Coons and Klobuchar: Most Americans can’t save for retirement. We want to fix that

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What do we mean by barely? Four in 10 American adults do not have cash savings to meet a $400 emergency expense, and unfortunately, $400 emergency expenses are pretty common. So, for far too many Americans, a broken bone, a minor car repair or even school supplies could mean that all the bills can’t be paid at the end of the month.
For these families, saving for retirement is nearly impossible, and the numbers confirm it: Among families in the bottom half of the income scale, only about 40% hold any kind of a retirement plan.

That’s a crisis waiting to happen, and it’s why we’re introducing an ambitious but achievable proposal to ensure that all Americans are able to prepare for retirement and cover emergency costs.

Our legislation, the Saving for the Future Act, would guarantee that if you’re working full time, in addition to your pay, you would receive a savings contribution of at least 50 cents per hour worked, or a little over $1,000 per year. The amount would rise to 60 cents after two years and then keep pace with wage growth after that.

If a worker sticks with their own automatic contributions, which start at just 4% of pay, their savings over the course of a career would grow to more than $600,000 by retirement, according to the think tank Third Way.

Here’s how it works: Men and women who work at a company with 10 or more employees would be entitled to an employer savings contribution of at least 50 cents per hour worked. Many companies already pay at least this amount into a 401(k) or other type of plan and would have to change nothing. Other employers would have to select a retirement plan that they would pay into.

To make it easy for smaller employers, those with fewer than 100 workers would have the option of simply paying into what we call “UP Accounts.” These federally provided accounts would charge low fees, could easily be transferred from job-to-job, and would be tailored to the employee’s age and savings needs.

Our legislation also offers a tax credit to help businesses of all sizes comply, but especially the smaller ones: The credit covers half the required contributions for any business’s first 15 workers — even those businesses that already provide retirement benefits. People working independently or for very small companies get access to UP accounts and an individual tax credit to help them contribute.

To pay for the tax credit, we propose a 2% increase in the corporate tax rate and an increase on the wealthiest households from 37% to 39.6%. It is also important to note that the bill has no effect on Social Security.

We both believe in the power of capital markets to create broadly shared wealth, but we’ve also seen that parts of our financial system have been badly broken, and the savings crisis is a perfect example of that.

Despite the relatively strong economy, too many American workers make too little to invest any savings in capital markets, and as a result, they don’t benefit when the market succeeds. To put it simply, if you don’t have enough money to invest, you don’t benefit when the market rises. The Saving for the Future Act is a way to help all American workers hold some equity in the economy so that when corporations do well, they do, too.

For many workers, savings isn’t — or can’t always be — a priority. That’s why, under Saving for the Future, a portion of workers’ UP Accounts is devoted to emergency savings. The first $2,500 of contributions would go, by default, to an emergency savings account. So, when participants encounter an unforeseen, unavoidable expense, they can tap that account easily and without penalty. After that initial $2,500, all additional contributions would go toward retirement.

Americans need more than just ideas to address the challenges of our often-unfair economy — they need a legislative plan that can pass our divided Congress and start the long process of closing the wealth gap in our country. We believe this bill can do that.

For Americans who don’t have retirement savings or a pension, it would provide income on top of Social Security. It would also help younger workers make the crucial first step onto the savings ladder, making them more likely to avoid the trap of high-interest loans and financial trouble down the road.

Saving for the Future will help ensure that we’re leveling the economic playing field. Today, 60% of part-time workers, who are disproportionately women, don’t even have access to a workplace retirement plan, and Black and Latino households each have just about one-tenth of the average household wealth that white families have. That’s clearly not indicative of an economy working for everyone.

For many Americans, those with a 401(k) savings plan and a competitive salary, the economy appears to be humming along, but more and more of our family, friends and neighbors are financially insecure, even if they’re working full time.

As senators who represent Delawareans and Minnesotans who are in exactly this situation, we believe our bill is the kind of direct action to address income inequality that working Americans deserve.

As Democrats, we also believe it’s the kind of market-based, deliverable and bold plan we should coalesce around as a party.

Americans expect the government to set reasonable ground rules for our economy — rules like a minimum wage, workplace safety requirements and anti-discrimination policies — that help ensure successful economies and benefit everyone involved. Guaranteeing minimum savings for full-time workers won’t just benefit the millions of Americans dreading an unforeseen expense; it will also make our entire economy stronger and more equitable.



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