More money for retirees — Huge change in retirement plans in this state
Having enough money to support you in your retirement is consistently a concern for the majority of future retirees. With cost-of-living increasing, and a large majority of the workforce having a family to support, putting aside money for retirement is often the last objective for most people, when it should be the first. North Carolina recently announced a change to help ease some financial stress for future retirees.
Why are many people not prepared for retirement?
A major problem many people face when they start saving for retirement is that they only start doing so many years into their career. This is generally because a large majority of recent graduates who enter into the workforce find themselves earning entry-level salaries.
When you consider monthly expenses, and that many of these students have loans to pay back, their salaries do not provide much (if any) income left over to contribute towards retirement savings. Because of these, many people wait to save for retirement until they are earning an income, which puts them in a position to do so.
However, this is also not always the case. As you move up the workforce, many people begin having families, and with the current state of cost of living, increased salaries still are not providing an income where workers feel that they can contribute towards retirement while being able to keep up with their living expenses. This means that when it does come time to retire, many workers are left destitute, and unable to have financial freedom in their old age.
North Carolina waives administration fee
According to the State Treasurer of North Carolina’s official website, in an effort to reduce the expenses associated with retirement as much as possible, the State Treasure’s Office in North Carolina announced that they intend to waive the administration fee for 12-months for the individuals contributing towards the N.C. 401(k) and N.C. 457 Plans. These plans are specifically for public servants, and are one of the most accessible and affordable retirement plans not just in the state, but in the country.
When participants in the programs contribute to them, they are also charged an accompanying administrative fee to cover the costs, which are associated with running the programs. The impact the fee waiver will have on participants is expected to have a combined total of participants saving $1.7 million over the year the fee will be waived for. Per participant, this boils down to a saving of 10 cents per $1,000 contributed. The state has decided to cover the costs for the next year instead of it falling onto the participants.
Increased uncertainty for the future of Social Security
With the North Carolina government trying to ease any additional burden onto future retirees, the Social Security administration is facing funding problems for the retirement program. Currently, the fund is expected to be depleted by the early 2030s. While this does not mean Social Security would cease to exist, it does mean that benefits for Social Security recipients would be reduced unless action is taken by Congress.
Currently, the two main proposals for extending the longevity of the fund are as follows:
- Increasing Social Security taxes
- Decreasing benefits now
However, it is uncertain if this would actually occur. With the recent Trump administration promising to not cut benefits or raise taxes for current beneficiaries, there is no consensus on how the administration is going to move forward with prioritizing increasing the longevity of the fund while also appealing to current beneficiaries who do not want to see their benefits cut or their taxes raised. However, what is clear is that a decision needs to be made soon and acted upon fast before time runs out.