Fodder for Congress

The effect of stock market volatility on families' retirement savings is just one issue that Congress should be concerned about, according to a report issued July 14 by the Congressional Research Service in Washington.

The effect of stock market volatility on families’ retirement savings is just one issue that Congress should be concerned about, according to a report issued July 14 by the Congressional Research Service in Washington.

The report, which cited 2007 data, listed seven major policy issues that it said Congress needs to address:

• Access to employer-sponsored plans. Just 61% of employees in the private sector were offered a retirement plan of any kind at work.

• Lack of participation. Between 20% and 25% of workers whose employers offered defined contribution plans didn’t participate, with workers under 35 less likely than older workers to join the plans.

• Low contribution rates. Contributions to 401(k)s averaged just 6% of pay.

• Lack of diversification and high risk. Fully 78% of DC plan assets were invested in stocks and mutual funds, a ratio that varied little by age.

• Confusion about fee disclosures and providers.

• Lack of information about pre-retirement withdrawals, which can have adverse long-term effects on retirement income.

• Lack of support for the use of annuities, which can protect retirees from some risks of outliving assets or investment losses

Congress should consider providing tax incentives targeted to low- and middle-income workers, the report suggested. Higher-income earners would continue to save much of their income even without tax incentives, according to the report.