Noticing an increase in the number of unprepared Americans beginning to retire, federal and state governments are launching special programs to help.
According to the New York Times, 17 states are exploring simple, low-cost savings plans that would allow workers to direct pre-tax earnings into retirement accounts to help guard against future risk—and help protect governmental budgets from further strain.
One goal of the state proposals is to lower the barriers to saving for retirement, such as minimum contributions, fees, and investment know-how, according to the New York Times.
Oregon Retirement Savings Plan
Oregon is considering a savings plan where the state would sponsor, advertise, and oversee retirement funds on behalf of participating workers. Those funds would be managed by a private investment company but wouldn’t have any guaranteed principal or investment gains, according to the state treasurer, Ted Wheeler.
“We need to do more to educate people about saving for retirement,” Wheeler, a former financial adviser, told the Times. “But education is not enough. The structure matters, and options like automatic enrollment are incentives to save.”
Illinois Secure Choice Savings Plan
In the Midwest, an Illinois state senator has co-sponsored the Illinois Secure Choice Savings Program, which would allow 3% of pre-tax wages to be deducted from participating employee’s earnings each pay period. That money would be pooled and invested in diversified funds by a manager chosen by a state-appointed board, according to the New York Times.
The cost of running the program would be capped at 0.75% and would be deducted from the money pool of participants. Any savings gained from the funds would belong to the participants, who would be able to transfer the account to a new job if desired.
Connecticut Retirement Savings Plan
Over on the East Coast, Connecticut’s legislature has created a retirement security board tasked with examining possible features of a savings plan and introducing a plan by Jan. 1, 2016, reports the Times. Details of savings plan depends on what the board discovers, including the number of people who will participate; AARP estimates that 75% of Connecticut employees working in smaller businesses don’t have any workplace retirement plan from which to choose.
“People save more, if they can, through their job,” John Erlingheuser, the associate state director in Connecticut for AARP, told the New York Times. “The plan simply allows a savings option through a payroll deduction.”
Other states considering creating savings plans include Maryland, Minnesota, West Virginia and Washington State, while California is in the process of reviewing proposals on the topic.
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