Retirement security for workers without access to workplace retirement savings plans will be part of President Barack Obama's State of the Union address Tuesday night, according to sources familiar with the proposal.
In the speech, Mr. Obama is expected to discuss creating a new retirement savings plan for first-time savers, who could tap into a new Treasury bond savings program that converts to a traditional IRA.
Similar to existing workplace deductions for savings bonds, the proposed “R Bond” program is aimed at lower-wage workers discouraged from saving for retirement by minimum deposits and retirement account fees. The bonds would have tax benefits similar to individual retirement accounts, and the balances could be rolled into IRAs when balances reach a sizable amount.
A government retirement bond is a default option in legislation sponsored by Rep. Richard Neal, D-Mass., that would create automatic IRA programs through employers, an idea also discussed by administration officials. While legislative solutions have stalled in Congress, Mr. Obama could institute the Treasury R bond program without congressional action.
Retirement experts appreciate it as a default option within automatic IRAs for employers without retirement programs, but question how much a voluntary bond purchase program can accomplish.
“We're glad that the president is looking to expand coverage. We have been very supportive of the auto-IRA proposal. I don't think (the R Bond idea is) going to really push it forward,” said Judy Miller, director of retirement policy for the American Society of Pension Professionals & Actuaries. “We disagree that there aren't low-cost options available in the private marketplace now,” she added.