Moyo Studio | E+ | Getty Images
Roughly half of Americans don’t have access to a workplace retirement plan — but states are increasingly stepping in to fill that gap, both for residents’ wellbeing and their own.
About 57 million people — 48% — don’t have access to a pension or 401(k)-type plan at work, according to the University of Pennsylvania’s Pension Research Council. Yet, Americans are 15 times more likely to save for retirement when they have a workplace plan, AARP Research found. (They’re 20 times more likely to do so if automatically enrolled.)
By the end of 2023, seven states — California, Colorado, Connecticut, Illinois, Maryland, Oregon and Virginia — had launched so-called “auto-IRA” programs to try filling the 401(k) access gap, according to Georgetown University’s Center for Retirement Initiatives. Oregon was the first state to do so, in 2017.
More from Personal Finance:
More retirement savers are borrowing from their 401(k) plan
Why employers can force out small 401(k) accounts once a worker leaves a job
Job data shows two kinds of workers: the ‘haves and have nots’
What is an auto-IRA?
Auto-IRA is shorthand for an automatic-enrollment individual retirement account. These programs require companies of a certain size to offer a workplace retirement plan of their own or facilitate payroll deduction into a state-sponsored IRA, at no cost to the employer.
If the latter, part of workers’ paycheck would be automatically contributed — generally 3% to 5% of earnings — to the state plan. Workers can opt out.
More than 800,000 workers participate in auto-IRAs, which hold more than $1 billion in total savings, according to The Pew Charitable Trusts.
They save about $165 a month, on average, said John Scott, director of Pew’s retirement savings project.
“This is a significant amount of money each month for these workers, many of whom, I’d say, have never saved for retirement in their lives,” Scott said.
About 195,000 employers are facilitating payroll…
Read the full article here