Big changes are coming to your 401(k). Here’s what you need to know.
NEW YORK (CNN) — The United States is on the brink of a retirement crisis. The primary savings tool for Americans — your 401(k) — isn’t helping.
By the end of the decade, about 21% of the country’s population will be 65 or older, up from 15% in 2016, according to forecasts by the Census Bureau. Most non-retired adults have some type of retirement savings, but only 36% think their savings are on track.
Now, Congress is looking to help Americans save by bolstering 401(k) programs — the tax-deferred, company-sponsored retirement accounts to which employees can contribute income, and employers can match their contributions.
A new bill, expected to reach President Joe Biden’s desk by the end of the year, could require most employer-sponsored retirement plans to enroll their workers automatically, making it easier for student-loan borrowers to save, and for older workers to make catch-up contributions. It will also lower costs for smaller businesses.
Retirement savings in the United States were long thought of as a three-legged stool. Americans had pension plans, Social Security benefits, and defined contribution plans like the 401(k). Not any more.
Pension plans are nearly extinct. About half of private sector workers were covered by those so-called defined-benefit plans in the mid-1980s, but by 2021 only 15% of private sector workers had them.
