4 retirement trends for 2014

Expect Social Security to be in the news more in 2014, says Chad Parks, CEO and founder of The Online 401(k). “It’s going to be one of those things that perhaps gets put into tax reform if tax reform goes anywhere in 2014,” he says. As of now, trustees forecast that by 2033 there will be a 23% reduction in benefits payable across the board, Parks points out. Potential solutions to the problem of making the system solvent include a cost of living adjustment, raising or removing the current $113,600 earnings cap, or raising the Social Security tax by 1.33% for employers and employees alike, he adds.

However, despite the importance of addressing Social Security, Parks and others don’t believe much will happen legislatively this year, due to the November elections. “I do think we are probably racing toward the traditional election year paralysis,” says Neil Smith, EVP, strategic business support services at Ascensus.
In that vein, Parks believes there will be “real discussions” on the tax-preferred status of retirement savings plans — which currently cost the Treasury around $160 billion a year — but “policymakers will not do something that might get them thrown out of office,” he says. Such discussions include lowering the amount people can save per year or phasing out the tax deductibility after a certain rate. However, adds Parks, “That’s a very short-sighted solution from Washington to their short-term income needs. They’re not thinking about the big picture, what that would do to the incentives and the motivation for people to save for retirement.”