401(k) Plans Could Be Altered Under Proposed Laws
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Your Money Briefing. Money and market stories from The Wall Street Journal. I'm J.R. Whelan in New York. There's a raft of legislation being considered by Congress that could significantly change retirement accounts and 401ks. We'll have details in a moment. First, these money headlines. U.S. automobile dealers expect foreign cars to cost nearly $6,000 more if President Trump's threatened 25% tariff on imported cars goes into effect. and some dealers have begun stockpiling foreign-built vehicles based on worries they could be more expensive to order from overseas. President Trump has repeatedly taken aim at foreign and domestic automakers in his efforts to pressure companies to expand U.S. manufacturing jobs.
If the tariffs do become reality, Mazda and Mitsubishi are expected to be hurt more than many other foreign brands because they are 100 percent reliant on imports to stock U.S. dealer lots and typically sell to price sensitive buyers.
What retirement-account changes are being proposed in Congress?
Meanwhile, investors are growing more cautious on the global growth story. For the first time since the China-inspired market turmoil of early 2016, a clear majority of the fund managers surveyed by Bank of America Merrill Lynch don't expect global growth to accelerate over the next 12 months. Confidence in global economic growth propelled markets through the last year and supported key benchmarks into 2018 despite concerns over trade and wider geopolitics. And as President Trump considers a possible emergency release of stockpiled oil from the 660 million barrel Strategic Petroleum Reserve if new supplies can't provide another sharp rise in prices, the Wall Street Journal heard on the street team argues it would be ill-advised.
The reserve was conceived at a time of gas lines and severe economic challenges. Plus, the last three drawdowns have come in the wake of armed conflict in the Middle East and in 2011 a devastating hurricane that knocked out one quarter of U.S. production. The Herd on the Street team argues the economy is currently booming, the stock market is near a record, and consumers are confidently snapping up SUVs. Shaving a dollar or two off the cost of a fill-up isn't why the reserve was established. Each barrel used for that purpose, they say, is one that won't be available in a legitimate emergency. This is your Money Briefing from The Wall Street Journal. Welcome back, everybody. The biggest legislative changes in a decade could be coming to retirement savings, including 401k accounts, if enough members of Congress get on board.
And Wall Street Journal reporter Ann Turgason is here with details. So, Ann, there are many changes being considered. One would encourage small businesses to offer retirement savings plans. How would it do that?
Well, there's a couple different measures in this one bill that's sort of likely to serve as a basis for something that Congress does. But probably the one that's being talked about most is something called multiple employer plans. And what it does is it allows... small companies to band together to offer their employees sort of one joint 401k plan. Currently a problem for small employers is that it costs a lot of money. It's complex for them to set up these plans. So if they band together and do this and sort of outsource it to a financial services company, all the administration and the setup, it takes up less of their time, it's more efficient, it's also less cost because there's more participants in the plan.
A current problem for small employers is if they only have eight or 10 employees or 20 employees, those employees are gonna pay much higher administrative costs than sort of a company with hundreds of employees would. So this allows these small employers to get these economies of scale that bigger plans can realize.
And the proposed legislation would also encourage 401k type plans to offer annuities. Can you explain what that means?
When you think about a defined benefit pension plan, a traditional pension plan, you know, the annuitization was a big feature of those plans.
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