Obama and Your Retirement

Now that Barack Obama will be our 44th president, it’s time to take a closer look at how his proposals could impact Americans. With a slumping economy and bearish financial markets taking a bite out of nest eggs, retirement issues are at the forefront of many Americans’ minds.

Even before the financial crisis dominated the campaign trail, Obama offered proposals to make Social Security more financially sound and encourage Americans to save more for their golden years. More recently, he has put forward temporary measures designed to ease the pain of the market downturn for retirees and workers alike.

Here are the key elements of his plans:

Temporary Assistance

Obama proposes allowing working Americans to make withdrawals of up to 15% from IRAs and 401(k)s during 2008 and 2009, to a maximum of $10,000, without triggering the standard early-withdrawal penalty of 10%; the withdrawals would still be subject to income taxes. Obama supports temporarily suspending mandatory minimum withdrawal rules for retirees over 70. He also proposes to temporarily waive taxes on withdrawals for those who do withdraw up to those minimums.

Retirement Plans

Obama proposes matching 50% on the dollar for the first $1,000 of retirement-plan contributions for families earning less than $75,000 a year, to encourage savings. He also has proposed requiring employers that don't sponsor employee retirement plans to set up automatic contributions to IRAs for employees, with provisions allowing workers to opt out.

Taxes

Obama proposes eliminating income taxes for seniors making less than $50,000, which the campaign estimates will save 7 million seniors an average of $1,400.

Social Security

Obama supports increasing payroll taxes on annual income over $250,000, perhaps by 2% to 4%, to improve Social Security's financial position; currently, only income under $250,000 is subject to the 12.4% withholding tax, which is split between employers and employees. He opposes increasing the age at which Social Security benefits may be collected, which is another commonly cited fix for the program, and also opposes privatizing benefits.

Whether Obama will be able to enact his proposals remains to be seen, but in the wake of the economic crisis, the next four years could prove to be landmark years for reform.