Vestwell Visits D.C. to talk 401(k) and Tax Reform with Congress

Vestwell Team arriving in D.C. Left to right: Aaron Schumm, Mike Shuckerow, Peter Kennedy

As the tax reform conversation gained steam in October, some lawmakers began discussing limits on individual 401(k) deductions as a way to raise government revenues.

At Vestwell, we were concerned about this development, given that Americans are already not saving enough for retirement.

The proposed legislation would worsen the problem known as the retirement savings gap, which is the difference between a person’s income and actual expenses during retirement.

The Retirement Gap is Getting Worse, and We Want to Help Fix it

The retirement gap threatens the long-term financial security of nearly all Americans, outside of what formal lobbying committees say.

That’s why we traveled to Washington D.C.  to speak with representatives about this savings crisis.

Along with our Special SEC Adviser and Chief Compliance Officer, Mike Shuckerow, and Special ERISA Adviser, Peter Kennedy, the Vestwell team met with 22 Senators, Congressional House members and their staff within the banking, finance, and technology committees.

Our goal was to educate the representatives on the ways that we can work together to help close the retirement gap.

Americans Aren’t Saving Enough (Or At All) for Retirement

The statistics are staggering; only 8% of people in all working households have enough saved for retirement, given their ages and income.

The median retirement savings for individuals aged 25 to 64 is shockingly low at only $3,000, and a mere $12,000 for those nearing retirement aged 55 to 64.

Left to right: Aaron Schumm, Perre Smalls

Defined Contribution Plans and Accounts Can Close this Gap

We already know that 75% of Americans rely on defined benefit plans and defined contribution plans, such as 401(k)s and 403(b)s, as their only sources of invested assets.

Social security is also an elephant in the room that no one is addressing; its uncertain future places even more importance on saving and investing during one’s working years.

More Than Ever, Financial Advisors Can Help Companies Facilitate and Administer the Right Retirement Plans

During my time in D.C., I underlined the importance of 401(k) plans to address savings deficiencies.

I also talked about the key role that financial advisors, empowered by technology, play in the administration of and access to retirement plans.

This is revolutionizing the way plans are administered today, as well as providing access and opportunities for companies who previously did not offer a 401(k) or 403(b) plan to their employees. In fact, up to 90% of plans with less than $50 million AUM are managed by financial professionals.

What’s more, according to the Department of Labor & Bureau of Labor Statistics, more than 500,000 companies in America do not offer retirement plans for principals and employees.

Fortunately, with technology, financial advisors are paving the way for SMBs to help their employees and principals save for retirement.

(Top) Left to Right: Peter Kennedy, Aaron Schumm, Rep. Bill Foster, Mike Shuckerow; (Left) Meeting with Congressman Huizenga, Left to right: Aaron Schumm, Bill Huizenga, Marliss McManus

“Rothification” Threatens Long-Term Savings

Finally, we discussed the long-term pitfalls of the trend toward “Rothification,” which replaces tax-deferred 401(k) plans with accounts funded by after-tax money.

Moving tax revenue up within the 10-year budget window via a Roth-type account would end up further widening the savings shortfall across the hard working Americans that need the tax benefit most to retire securely.

Our goal was not to lobby for 401(k)s, but rather to remind lawmakers about the significant impact these proposed changes would have in further weakening American retirement readiness.


 (Top) Meeting at Cannon House Office Building; Left to right: Aaron Schumm, Congressman Ted Budd, Peter Kennedy, Mike Shuckerow; (Bottom) Left to Right: Aaron Schumm, Congressman Ted Budd 

Real Change Takes Partnership

Since my trip, I’ve continued to communicate with lawmakers and their staffers about these issues.

We have even invited them to meet us in our New York offices so that they can learn more about what Vestwell is doing.

Congressman Ted Budd, R-NC, took us up on the offer. The passion that Congressman Budd and his Chief of Staff showed us toward helping businesses, as well as learning more about how Vestwell services the retirement landscape, was truly invigorating.

On a personal level, I found it reassuring that our elected officials see saving for retirement as a non-partisan concern. Everyone I talked to was very willing to help others. They were ready to think deeply about the issues we raised and engage with us and others, to create solutions.

Our government is not just listening, they are acting. Vestwell is mobilizing financial advisors with technology to propel retirement savings forward, and we remain hopeful the regulators remain informed and are on a path to help.

I’m excited about the potential for change and proud of our role in it.

Wishing you all a very happy holiday season and the warmest wishes for a happy New Year!

Kind Regards,

Aaron Schumm