Retirement industry needs innovation, regardless of legislation
November 13, 2017
Retirement industry needs innovation, regardless of legislation
By Carlos Garcia, CEO/Founder of Finhabits

Carlos Garcia’s Response To: Proposed 401(k) tax policy changes

As reported in: Tax bill leaves your 401(k) unchanged—for now


The GOP Tax Plan keeps 401(k) pre-tax contribution limits unchanged—for now. Some in the retirement industry see this as a savings crisis averted, but really this was just a distraction from the real savings crisis that is already here. Very few Americans come close to maxing out their 401(k)s at $18,000 per year, according to Vanguard data. Half of households with people 55 and older have no retirement savings at all, according to the U.S. Government Accountability Office.

Our current model of employer-based 401(k)s isn't working for most people. Only 49 percent of whites, 32 percent of blacks, and 20 percent of Latinos contribute to a 401(k). This is according to data released at October’s Aspen Institute roundtable on retirement insecurity in the Latino community (at which I was a panelist).

Lack of access is one reason. Only 61 percent of whites, 54 percent of blacks, and 38 percent of Latinos work for an employer that provides a retirement plan. Another reason is that most plans are difficult to understand and use. They're not easily portable from one job to the next, which is a problem when the average worker holds 12 jobs in a lifetime.

Our industry needs to focus on innovative solutions that make it easier for workers to save for retirement. Making retirement enrollment automatic is one popular solution. Using technology to develop "employer agnostic" investment products, such as Finhabits, is another. Increased access, not increased savings limits, is what will get more workers saving.


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