President Obama Wants You to Save More Money for Retirement

(MoneyWatch)  Health care reform isn't the only thing on President Obama's mind these days. Over the weekend, he announced some administrative actions that he hopes will help workers save more money for retirement. While I'm only in favor of two of the three ideas, I love that these changes could get young people in the habit of socking away cash for their golden years long before they see their first gray hairs.

Here are the changes:

1) Making it easier for companies to automatically enroll employees in retirement plans.
Why this will help: Fewer than half of all workers participate in a retirement plan, according to the Employee Benefit Research Institute. And that number drops significantly for people who are just starting their careers. But it's often been said that 20 somethings would start saving a lot earlier for their golden years if their employers automatically enrolled them in a 401(k).

Currently, many employers, especially smaller companies, ask their workers to opt into retirement accounts. But if you leave it to recent graduates to actively sign up, my guess is that many of them are thinking they can't spare an extra dollar from their paychecks. After all, they have student debt and rent to worry about immediately, while retirement is still at least 30 years away. But what those young people aren't considering is that they are missing out on saving pretax dollars and walking away from free money if their company offers a match on employee contributions.

2) Allowing workers to contribute the cash value of unused vacation and sick days into a 401(k).
Why this will help: Only about 10% of workers contribute the maximum amount allowed into a 401(k) each year. So allowing workers to set aside the small payment from unused vacation and sick days, provided a company gives their workers the money, is a great way to help employees make up the savings gap. And it's especially helpful after the losses most of us have experienced in our retirement accounts since the financial crisis started. Plus, since the money goes into a 401(k) on a pretax basis, you'll get more bang for your buck than if you just took the cash.

I see this new option as something that's particularly appealing to those in their 20s. While they may hesitate to part with their paychecks, they may be more willing to put unused sick days away for retirement since it's money they weren't really counting on anyway. (I don't know too many young workers who don't use all of their scarce vacation days.)

3) Offering you the option to purchase U.S. savings Bonds with your tax refund.

Why this won't help: I'm not a huge fan of this idea. I'd rather see young people take their refunds and pay off debt. If they're fortunate enough not to owe any money, they could put the cash into an IRA (something the IRS already allows you to do automatically) or toward a down payment on a house. While buying U.S. savings bonds may be good for the government, they seem a bit restrictive and old fashioned for those in their 20s.

Do you think these changes will help younger workers save more for retirement? What about the rest of us? Please share your thoughts.

Old Tourist Couple image by Pedrosimoes7, CC 2.0.