Americans are well aware Social Security doesn't begin to cover the real costs of retirement and that to maintain their standard of living after their working years are over, they need new incentives to save and accumulate assets during their wage-earning years.
Earlier this year the U.S. House passed a bill boosting contribution limits to Individual Retirement Accounts and 401(K) plans. The legislation drew threats of a veto because the administration claimed it was tilted too much toward higher-income wage earners.
But now the Senate is weighing in with its legislation which - so far anyway - has not drawn veto mutterings from Treasury Secretary Lawrence Sommers.
Introduced by Senate Finance Chairman William Roth, R-Del., namesake of the popular Roth IRA, the Retirement Savings Opportunity Act (S.646) would raise annual contribution limits to 401(k) plans from $10,500 to $15,000 and for IRAs from $2,000 to $5,000 a year.
A new 401(k) option would be created that would let workers contribute after-tax dollars that could later be withdrawn tax-free. This is an extremely popular feature in the Roth IRAs and the senator rightly feels it will be just as popular in the 401(k) context.
Also included in S.646 is a "catch-up" provision to let people over 50 contribute up to $7,500 to an IRA. This is designed primarily for women who left the work force to raise children and haven't been able to keep pace with their retirement savings.
It would be a signal accomplishment in this election year if the Democratic administration could come together with the GOP-led Congress to pass legislation to encourage more retirement savings.
The sooner such a bill is passed the better. The years are going by swiftly for the huge baby-boomer generation, which will start to retire in 12 years, and the more the government can do to encourage personal savings now the less it will have to tax wage-earners in the future to help the expanding elderly population.