Americans aren’t saving—or saving enough—for retirement, and the country is heading for a crisis as boomers leave the workplace in ever-increasing numbers.
But in a blog post at Seeking Alpha, Patrick Gunn has come up with an idea that he believes will solve the problem.
Stimulated by changes to the military retirement plan that have included expansion of the government’s Thrift Savings Plan, Gunn proposes that the TSP be expanded again—to include all working Americans—and to make it mandatory to save a minimum contribution in a TSP account as a means of retirement savings.
Retirement would be less of a crisis if the ceiling were raised on Social Security contributions—there are plenty of gloomy predictions on the future of the “entitlement” program, to which working Americans contribute and are thus entitled.
However, with a Republican Congress in charge, an increase in the ceiling is probably at least as unlikely as the current presidency was at this time last year.
And Gunn rightly notes that Social Security by itself is not enough for retirees to survive on, and given the current rate of savings by most Americans, retirement is a grim picture instead of a welcome later stage of life.
In his post, Gunn points out that according to the March 2015 report from Dr. Nari Rhee and Llana Boivie of the National Institute on Retirement Security, “a followup to a 2013 study, 40 million working-age households have no retirement account assets at all and the median retirement account balance is just $2,500 for all working-age households.”
Gunn also says in the post that “[t]he Center on Budget and Policy Priorities points out that 66% of all retirement saving tax incentives go to the top 20 percent of the population and overall costs taxpayers $117 billion each year. More striking in their study is that the top 20% of households received twice as much in subsidies as the bottom 80% combined.”
Adding the TSP to the mix could change that picture, Gunn says, proposing “to not only give every wage-earning American access [to the TSP], but to make it mandatory to contribute via a ‘retirement tax.’”
Gunn’s plan calls for a minimum 1% tax, with the money placed in the default “G Fund” of the TSP. Individuals could elect to invest in other funds, but half would always go to the G Fund, and they could also elect to allocate a ceiling of 15% of their wages to the TSP.
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