9.6: Savings
Create better ways for workers to build savings for retirement. Other Information:
An Improved Savings Plan to Supplement Social Security. As Social Security is transformed into a real insurance system that
focuses scarce resources on those who need them most, the plan also creates better ways for workers to build savings for retirement.
Beginning in 2014, a new savings plan will be introduced over two years. Under this plan, 6 percent of each worker's income
is placed in a retirement savings plan that the worker owns and controls unless he or she explicitly declines to have such
an account. (This approach is known as automatic enrollment.) This new, additional retirement security system gives Americans
another tool with which to secure their retirement standard of living. Savings are invested through an improved version of
the IRA/401(k) employment-based retirement savings system already familiar to Americans. The money put into these savings
accounts will not be double-taxed, unlike today's Social Security payments and many other savings mechanisms. In addition
to this new savings plan, workers have two other important ways to save for retirement. First, under the reformed tax system
detailed below, all savings (without limit) will no longer be double-taxed. Savings remain completely free of taxation until
they are actually spent. Second, as benefit reforms drive the costs of Social Security below the level of taxes collected,
those savings will go into the workers' accounts.
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