Last Updated on May 17, 2021
Retiring Under Biden’s Plan
Since the inauguration of a new presidency, it’s been a wonder as to what kind of changes will be seen in different strata of the nation. Biden’s presidency seems to have been true to its word in revamping the policies Trump and the previous presidents left behind.
Aside from the fact that the new presidency has ordered a revision of the previous immigration policies, it has also ordered for the cancellation of the Keystone XL permit, moved for a mandatory ethnic pledge to be signed by government appointees, and ordered a pause on the loan payment of federal students.
Biden’s presidency is also proposing changes in the nation’s retirement scheme – which, like other changes, will influence the living style of the citizens.
Understanding Biden’s Plan on Retirement
Biden’s proposed plans would have a direct impact on the tax burden of its participants as it would alter the previously existing 401(k) savings plan. The existing 401(k) scheme permits for a deduction in the tax burden of those contributing to it, thereby minimizing their taxable income. The amount contributed by anyone into the account is not taxed until the depositor withdraws from it. In this scheme, benefits on tax deduction increase as your income increases.
Relating the existing plan to retiring under the Biden plan proposed would be a reverse in the scheme, as his presidency seeks to convert the tax deduction into a tax credit of about 26%. The proposed scheme stands to be more advantageous to average-income earners as they would get more tax credit than they would see a tax deduction. This plan will help average-earning working-class participants save more easily, and yet still satisfy the high-earning participants.
From the new presidency’s perspective, the existing retirement scheme has loopholes in its remuneration, implying that the soon-aging citizen is fast advancing towards underfunding. Given this, the Biden presidency proposed an automatic state-pioneered 401(k) enrollment program
401(k) Automatic Enrollment Plan
Biden has proposed an automatic enrollment plan for all citizens within the workforce age bracket. The plan is meant to capture both those who are under a salary payroll and those who are not actively earning, such as those who care for aged parents.
Biden’s presidency appears to be of much concern for non-earning citizens. Captured in his plan is a system that intends to help the non-earning bracket secure an efficient long-term financial plan, thereby ensuring their future financial stability. The plan also seeks to ease the burden on lower-income earners, giving them a less stressful route to save for retirement.
Retiring under Biden’s plan, the majority, if not all employees who do not have an existing pension or 401(k)-type plan will be automatically enrolled in the 401(k) plan which will serve as an easy means to save for retirement in the future.
Social Security and 401(k)
Within the 401(k) of Biden’s presidency, is an agenda to bridge the gap of Social Security inflow and outflow to a reasonable extent without burdening the average income earners. He also intends to change the annual Social Security Cost of Living Adjustment (COLA) measuring standard to the CPIE index in place of the existing CPI index.
With so much care for the elderly citizen, the CPIE index (the Consumer price index for the elderly) is a measure crafted to keep track of inflationary changes that might affect the living standard of retirees as they advance in age, putting into consideration their healthcare. In a bid to help aged workers who have experienced layoff from work, the presidency also intends to reduce the permitted age of those eligible for Medicare from 65 to 60.
Fortunately, employers seem to be anticipating the full execution of the plan, since it serves as an incentive for employment.
Retirement And President Biden
Biden’s plan as it relates to retirement or 401(k) plan, appears to be advantageous in many ways. It seems to be quite concerned about the living standard of its citizens, putting the elderly and their healthcare as one of its top priorities. Providing an option for the non-income earning workforce to achieve future financial security and catering for the working-class whose company does not have a retirement plan for its employees.
Biden’s plan has the potential to bridge the gap between average income earners and high-income earners. It also appears to be able to stabilize the equality in the tax burden borne by the different income earners.
Although in the midst of these, there is a concern as to the reduction in tax incentives of small businesses, seeing that withdrawal will most likely be made from employees’ income. Biden’s plan as it concerns retirement planning intends to cover a wide range of the nation’s workforce to improve the retirement system of the United States of America. Retiring under Biden’s plan may actually prove a benefit desperately needed in the United States right now.