CLEVELAND — The last time a major piece of retirement legislation was passed in Washington was in 2006, a good two years before the economic collapse that saw many American businesses get rid of their pension plans. Now Congress is poised to come to an agreement on some major changes. One measure passed the House recently with another the Retirement Security and Savings Act making it's way through the Senate, both of which feature similar changes.
Senator Rob Portman (R-OH) is one of the sponsors of the bill and said something needed to be done.
"People aren't saving enough for retirement and it's a real problem because people are living longer and healthier lives and they don't have the savings to be able to take care of themselves. So we're doing something really simple which is to say let's create, on a bi-partisan basis Republicans and Democrats together, a lot more incentives to save. Particularly with small businesses where the biggest problem is," Portman said.
"If you work for a larger business, you're likely to have a 401K with a decent match and you're likely to have some pretty good benefits. If you work for a small business you usually don't and that's what we found in doing the research and talking to people."
Another thing they found was baby boomers, the generation closest to retirement, weren't putting aside enough.
"That's an immediate crisis we've got to address. We provide the ability for people to save more immediately. If you're over 60 you can put more money into your 401K and IRA for instance under our bill."
Both measures also address the fact that once you reach the age of 70 and a half you are required to start drawing from your 401k even if you're still working.
"I'm hearing from Ohioans across the board, all different income levels, saying 'wait a minute I'm still working," Porman said. "Why should I take my money out of my retirement plan and have to pay taxes on it. Let me keep it in there and let it continue to work for me' and I think that makes a lot of sense."
Local CPA Jeffrey Neuman, president of Barnes Wendling CPAs, said these and other provisions make sense and reflect the fact that people are working longer.
"The House act would allow for more expansion, you can put money into an IRA as long as you're working, that's also a 70 and a half rule," he said. "Once you turn 70 and a half currently you're not allowed to put any money in an IRA - why? Well, they're going to eliminate that."
The changes to be worked out come as Congress has yet to act on the even bigger issue of Social Security.
"If we don't address Social Security reform then in less than 15 years you're going to have a reduction of benefits by 25%," said Senator Portman. "The way I look at is if you're under 51 years old you better pay attention because the way the law works you're going to see a big cut in your Social Security. We can't let that happen so we need to reform social security."
That being said he added, "Social Security was never meant to be the sole source of retirement income and it's not. In other words, it's tough to live on your Social Security benefit. That's why we got to get people to save more for their own retirement, provide additional incentives there."
"That's in everybody's interest so that's what we're doing right now is to say yes we need to shore up Social Security, that has to be a bi-partisan undertaking otherwise it will never happen but in the meantime let's let people save more for their retirement so they've got the Social Security as the safety net but they also can have funds above that to be able to lead a retirement where they can have some peace of mind in their senior years and that's something that I think again we can get done this year because it have not been a partisan issue," Portman said.