The good (and not-so-good) with Obama's latest retirement proposals
President Obama is proposing several changes to retirement accounts as part of his 2017 budget. According to one strategist, some ideas are good, though others have little chance of getting passed.
“I don't often find myself on the same page as the president, but these proposals are pretty good,” said David Nelson, chief strategist at Belpointe Asset Management.
Nelson particularly likes the idea of pooled 401(k) plans, which would allow small businesses to join together to offer retirement savings to workers.
“Setting up a 401(k) is pretty expensive,” he said. “Many small companies just don't do it. But if you can pool your resources with another small company and offer a benefit to your employees, I think it's a great idea. I hope this one goes through.”
Another proposal is to allow part-time workers who have worked at least 500 hours over a three-year period to participate in retirement plans.
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“That's a really critical issue,” Nelson said. “There are millions of Americans out there who just have no access to any kind of retirement plan. If you're working at Wal-Mart (WMT) part-time, you're not going to be part of its retirement plan.”
[A Wal-Mart spokesperson responds that the company offers all part-time employees access to its 401(k) program.]
However, other parts of the president’s plans aren’t such a big deal, according to Nelson.
One of those being touted is portability of benefits. Data from the Bureau of Labor Statistics show workers stay at a single employer for an average 4.6 years.
“We're already portable now,” claimed Nelson. “If you leave your existing employer and you have a 401(k) plan, you can usually take [the assets] to another 401(k) plan ... or you can roll it over into an IRA rollover. It’s a big part of the financial industry. So I don't know how novel that is.”
He is also skeptical of requiring companies with 10 or more employees to open an IRA account. “If you're not matching funds, people are probably not going to put into it,” said Nelson. “It's not really a novel idea but it will probably part of the package.”
And while Nelson is generally optimistic about the proposals from the White House, he also doubts they will get through Congress in their current form.
“This is an election season,” he said. “It’s probably going to be used as a bargaining chip. And nobody's going to give [Obama] an in on this. He might trade it for something.”
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