By Joanne Bump
On August 7, 2025, the federal administration issued an executive order that proposed a change to the types of investments allowable within IRAs, 401(k)s, 403(b)s, and 457 plans. The proposed Retirement Investment Choice Act was introduced on October 14, 2025, to make these executive order changes into a bill that can be enacted into law by Congress. It allows these plans to include risky investment choices like cryptocurrency, private equity, and private credit without regard to their complexity, risk, or illiquidity.
According to Steven Rattner, New York Times opinion writer and former counselor to the U.S. Treasury Secretary, allowing these risky investments could result in millions of Americans losing their retirement savings. In a May 5, 2026, New York Times article, he concludes that the economic dignity in old age should be a promise, not a luxury. He points out why expanding access to risky investments could do more harm than good.
The proposed bill includes real estate and private companies which are illiquid assets that are risky, compared to pension plans or Social Security (SS) benefits. According to Investopedia, defined benefit pension plans require careful asset management to ensure future benefit payments. In contrast, illiquid investments can’t be disposed of quickly and may result in significant loss, depending on the assets market value at the time of sale. According to Rattner, this new retirement investment expansion would require everyday Americans to become money managers. This is an unrealistic expectation given the enormous complexity of the task.
In the Federal Reserve’s 2022 Survey of Consumer Finances (SCF), just over 54 percent of families have retirement accounts like an IRA. For those that do, the median value of those accounts in 2022 was just $86,900, which is not enough to last the 20 years of an average retirement. This is especially true since the median retiree spends over 10 percent of their income on out-of-pocket medical expenses not covered by Medicare or SS. Medical insurance coverage isn’t likely to cover more costs given that both Medicare and Medicaid are slated for federal budget cuts as discussed in previous SERA-Nade articles.
For those nearing retirement, ages 55-64, SCF data shows that the 50th percentile, or the middle of the group, have only saved $10,000 in retirement accounts. In general, lower-income workers save less and withdraw more often than higher income individuals. Low earners usually have less financial knowledge and experience to rely on to make sound investment decisions. At the very least, individuals will need to work with financial advisers. They charge fees for their services, but getting good financial advice leads to higher investment returns for retirement. Further, the current retirement structure has eliminated the social insurance aspect found in a traditional pension plan, where retirees can rely on professional pension managers and actuaries.
Strengthen SS – The alternative to encouraging risky investments for retirement accounts, is to hire professional investment experts to make sound investment choices. The SS Trust Fund is expected to become insolvent, losing its ability to pay full benefits by late 2032. (Tax Policy Center) Consequently, taxes need to be raised to fully fund SS. Currently, the SS Trust Funds are not permitted to invest in stocks or private securities. It must be invested in special non-marketable treasury bonds which earn low yields, and aren’t keeping up with inflation.
Newest SERA Retirees by Income Groups – Our readers may find it interesting that the Office of State Employer’s (OSE) website includes the “February 2026 Payroll Statistics” chart (see below) of the 84 new State Employee Retirees by income categories that retired beginning with the February 2026 pension payments. About 23 percent have a yearly pension of $10,000 or less. Most of the new retiree annual pensions are in the middle-income category.
The average age of retirement is 61.4 years. This “young” age illustrates that these retirees, on average, are not waiting until the full SS retirement age to retire. Some of these retirees may wait until they reach the full retirement age (FRA) to apply for SS benefits when they will receive 100 percent of their earned benefit.
Many will apply for SS benefits early, when they reach the minimum age required of 62 years, but their benefit amount will be permanently reduced by up to 30 percent compared to the full benefit amount they could have received, if they waited until the FRA. In addition, if SS beneficiaries work and earn income while drawing SS, their income is subject to an income tax based on an earnings test.
Eliminate SS Retirement Earnings Test – The Senior Citizens’ Freedom to Work Act of 2026 would end the earnings test, which historically has had bipartisan support. According to a May 5, 2026, report by the Economic Policy Innovation Center (EPIC), older Americans are the fastest growing segment of the labor force. Some seniors retire but find another line of work to continue making income. However, the earnings test is outdated as it penalizes senior workers with a perceived marginal tax rate up to 84 percent that discourages working. Ending it would boost employment, income, and economic output. Plus, it would increase tax revenues, and help to reduce a modest portion of the SS shortfalls, and improve the simplicity and accuracy in the SS Administration.
The earnings test applies to those that receive SS benefits before reaching their FRA. The FRA is age 67 for people born in 1960 or later. The FRA for those born between 1955 and 1959 is between age 66 and 2 months and 66 and 10 months. It also applies to SS beneficiaries that continue to work and make more than $24,480 per year up to a specific cap. Because most people claim SS benefits before reaching their FRA, the earnings test can affect the income of millions of seniors. SS beneficiaries affected by the earnings test lose $1 in SS benefits for every $2 they earn above $24,480. These lost benefits are gradually added back in after the individual reaches FRA, unless they pass on before this adjustment is made.
(Editor’s Note: Joanne Bump serves as feature columnist for “Retirement Matters.” Column content is time sensitive and is based on information as of 5/10/26. Sources are primarily from non-profit and government policy research organizations. Joanne can be contacted by e-mail at joannebump@gmail.com.)