Improving retirement important
These days, a secure retirement increasingly is out of reach for many working adults, especially those employed by small businesses.
That’s because here in Pennsylvania, 44 percent of private sector employees ages 18 to 64 — roughly 2.1 million individuals — work for an employer that does not offer a retirement plan.
Research shows access to a retirement plan is an essential step to increasing long-term financial security.
A study by the Employee Benefit Research Institute found that 62 percent of employees with a retirement plan had more than $25,000 in total savings and investments, and 22 percent had $100,000 or more.
However, only 6 percent of those without access to such a plan had more than $25,000 saved, and only 3 percent had $100,000 or more.
Employees always have the option of setting up their own individual retirement accounts.
But only one in 20 workers will open a retirement account on their own, and they are 15 times more likely to contribute if it’s offered at work.
We need to be doing more to encourage workers to save for retirement. While Social Security is an essential component of retirement planning, the average benefit is only $1,300 a month.
Most retirees will certainly need additional resources to cover their living expenses.
With no help coming from leaders in Washington, state governments are applying what they learned during the creation of IRS Section 529 college savings plans for families.
The result is a simple state-run automatic payroll deduction program for retirement savings. Oregon is the first state to roll out a plan that covers private sector workers who do not have access to a savings program at their workplace. Eight additional states have similar proposals in the works.
Here in Pennsylvania, AARP is working with State Treasurer Joe Torsella and a task force of legislators, business leaders and government officials to study how to improve retirement savings for our state residents.
We believe Pennsylvania should adopt its own version of a state-run retirement savings program for private sector workers.
In a state where unfunded state pension liability can be a sensitive subject, it’s important to note that this proposal does not offer employees a guaranteed monthly income or rate of return.
It’s simply a tool to facilitate individuals saving privately.
Employees would have a choice of whether to participate, and the accounts would be portable so a person could take their savings with them if they change jobs.
We’re optimistic that a retirement savings plan for Pennsylvania workers can be considered by the General Assembly in 2018.
Enhancing retirement savings opportunities for Pennsylvania’s private sector employees can’t happen soon enough.
Bill Johnston-Walsh is the State Director of AARP Pennsylvania.