America is aging. By the middle of this century, the U.S. Census predicts that there will be 87 million Americans over the age of 65, over twice as many as there are today. America, like other developed nations, is beginning to confront a new reality where older citizens will become the dominant demographic group.
In many respects, the explosive growth in the number of older Americans is a testament to our amazing achievements in medicine and the vast improvements our nation has made in improving the quality of life for older citizens. It is undoubtedly a good thing that Americans are living longer, more active lives.
Yet this can pose challenges for those who are not prepared for retirement, particularly African Americans.
Research indicates that many future retirees, including an estimated 77 million Baby Boomers, will have difficulty maintaining an adequate standard of living. For African Americans, this problem is exacerbated by various factors.
Recent data indicates that 45 percent of all African American workers did not have access to employer-based retirement benefits, and of the other 55 percent who did have access to those benefits, only 41.5 percent participated. Additionally, many African Americans rely greatly on Social Security, and for one out of three African Americans over the age of 65, it is the only source of income.
Currently, only 48 percent of African Americans say they have saved money for retirement compared with 66 percent of American workers overall whom have saved. With the National Caucus and Center for Black Aged estimating that the African American senior population is projected to grow from just 3 million to 10.4 million by 2050, African American seniors will need to make their savings last longer.
A recent Minority Retirement Confidence Survey showed that African Americans are anxious at the prospect of retirement. Diminished retirement income can cause highly negative consequences if retirees have high medical bills or other financial stress. As retirement income diminishes, retirees may be forced to forego private medical care, causing many to turn to local, state and federal social-services programs, including Medicaid.
It is for these reasons that I have reintroduced bipartisan tax legislation to ensure retirement security.
The Retirement Security for Life Act provides a tax incentive, available to all retirees, when they elect to receive a guaranteed stream of income for life from their annuity. The bill would exclude federal taxes on half of the income generated by the annuity, up to a maximum of $20,000 annually. For the typical retiree, it would provide a tax break of up to $5,000.
By providing incentives, the Retirement Security for Life Act will encourage Americans to invest in their own retirement. Life annuities are a critical component in helping African Americans prepare for retirement. A life annuity provides beneficiaries with guaranteed life-long monthly payments. The periodic payments from a life annuity would guarantee income throughout retirement as a complement to Social Security and pension benefits.
While income from employer-sponsored plans, such as IRAs or 401Ks that already enjoy a tax advantage are not eligible, after-tax dollars such as the proceeds from the sale of a house or small business, can be used to purchase an annuity. Currently, about 46 percent of African Americans own a home, a rate that is increasing.
All of us want to be able to retire. The Retirement Security for Life Act will ensure that Americans are not only able to retire, but enjoy those years, knowing that they have financial stability. I encourage you to contact your Congressional representative and ask them to support this legislation.
U. S. Rep. Stephanie Tubbs Jones is a Democrat from Ohio