people can opt to receive their tax returns in savings bonds. I know, I know, some people actually increase their withholding in order to have some ‘savings’ at the end of the year. Of course, this amounts to a interest free loan to the government. Increasing the incentive to put more money in it may cause more of this behavior, although I suppose it may cut down on some of the tax refund spending once that return comes. Also, savings bonds happen to be taxable at the federal level. So your tax refund in the future may be, ironically, taxable. In a perfect world, the IRS would pay interest on the balance that it collected in excess of the amount owed. Still, you may be a bigger fan of this than me; let’s see how it all turns out.
I’m certainly a fan of the possibility of increased 401(k) contributions, but the tax refund games are a little too clever. What do you think?
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