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Tim Ryan, 68, retired from his job as finance director of a Fortune 500 company more than a decade ago, living comfortably thanks to a good pension and his contributions to an employer-sponsored 401(k) plan.
For the past several years he’s worked as a volunteer for AARP Connecticut to make saving easier for others.
“It seems like so many people nowadays, especially if they’re working for a smaller company, just don’t have that same opportunity,” the Trumbull resident says. Most big companies have replaced pensions with 401(k)s, he notes, and many smaller ones can’t afford to offer any retirement savings benefit.
But workers can get help from a new state-facilitated retirement savings option that will go into effect this year. Ryan has fought for and promoted the program, called MyCTSavings.
Connecticut’s program aims to help about 600,000 private-sector employees who have no access to a retirement savings plan at work. More than a dozen states have passed laws creating similar programs.
Employees can have automatic payroll deductions into a Roth individual retirement account (IRA) that’s managed by Sumday, a subsidiary of BNY Mellon.
While the program is voluntary for employees, businesses with five or more workers must offer access to it if they don’t have a qualified retirement savings plan.
Program Phases In
The Connecticut Retirement Security Authority (CRSA), the quasi-public agency overseeing the program, will roll it out in phases starting this year, although there is no firm timetable, says Kevin Lembo, who recently retired as CRSA chair and as state comptroller. Larger companies will go first.
Lembo says that taxpayers will also benefit in the long run, since people who are unprepared for retirement are more likely to need government aid to pay for basic needs as they age.
Half of all households in the state risk not being able to pay for their everyday expenses in retirement, says John Erlingheuser, AARP Connecticut’s advocacy director.
The average Social Security household benefit for those over 65 in the state is about $21,000 a year, according to AARP’s Public Policy Institute, yet Connecticut households with older residents spend about $26,000 annually on food, utilities and health care.
“What we do know is, if people can save for retirement through payroll, they’re 15 times more likely to save,” Erlingheuser says.
Employees will automatically have 3 percent of their paychecks directed to the Roth IRA unless they opt out. They can raise or lower their contribution at any time, pick investment options and take the savings with them if they move to another job.
Those 19 and older with earned income who have been working for at least 120 days are eligible.
Employers will only be responsible for distributing informational material to workers and adding a line-item deduction to their paychecks.
Companies will not be charged fees or have to contribute to plans. The program will be funded by a small administrative fee paid by participating workers.
“We’ve tried to make this as easy as possible,” Lembo says.
For more information visit myctsavings.com, or contact Erlingheuser at firstname.lastname@example.org, or 860-545-3165.
Natalie Missakian is a writer living in Cheshire, CT.
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