Combined retirement and health payroll savings plan deductions are the wave of the future, a Fidelity retirement specialist said today.
“We need to pull that together. That is the frontier for the next two or three years and when we do we will be able to [achieve] higher levels of retirement security,” Fidelity Investments Retirement Policy Development chief Doug Fisher told an Employee Benefit Research Institute policy forum in Washington D.C.
In contrast to the often across-the-board 3 percent or 6 percent automatic deduction, the combined health and retirement number workers pick for their employee-sponsored plans would be based on the individual needs, he said.
The investment strategies would vary, as well, depending on a worker's needs for health care, long-term care and retirement.
Money put into a tax-advantaged health-care retirement account would likely be put into cash for the short-term needs of an employee with a high-deductible health plan, while longer-term investments would be the way to go for long-term care, he said.
Fisher said the money for long-term care and retirement savings couldn’t be commingled in an investment account because federal laws require the funds be placed in different “silos.”
Speaking to the retirement crisis at the EBRI event, National Institute on Retirement Security Executive Director Diane Oakley said short-term help for low- and moderate-income workers saving for retirement is unlikely because they don’t have strong political connections and the financial services industry does.
She said the financial sector isn’t set up to provide retirement advice to the workers who need it most--employees making $20,000 a year at businesses with five or so staffers.
“We need to find a new model to help them save for retirement,” Oakley said.
Nine out of 10 boomers feel the retirement system isn’t working and the federal government isn’t paying enough attention to it, she added.
Also at the seminar, Investment Company Institute Director of Retirement Investment Research Sarah Holden said it would be great if IRAs were made universal like they were in the 1980s, when people across the entire income spectrum were taking advantage of them.
Less complicated rules for IRAs would help people who change jobs a lot, she added.