Solving The Retirement Crisis
The President's Economic Recovery Advisory Board
, led by Paul Volcker, has gotten high marks for their efforts to solve problems with the country's complex retirement system. The group has issued an official plan to simplify the presentation of retirement incentives and encourage workers to save up for retirement. Their proposals have also garnered reactions from retirement professionals. Here's what Paul Volcker and company propose:
Rules need to be simplified, and retirement accounts consolidated. This will address the problem of confusion among retirees who have trouble picking out and maximizing different retirement accounts, including 401Ks, 403bs, IRAs, and SEP-IRAs. Most workers find it hard to confirm program eligibility, and how much they should contribute to their retirement accounts.
Details of the confusion were in a recent IRA Advisor issue, which contains information such as the maximum amounts you can place in an employer-provided plan (if you're only working for a single employer) for this year. The maximum contribution for money-purchase plans, profit-sharing plans, and SEP-IRAs is $49,000, which is the same maximum amount for 401k plans and 401b plans if you're younger than 50 years old. If you're aged 50 or beyond, the maximum amount is $54,500.
There are different contribution limits for simple IRA plans and 457 plans - $23,000 for workers below 50 and $28,000 for those 50 and up for the former, and $16,500 for workers younger than 50 years and $22,500 for those aged 50 and up. Contribution limits also change if the person works more than one job.
The report recommends the consolidation of employer-sponsored retirement accounts, as well as the simplification of the rules of eligibility and contribution.
While Ibbotson Associates president Peng Chen lauds this proposal, Profit Sharing and 401K Council president David Wray says the diversity of the workplace and how different plan types address this scenario will render the proposed move useless.
by: Carina Smith
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