Many Americans don’t have access to retirement accounts at work, and they appreciate that states are stepping in to fix the problem.
Nearly three-quarters of Americans say state-funded retirement savings programs, such as those in Illinois, Oregon and California, are a good idea, regardless of their age or political affiliation. follow National Institute for Retirement Security.
Three-quarters of survey respondents said they would participate in these plans if they had access. Respondents said they liked certain features of these programs, like easy portability and low fees. The survey included more than 1,200 participants aged 25 and over.
Illinois, Oregon, and California have shown how successful these programs can be. In total, there are 16 programs across the country – in 14 states and two cities. At least $378 million has been saved in these programs, according to the Georgetown University Retirement Initiative Center, the song proposals, promulgation and schedule of programs. According to an analysis from Georgetown University’s Center for Retirement Initiatives, most states have considered this option since 2012.
Take Oregon for example. It was the first state to implement the program and has 17,000 registered employers with more than $14 million in assets, according to Georgetown. The average monthly contribution is $131 and the savings rate is 5.5%. The opt-out rate is about 32%.
State-run automatic IRA plans are similar to IRAs, which means they have the same contribution limits. One significant difference, however, is that they mimic a 401(k) with automatic deferral of each paycheck, so that people don’t have to actively put money into an IRA once it’s paid. Automated features like these are a key driver of saving in retirement – and one reason advocates, such as Nobel laureates, Richard Thaler, which leverages more automated options on these plans. (Along with automatic deferrals, some plans may offer auto-reporting, where employee contribution rates are automatically increased for certain periods of time.)
Small businesses especially benefit from these services, as they can make employee retirement benefits efficient and affordable. (In some programs, these plans are required – not simply an option.) Several other states and cities are preparing to offer these automatic IRA programs, and dozens of other states are considering the option for their own voters. New York State is the latest state to sign into law this month.
The need is very serious. About half of private sector workers do not have access to a workplace plan. Anyone who earns money can contribute to an individual retirement account, but the contribution limits are much lower than in a 401(k) type plan. In 2021, individuals under age 50 can contribute $6,000 to an IRA, compared with a worker with a 401(k) plan who can defer $19,500 in his or her salary. Many private companies no longer offer defined benefit pension plans.
Having state-run plans is great, but a federal program would be even better — and that’s what Congress is currently doing. considering, writes Alicia Munnell, director of the Center for Retirement Studies at Boston University.
“All Americans need an extra layer of protection above Social Security,” writes Munnell. “A nationwide problem requires a federal solution.”
https://www.marketwatch.com/story/75-of-americans-think-the-government-should-help-them-save-for-retirement-11637595731?rss=1&siteid=rss 75% of Americans think the government should help them save for retirement