NEW YORK (MainStreet) — President Obama’s State of the Union Address contained proposals that will benefit Millennials who are childless, saddled with college debt, working part time, grappling with an unforgiving job market and facing many other financial challenges.
“The President’s plan offers this generation and the ones following the opportunity to save while also getting them in the habit of saving with little to no effort,” said Chad Parks, Founder and CEO of Ubiquity Retirement and Savings. “Even part time workers have the opportunity to save now.”
The SOTU address included plans that employers with more than ten employees will be required to offer an Auto-IRA and in turn will be eligible for a credit to cover their administrative costs of establishing and maintaining such plans.
An Auto-IRA differs from a myRA in that it is designed as an opt-out plan, which means workers have to take action to remove themselves from the plan.
"The employee is automatically enrolled with a designated payroll deduction rate and would be required to decline access to retirement savings in order to forego the opportunity," Parks told MainStreet. "An Auto-IRA is also a ROTH-IRA plan and contributions are on an after-tax payroll deduction."
The President's focus during his speech last week was on improving the lives of the middle class through improvements in retirement, childcare, college and employee rights.
“Since Millennials were born between 1976 and 2004, they are a broad age group and not all will benefit from the President’s proposals however those in college, working and starting families will,” said Gary DuBoff, a CPA, certified financial planner and principal in the tax and accounting department with MBAF.
Another potential perk benefitting millennials is cutting mortgage premiums by 0.5% points from 1.35% to 0.85% to make homeownership more affordable.
“This will be particularly beneficial to young, first-time homeowners,” DuBoff told MainStreet.
The President proposed doubling the Earned Income Tax Credit (EITC) for childless workers, increasing the income level at which the credit phases out and making it available to workers ages 21 and older.
“We want a fair nation but people need to work and pursue opportunities not rely on government,” said Robert Basso, founder of Advantage Payroll Services. “The best way to improve the national economy and elevate more people is to support business growth, trade, research and development and economic activity.”
Only 37% of part-time workers currently have access to a workplace retirement plan. That’s because employers offering retirement plans have been allowed to exclude staffers who work less than one thousand hours per year no matter how long they’ve worked for the employer.
“We can expect to see an expansion of eligibility rules for part-time employees working less than 1,000 hours as well as expanding access to employer-based retirement accounts through Auto-IRAs and myRAs,” DuBoff said.
Other Millennial-friendly initiatives include adjustments to paid sick leave by encouraging Congress to pass the Healthy Families Act providing for seven paid sick days.
“President Obama encouraged states, cities and businesses as well as Congress to take action to increase the minimum wage across the board,” said DuBoff. “This might also include changes to labor laws and penalties to employers who skirt the current labor laws.”
—Written for MainStreet by Juliette Fairley