Over the past year, millions of Americans have watched the value of their 401(k)s, college savings plans, and other vital savings accounts plummet. In fact, a poll commissioned by National Public Radio last week found that the number-one economic issue on the minds of American families is savings and investment losses.
The diminishing values of Americans' savings and retirement accounts calls for better solutions. Now is not the time for Washington to pursue policies that cause savings to fade even more quickly. Some are even suggesting that we wipe out 401(k)s completely, substituting them with government-run accounts that put bureaucrats, not families, in charge of savings decisions.
At the beginning of March, I was asked to join a working group to help develop solutions that will assist Americans in protecting and rebuilding their savings as quickly as possible. Members of my party, from various professional and geographic backgrounds, came together to find common sense answers to this serious problem.
On March 24, our working group introduced the blueprint for the Savings Recovery Act. This framework comprehensively addresses the serious concerns that American families have with their evaporating savings.
Rebuilding Americans' Retirement Savings. Current law limits the amount Americans can put into a retirement savings account and the "catch-up" contributions they may make. Our proposal raises both the contribution and catch-up limits to give Americans the opportunity to more quickly build back their retirement savings.
Rebuilding College Savings. The Savings Recovery Act would extend tax credits for contributions made to 529 college savings accounts. Additionally, it would enable families to change the investment direction of a 529 plan two times each year to better respond to changing market conditions. The current law only allows for adjustments once a year.
Increasing Retirement Income. This legislation would double the Social Security earnings limit from $14,160 to $28,320 allowing more Americans to increase their income without being penalized.
Tax Relief for Investors and Seniors. The Savings Recovery Act would immediately suspend the burdensome capital gains tax on new assets for the next two years. It also suspends taxes on dividend income through 2011. This change would particularly help seniors and those on the verge of retirement.
Stabilizing Worker Pensions. To help ensure the viability of worker pension plans, and allow employers to keep jobs and weather this economic storm, the Savings Recovery Act provides two additional years to resolve funding shortfalls. This proposal does require employers to continue making interest payments to their pension plans to prevent shortfalls from growing larger.
Preserving 401(k)s. Some in Washington propose completely wiping out 401(k)s and replacing them with government-run accounts. The Savings Recovery Act is committed to preserving 401(k)s and reflects this important principle. American families, not bureaucrats, should be in charge of their savings.
I will continue working with my colleagues to find bipartisan solutions that will help restore Americans' savings and ensure that Washington does not stand in the way of families' ability to save more. It is time for Washington to end the policies that are destroying Americans' savings and work with on better solutions to rebuild them.