Bipartisan legislation introduced in 2023 aims to create a federal workplace retirement account similar to a 401(k), but research suggests this could decrease long-term wealth by up to 20% for Generation Z workers. The proposal would automatically enroll workers in the program with employer matching contributions, yet could lead private businesses to reduce retirement benefits.
The bipartisan legislation , introduced to Congress in 2023, would create a federal workplace retirement account for workers, similar to a 401. Like other workplace retirement accounts, this plan would come with tax advantages and give investors the choice to invest in a menu of mutual funds, including target-date and index funds.
Overall, under the RSAA, Morningstar's model estimates that wealth by retirement age could decrease by up to 12% for millennials and 20% for Gen Z workers.Full- and part-time workers without access to an employee-sponsored plan would be automatically enrolled in the program and contribute 3% of their income. Anyone can choose to opt out.Workers under a certain salary threshold would be eligible for a"match" in the form of a federal tax credit.
And while certain workers without access to a 401 currently stash savings in an individual retirement account, many would be less likely to do so if defaulted into a government plan, says Spencer Look, associate director of retirement studies at Morningstar Retirement and the study's co-author. Evolutionarily, people are wired to avoid risk and prefer things the way they are, he says."For much of human history, things are kind of OK the way they are right now. So we have an aversion to making changes."
Federal Workplace Retirement Account Bipartisan Legislation 401(K) Long-Term Wealth Millennials Gen Z Morningstar Retirement Plans
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