Janet Yellen is a formidable figure in the US economy – and as the newly appointed Treasury Secretary, she is also expected to be a transformative force on retirement security.
During her interviews for the post, the Treasury official said changes needed to be made to future retirees. When Senators asked her about her potential role in retirement security as part of her nomination hearing, she mentionned various proposals that President Biden had supported in his campaigns and what she would do to help.
Yellen, who chaired the Federal Reserve between 2014 and 2018, mentioned offering tax incentives to small businesses wishing to start retirement programs, strengthen the social security system, give workers without a 401 (k) plan access to a “Automatic 401 (k)” and balance tax benefits for all income levels.
“There are many options available to make pension contributions more generous for middle-income families,” she said. Yellen added that she would research the myriad ways to solve the growing problem.
See:Yellen defends Biden’s economic plan at confirmation hearing
“We believe it can play a very important role in expanding opportunities for American workers and retirees in many ways,” said Paul Richman, director of government and policy affairs at the Insured Retirement Institute, a professional organization that defends the retirement industry. His role as Secretary of the Treasury will directly and indirectly affect retirement savings.
There are already four retirement security bills going through Congress, which could help middle-class families build their nest egg to some extent, Richman said. The new Treasury Secretary has the strength and ability to respond and balance these many concerns, said Eugene Steuerle, co-founder of the non-partisan Urban-Brookings Tax Policy Center. The government can no longer deal with problems one by one.
“Janet Yellen is extremely qualified to recognize the need to address these issues simultaneously, which would be a radical departure from the way we do things,” he said. “He’s someone who has the ability to handle issues at that level and my fear for the economy as a whole is not to do that, a lot of our long term issues in terms of growth and money. for those who need it most will continue to fall by the wayside.
As the head of the Treasury Department, which oversees the Internal Revenue Service, she can research and encourage the government to take many avenues in trying to change the way Americans save money for their future. Tax incentives and the way accounts are taxed are two of the main factors in planning for retirement – this is one of the reasons people may be more inclined to invest in one type of account rather than one. other, like a 401 (k) plan instead of an individual retirement account (IRA) or a Roth account over a traditional account. There are also tax-advantaged retirement programs and employer-sponsored tax credits that may be subject to further consideration.
A plan for Social Security
Yellen will also be heavily involved in what happens to Social Security, whose fate is currently in limbo as Congress determines how to resolve its insolvency issue. If the government does nothing, the program’s trust funds will be depleted by 2035 (or sooner thanks to the pandemic), when Americans will only receive about 80% of the benefits owed to them.
“Social security reform has not been a short-term priority since 1983 and the date for the accounts has finally arrived,” Steuerle said. Medicare is also in urgent need of attention. During his Senate talks, Yellen said the government needs to find a way to deliver health care cost-effectively.
Also see: Yellen says the smartest thing to do now is to “act big” to help struggling Americans
Yellen also addressed concerns about Social Security in his written responses to senators’ questions. “Having a strong Social Security program is essential to ensure a secure retirement for all Americans, especially our most vulnerable populations,” Yellen said. She mentioned Biden’s proposals – including taxing workers who earn more than $ 400,000 and increasing benefits for survivors, low-income workers and older beneficiaries.
While retirement security seemed to be a priority for Yellen, there are other pressing questions – such as the consequences of the pandemic, said John Scott, director of the retirement savings project at Pew Charitable Trust. But that, too, will affect future retirement security, given that so many Americans have lost their jobs or wages or have had to quit or dip into their retirement savings. “Some of these immediate steps will also have an indirect or ripple effect on retirement security,” Scott said.
Even though Yellen is not directly involved in all conversations about the retirement proposals – given that she will have a long list of duties as Secretary of the Treasury – she will be the one “who sets the table for debate”, Scott said. She also has experience in government and working with members of both parties, which will benefit her in this role.
“One Secretary of the Treasury in particular receives a lot of attention because of his decisions,” Scott said. “I’m talking outside of retirement security, but what they say can affect the stock market. Someone like her makes retirement policy a priority, not just generally but with specific initiatives, and I think that can have a big impact in the future. “