Boots & Sabers

The blogging will continue until morale improves...


Everything but tech support.

0600, 06 Sep 18

Trump improves retirement savings options for Americans

Here is my full column that ran in the Washington County Daily News yesterday.

Amid all of the tweets, insults, accusations, lies, betrayals and other palace intrigues that the media obsess over, President Donald Trump is aggressively deregulating and advancing reforms for the benefit of the middle class. In one of many examples, Trump signed an executive order last week to instruct federal departments to make it easier for Americans to utilize tax-advantaged retirement plans.

Since the 1970s, the federal government has encouraged Americans to save for their retirement by allowing them to defer income taxes for money put into certain retirement accounts like 401(k)s and IRAs. One could certainly argue whether or not it is the role of the federal government to use tax regulations to encourage this behavior, but given the fact that our nation has decided on a social construct whereby taxpayers will financially support people who did not, or could not, save enough to provide for themselves in their elder years, such inducement for people to save certainly improves the general welfare. There is little doubt that the individuals who use these plans benefit immensely.

The rules regarding these tax-advantaged retirement plans have been changed over the years as conditions and preferences have shifted. One of Trump’s orders is a relatively minor tweak. Trump directed the Department of the Treasury to evaluate changing the rules regarding required minimum distributions to allow retirees to keep money in their accounts longer.

Under the current rules, retirees must start taking money out of their 401(k)s and IRAs when they are 70 1/2 years old, even if they do not need the money. The reason, from the federal government’s perspective, is that the income tax on that money was deferred, not waived. The government needs the money to be withdrawn before the retiree dies so that it can be taxed. People are living longer now, so Trump’s directive is to raise the age and required distribution amounts to better reflect current demographics. Ideally, Trump will go one step further and work with Congress to waive the required minimum distributions completely.

The other parts of Trump’s executive order are arguably more important. Despite the popularity of taxadvantaged retirement plans like IRAs and 401(k)s, a large percentage of Americans do not have one available to them through their employers. According to Pew Charitable Trusts, 35 percent of private-sector workers older than 22 do not have access to a 401(k) plan through their employer. Access is skewed to the younger generations with 41 percent of millennials lacking access through their employers.

One of the things preventing access is that smaller companies are often unable to afford the costs to set up and administer these kind of retirement plans. Trump ordered the departments of Treasury and Labor to find ways to reduce the regulatory burden for small businesses to offer workplace retirement plans.

Furthermore, federal law prohibits small businesses from pooling their resources to offer retirement plans unless they are related businesses like members of a trade association. Trump ordered the departments of Treasury and Labor to issue regulations allowing any group of small businesses to join to offer association retirement plans to their collective employees.

Combined, these two parts of Trump’s executive order will make it easier and more affordable for businesses of any size to offer attractive retirement savings plans to their employees. With more Americans having access to more retirement saving options, more Americans will be inclined to save for their sunset years.

The sad thing for America is that the media are so caught up in the daily soap opera of the White House that they almost completely ignore the actions Trump is taking that actually matter to Americans. Trump does not help matters by feeding the frenzy. In fact, he seems to enjoy it. But most Americans are just trying to live their lives and would like to know when the government is doing things that might affect them — especially when it is good.

As we transfer another Labor Day into a memory, President Trump is taking yet another action to improve the lives of American workers by making it easier for them to save for the time when they will no longer work. That is far more important than yet another breathless story about yet another tweet.


0600, 06 September 2018


Pin It on Pinterest