3 U.S. Presidents Who Still Influence Your Retirement Planning Today
Each year, Presidents' Day is celebrated on the third Monday in February, paying tribute to George Washington, Abraham Lincoln, and the other U.S. presidents who helped create this country and allowed it to thrive.
But while the earliest presidents were responsible for shaping U.S. democracy, it's the presidents of the last 100 years who have shaped the personal finances of many modern U.S. households. Here we discuss three U.S. presidents who had a role in shaping American retirement planning, and how their efforts endure today.
Franklin Delano Roosevelt
In 1935, President Franklin Delano Roosevelt signed the Social Security Act, which created the Social Security system we know today. When Social Security was created, it was designed to be one leg of the "three-legged stool of retirement,” with the other two legs being personal savings and a corporate or government pension. Today, fewer workers have access to a pension, which means that Social Security benefits continue to constitute a major part of many adults' retirement plans.
In 2019, nearly 70 million Americans received benefits administered by the Social Security program, and 55% of these beneficiaries are women.1
Gerald R. Ford, Jr.
In 1974, President Gerald Ford, Jr., signed the Employee Retirement Income Security Act (ERISA), which revolutionized pension rights and provided a strict set of rules and regulations to govern employee-sponsored retirement plans. Another key aspect of ERISA involved providing employees with significant tax benefits for contributing to an ERISA-covered retirement plan.
ERISA requires plan sponsors to provide participants with a variety of information, including:
- Disclosures about plan features
- Disclosures about plan funding
- Minimum standards for plan participation
- How and when a pension vests
- How pension benefits accrue
- How pension benefits are funded
- What fiduciary responsibilities a plan sponsor or administrator has
- How to file grievances or appeals to access plan benefits
Jimmy Carter, Jr.
In 1978, President Jimmy Carter, Jr., signed the Revenue Act of 1978. This law amended Section 401(k) of the U.S. Tax Code to expand retirement plan offerings. If the phrase 401(k) sounds familiar, it's because this is the legislation that helped create a new type of retirement plan.
Section 401(k) took effect Jan. 1, 1980, and, for the first time, gave employees a way to defer their salary, bonuses, or stock options into a retirement account, tax-free. Many employers created and offered 401(k) plans as a way to supplement (or, in some cases, replace) the defined benefit pension plans.
Today, 401(k) plans remain one of the most popular and frequently-used ways to save for retirement. As of 2022, the average U.S. worker is setting aside about 14% of their total income in a 401(k) retirement plan.2
This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
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1 “Fast Facts about Social Security, 2020,” Social Security Office of Retirement and Disability Policy, https://www.ssa.gov/policy/docs/chartbooks/fast_facts/2020/fast_facts20.html
2 “Americans are putting more money into 401(k)s, see how you compare,” CNBC, https://www.cnbc.com/2022/06/04/americans-are-putting-more-money-into-401ks-see-how-you-compare.html