With retirement savings remaining a critical issue for current and future American seniors, several states are aiming to try and make a difference in the ability of citizens to save for retirement by incorporating automatic payroll deductions into offered retirement plans at employers. This is according to MoneyTalksNews and research from the Georgetown University Center for Retirement Initiatives and the Pew Charitable Trusts.
“Citing research from the AARP’s Public Policy Institute, Pew says employees who have access to automatic payroll deductions at their jobs are 15 times more likely to build retirement savings,” the Money Talks News column reads. “While 17 states debate new proposals, 10 states already have these plans in place, according to [Georgetown]. In 2019, California became one of the first states to launch this type of retirement plan, following in the footsteps of programs in Oregon and Illinois.”
Three more states are scheduled to begin offering their own programs later this year, including Maryland in June, and Colorado in October, the column reads. States with such programs in development include Virginia, Maine, New York and New Jersey. Two lawmakers in the state of Pennsylvania — one Democrat and one Republican — are collaborating to see if that state can get a plan prioritizing retirement savings up and running.
“In Pennsylvania, state Republican Rep. Tracy Pennycuick and state Democratic Rep. Michael Driscoll have co-sponsored a bill to introduce this type of IRA program in their state,” the column reads. “In an interview with Pew, Pennycuick acknowledges that there are many IRA products on the market. But she contends that if the state takes on the administrative responsibilities, small businesses on the fence may be more likely to offer the automatic payroll deduction option to their employees.”
There is also some progress on this front being made at the federal level. The Securing a Strong Retirement Act of 2021, also known as “SECURE” or “SECURE 2.0,” was recently passed in the U.S. House of Representatives in an overwhelmingly bipartisan vote of 414-5.
That new bill makes various changes with respect to employer-sponsored retirement plans, including the institution of automatic enrollment of employees in certain plans and increasing the age at which participants are required to begin receiving mandatory distributions.
However, at least one economist — Teresa Ghilarducci of The New School in New York City — does not believe that the new federal plan introduced in the bill will provide enough for aspiring retirees.
“What does anyone need from a pension system?,” she asks rhetorically in a recent Forbes column. “You need to save consistently; you need enough money in that plan; you need that money invested well at low fees; and you need the money for life. SECURE 2.0 doesn’t give you any of that. But SECURE 2.0 is a a first step—auto enrollment and auto escalation in particular, anything to get people saving for the long run and for a long time.”