Hillary Rodham Clinton proposed a national system of subsidized retirement savings accounts yesterday, aimed primarily at middle-income Americans who do not have pension plans, that would offer workers matching tax credits of up to $1,000 to encourage their participation.
The senator from New York and front-runner for the Democratic presidential nomination said her proposal would help millions of middle-class, working families who do not have access to automatic, direct-deposit retirement savings plans because they work for small businesses that cannot afford costly, tax-deferred 401(k) plans that offer matching employer contributions.
“I believe it’s time for a new bargain with the American people — a bargain that reflects the changing global economy and the new realities of aging,” Mrs. Clinton said in a speech in Webster City, Iowa, where she announced the details of her “American Retirement Accounts” plan. “I believe that if you work hard and contribute to our country, you should have the opportunity to save and invest.”
“These accounts will take the best of 401(k) plans — and make it available to every working family in America. They will help those who are currently falling through the cracks of our system, while reducing wealth inequality, increasing national savings, and encouraging economic growth,” she said.
The Clinton campaign said more than 75 million workers each year “have no employer-sponsored pension. This includes 77 percent of small-business employees, and 77 percent of part-time workers.” Nearly one-third of households do not have enough savings, including their Social Security, to replace half their income in retirement.
Among the plan’s provisions:
• The federal government would provide a refundable matching tax credit — dollar for dollar — for the first $1,000 saved by a married couple earning up to $60,000. The plans would allow individuals to contribute up to $5,000 a year in the tax-deferred accounts.
• The tax credit would drop to a 50 percent match on the first $1,000 in savings for couples earning between $60,000 and $100,000 and would be phased out for higher-income families.
• The matching tax credit would also be made available to any American who participates in 401(k) accounts in addition to the American Retirement Accounts.
“That means tens of millions of middle-class families will get matching tax cuts of up to $500 and $1,000 to help them build a nest egg for retirement,” the Clinton campaign said.
• The plans would be portable and could be transferred from job to job. Workers would be able to withdraw funds penalty-free to buy a home or for college costs, and up to 10 percent to 15 percent of the funds to tide them over when they are unemployed.
The plan would cost up to $25 billion a year, depending on how many enroll in the program, the campaign said. To cover the federal revenue loss, Mrs. Clinton proposed freezing the estate tax at 2009 levels rather than let it expire in 2010 for one year, as it is now scheduled to do under President Bush’s tax cuts.
The plan’s cost is nearly the same amount that she planned to spend on her short-lived $5,000 “baby bond” proposal to encourage family savings, an idea she dropped yesterday after it came under a hail of criticism from Republicans who attacked the federal giveaway as “socialism.”
Former Sen. John Edwards’ presidential campaign yesterday accused Mrs. Clinton of abandoning the idea because it didn’t test well in their polls.
“Apparently, new polling data seems to have pressured the Clinton campaign to throw out the baby bond with the bath water,” said Chris Kofinis, an Edwards campaign spokesman.
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