One unsurprising effect of the recession, reported by a few weeks ago, is that 25 percent of American employers have eliminated matching contributions to 401(k) retirement plans for their employees.

Before money got so tight, many employers offered matching contributions to retirement accounts as a way to incentivize their workers to sock money away for the future.

But, in an effort to stay afloat in tough times, a quarter of such employers have apparently stopped that particular benefit.

Obama’s Plan to Help Us Save

According to CNNMoney, though, there may be relief for those of us who aren’t so good at planning for the future.

Here’s why the current administration thinks we need retirement reform:

• Though IRAs and 401(k) savings plans were introduced in the 1970s, only about 57.7 percent of American workers have a financial plan for retirement besides savings accounts and Social Security.
• Fifty percent of U.S. workers older than 55 have saved less than $50,000 for their golden years.
• Thanks to the current weakness in the stock market, the value of the average 401(k) account for those between 55 and 64 dropped between 10 and 20 percent.

These numbers are troubling, especially because Social Security is unlikely to sustain all the Baby Boomers and subsequent generations who may depend on it after they stop working.

Automatic Retirement Savings from Your Salary

Obama has proposed a plan that would affect employers who don’t currently offer a 401(k) or similar retirement plan to their workers.

Basically, the program works like this:

1. Employers open Individual Retirement Accounts for workers. Employers without a 401(k) plan would be required to automatically open an IRA for each employee.
2. Direct deposits from employee pay would contribute to the IRA. Without employees having to consciously decide whether or not to save for retirement, the program would allow direct deposits to build up retirement savings.
3. Employees who don’t want the benefit could opt out. Any worker who preferred not to save money for retirement in an IRA could opt out of the program.

The thinking behind this program is that more people will save if the process is automatic, which will mean fewer Americans will need to depend on federally-funded Social Security when they retire.

Praise and Criticism

Naturally, not everyone is on board with this plan.

Critics believe the move would be too paternalistic, amounting to a “nanny state.”

But supporters see the proposal as an excellent way to encourage more widespread retirement savings for a nation that struggles with putting away money for any purpose. It may not be as fun, but saving can help you stay out of bankruptcy.

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