Many are concerned that Arkansans haven’t saved enough money for retirement and could end up needing public assistance. Therefore, this is a bigger issue than just what one person has saved for retirement. It’s about the impact an aging population with limited savings could have on our state’s economic future. Most telling is the high number of Arkansans who feel anxious and behind schedule when it comes to their retirement. Much of that anxiety is around cost of living increases and health care expenses.
An estimated 55 million employees in the U.S. do not have access to employer-sponsored retirement plans. Many work for small businesses that don’t offer traditional retirement programs because of high costs and administrative burdens.
AARP has been actively supporting Work and Save initiatives across the country. Together with the other states where legislation has already been enacted, these programs will enable more than 15 million people to save at work. The goal is to provide a low-cost, simple way to have as many people as possible start saving for their future.”
AARP’s Public Policy Institute estimates that workers are 15 times more likely to save for retirement when they have a payroll deduction program. A new AARP national survey found that 80 percent of private sector workers ages 18 to 64 support state-sponsored public-private partnerships designed to help employees save money for retirement.
Most state-sponsored retirement savings programs automatically sign up workers for Roth IRA accounts and feature low-cost mutual funds or other savings and investment options, such as money market accounts.
“Every state doesn’t have to be the same – they can create programs that work best for them,’’ says Elaine Ryan, AARP vice president for government affairs, state advocacy and strategy integration. “The critical thing is to get the ball rolling, to get employers to provide a simple and easy way to provide employees a way to save and to help employees with future financial security.”
The first $1,000 is invested in a money market account and the rest in target-date retirement funds based on an employee’s age. Employees can opt out anytime and keep the accounts when they change jobs. Because contributions are made post-tax, individuals can access the money without any penalty.
People are more likely to save for retirement when they can do it through payroll deduction at work. But many small and mid-sized businesses don’t offer pensions or 401k programs. Work and Save is a voluntary, government-managed retirement savings program that makes it easier for businesses to offer employees a way to save for retirement.