Anne Kim, Senior Policy Strategist at CFED, has a piece today in the Washington Monthly that looks at the flaws in our current retirement savings landscape. In short, our current system just isn't meeting the needs of many Americans, who have a variety of short, medium and long term savings needs. Our current "toolbox" of retirement savings options simply isn't meeting this diverse range of needs, as evidenced by recent reports that over a quarter of Americans have made withdrawals from their work-based retirement accounts for non-retirement needs. As Kim explains, "For many people, employer-sponsored retirement plans are the only mechanism “forcing” them to save. Yet the retirement-only focus of the current system isn’t versatile enough to meet people’s real needs—especially to cope with emergencies such as a job loss or a horrifically expensive car repair."
Kim highlights a few options on the table to improve households' financial security while still supporting retirement savings efforts. One of them is an idea we've championed: the Financial Security Credit. As Kim explains, the Financial Security Credit takes an existing tax provision known as the Savers' Credit and amplifies its capacity to help Americans save. She writes: "This proposal would dramatically expand the benefit by providing a refundable “match” and allowing it to apply to savings in shorter-term vehicles such as one-year certificates of deposit or U.S. savings bonds. This match would both beef up the emergency savings available for the workers who need it most and incentivize more savings as well." By acknowledging the diversity of savings needs of American households, the Financial Security Credit is well-positioned to help people take advantage of the tax filing process and leverage their refund to better meet a specific financial need.
Check out the other proposals Kim thinks are promising here.