Republicans further diminished the possibility of retirement by repealing automatic retirement accounts that lighten the load on Social Security.
Baby Boomers are on the edge of retiring, and the Generation X and millennial demographics will approach retiring age in the coming years and decades. Many of these soon-to-be retirees are not financially prepared for life after 65. According to Time Magazine, 1 in every 3 Americans have no pension or any form of retirement savings whatsoever, placing an added burden on the Social Security system.
To remedy this, the Obama administration established legislation that would make way for the set up of automatic payroll deductions so workers could contribute to Individual Retirement Accounts (IRAs), without conflicting with strict rules that apply to existing pension plans. Obama proposed tighter regulations on advisers who handle 401(k) and IRAs.
In response to the Trump administration’s attack on retirement, states started setting up automatic IRA accounts for private sector workers to use to save for retirement thru payroll deductions. The Congressional Review Act was utilized Thursday by Trump to relinquish Obama’s protection of retirement accounts.
In another attack on retirement, Trump issued an executive order ordering the Department of Labor to abolish protection for retirees that require advisers to act in their clients’ best interests rather than steering clients into risks that may be hazardous. As ThinkProgress reported, a financial advisor who worked off commission selling variable annuities bilked recent Pacific Bell retiree Phil Ashburn out of approximately $285,000 worth of a $355,000 investment. Because variable annuities fluctuate based on market performance, Ashburn’s investment was nearly depleted by 2015, and is now trying to save his house.
According to the American Association of Retired Persons (AARP), U.S. citizens lose approximately $17 billion a year due to retirement advice that’s not given in the best interest of the customer. However, Trump’s repeal of these Obama-era rules free up financial advisors to give bad financial planning advice without any regard for their customers’ fiscal stability.
All of this is particularly alarming, considering Trump’s proposed tax plan either severely cutting or repealing the payroll tax, which is the chief source of Social Security’s funding. The plan is marketed as a means of saving working families money by undoing the mandatory 6.2 percent employee payroll tax. Should Congress successfully pass the payroll tax cut, it would, by default, put Paul Ryan and Mitch McConnell in charge of appropriating funds for Social Security.
Steven E. Johnson is a Mississippi-based author who covers racial justice and political issues for the Resistance Report. You can contact him at stevejlive at gmail dot com.