The coronavirus has impacted everyone in one way or another. More seasoned workers have been left out of the government, and they are receiving no response to the economic crisis due to the ongoing coronavirus pandemic. If this thing isn’t stopped in the next “Phase 4” federal stimulus package, we would like to alert you that millions of middle-class Americans are expected to fall into poverty or face poverty as they plan to retire over the next couple of years.
To save for retirement savings, we have come up with five policies that must be included in the next federal stimulus-relief package.
1. Unemployment benefits should be expanded, and Medicare should be extended
It’s estimated that the rate of jobless people is expected to rise as high as 30% in the coming months, which may result in as many as 12 million older workers going jobless. Even if the economy recovers, these older workers will have to face more significant barriers in resuming work than their counterparts. Older workers may stay jobless longer than younger people, and if they get a job by chance, they will have to work on a reduced salary that would be 20% less than their original one.
The government should expand benefits for these unemployed workers in addition to an extra $600 a week. Older workers over 55 should get more benefits for at least until the end of the year. The additional benefits will help older workers become more fragile in the labor market. Medicare should also be extended. If they cannot get a job or are a 1099 worker or their employer does not give them healthcare—the eligibility age to get Medicare should be reduced to 55.
2. Social Security benefits should be increased by $200 a month
In the first three stimulus packages, no help was given to seniors after sending $1,200 checks. There are many seniors out there who are depending on their Social Security benefits and have no other source of income because employers do not offer a pension plan. Most of the employers of low- and middle-income workers do not provide any retirement plan. With work, not many of them can save for their retirement. Generally, the lower- and middle-income workers end up withdrawing money from their retirement savings. This is why more low- or middle-class workers withdraw money from their retirement savings than higher-income people to meet their short-term daily needs.
Since Social Security benefits provide most of them with reliable retirement income, its benefits should be increased permanently to help lower- or middle-income elderly people. To solve this problem, the government can start Social Security “Catch-Up” Contributions, a program that automatically contributes an additional 3.1% of their salary to Social Security when they reach age 50. This program would help to increase monthly benefits at all low, middle, and higher earnings levels. Believe us: this can be done.
3. Do not extend federal help to companies that do not contribute to the retirement accounts of workers.
Our retirement system depends on employers to continue retirement plans in the form of traditional pensions or retirement savings accounts like 401(k)s. This should be taken care of even in the best of times, and depending on employers to offer retirement coverage is why 50% of workers have no retirement coverage.
But in bad times like this, employers who offer retirement coverage stop contributing to match the contribution made by an employee. This is happening at most of the major companies like Marriott and Amtrak. Sadly, but true, our heroes of the day, our healthcare workers, are also a part of these benefits cuts. Our federal government should stop helping private companies who do not continue to fulfill their promises to employees.
4. A reverse policy that allows 401(k) withdrawals penalty-free
The CARES Act has waived penalties for an individual who withdraws their money early from their 401(k) and IRA accounts. Well, this may sound good for some. Though it protects an individual from using his or her retirement saving in the hour of crisis, it protects retirement funds from getting trapped to short-term needs; it encourages people to sacrifice their future savings. The policymakers should consider people and do something to help those who are severely affected by the coronavirus outbreak and don’t have enough to pay their bills today.
5. A public option to 401(k) account should be created to fix this problem for the long term
The coronavirus pandemic has impacted everyone, especially the stock market, where the retirement wealth has almost been wiped out. Do you know the reason? Because our Congress and employers have shifted all the recession risks to an individual over the last 40 years by supporting the individual-directed, voluntary, and commercial 401(k)-type accounts. As 401(k) account holders see their retirement wealth dropping 20% or more in this recession, individuals have to bear the burden. Workers near retirement would never be able to recover the losses.
The depletion of 401(k) and IRA balances is a sure shot indication of our prevailing broken retirement system. This problem needs to be fixed, and a public option should be taken to sustain otherwise declining contribution accounts. The retirement accounts guaranteed should help contribute to workers’ retirement plans to help them get a stable rate of return and tolerance for the ups and downs of the market. This stability may give some relief to the old and poor who are forced to retire.
More than 15 million workers are age 55 to 64 in 2020, so it is expected that nearly 50% of workers will be inferior or near-poor by the time they reach 65. This number will appreciate as the COVID-19 recession continues to destroy pension accounts and jobs of older workers — and if the federal government can help in its next round of the federal stimulus package.
