Like most small business owners, Elizabeth Watanabe, of Burgers on Bishop, wants to help her employees save for the future because they work hard for her.
But it’s not easy to set up a savings plan at work. Most small business owners say it’s too expensive, complicated and time consuming to offer retirement savings through payroll deduction, the most effective way to get people to save.
A new AARP survey found that nearly two-thirds of Hawai‘i’s small businesses do not offer retirement savings programs to workers, but most would offer a state-facilitated plan if it was available. Seven of ten Hawai‘i small business owners support a privately-managed, ready-to-go Hawai‘i retirement savings option. As taxpayers, 75 percent of small business owners are concerned that people who haven’t saved enough money for retirement could end up on public assistance programs.
“I’d love to help my employees save because it’s a benefit to them,” Watanabe said. “It’s also a benefit later to the state because these people won’t become a burden to taxpayers.”
The inability of workers to save for retirement at work is contributing to an estimated retirement savings gap of between $6.8 trillion and $14 trillion nationally between what workers need for retirement and what they have saved. About 94 percent of workers without access to a retirement savings plan at work have under $25,000 in total savings and investments. In addition, about half of all workers have no retirement savings and the average savings among working-age families is only about $3,000.
The AARP survey found that 60 percent of those businesses that do not offer retirement savings said it’s too expensive, 41 percent said it’s too complicated to operate and about a third (36%) said it would be too time-consuming.
In terms of numbers, AARP estimates that about 216,000 workers in Hawai‘i do not have an easy way to save at work.
“Hawai‘i’s workers work hard. They need an easy way to save. Working until you die or can’t work anymore is not a viable retirement plan,” said Barbara Kim Stanton, state director of AARP Hawai‘i. “Big financial services companies are not servicing Hawai‘i’s small businesses. If they were, the majority of Hawai‘i’s private-sector workers would already be saving for retirement. The state needs to help small businesses and workers with a program similar to one that’s already working in Oregon.”
Oregon is one of at least ten states that is doing something to help small businesses, workers and taxpayers close the retirement savings gap. They are offering what’s known as an “auto-IRA” program, which allows businesses to offer a basic retirement savings plan to workers at no cost to the business.
OregonSaves is the nation’s first state-facilitated retirement savings program. It’s a public-private partnership similar to college 529 savings plans. The state helped set up the program, but it is run by a private company. Since OregonSaves began as a pilot program in July 2017, 63,000 workers have established accounts (about 72 percent of those eligible) and total savings are approaching $14 million. Recently CalSavers started in California and Secure Choice launched in Illinois. At least seven other states are working on starting similar programs.
Senate Bill 1374 and House Bill 1189 are moving in the Legislature and will take the first steps to create a state-facilitated retirement savings program in Hawai‘i . The AARP survey taken in the fall showed 70 percent of small business support a Hawai‘i retirement savings option and eight of ten businesses agree that lawmakers should support it too.
Nearly seven of ten businesses said they were likely to offer a state-facilitated savings plan to workers if it were available here and about the same number of businesses said offering a retirement savings plan helps small business attract employees and stay competitive.
Nearly two thirds (64%) of small business owners expressed concern about their employees not having enough money to retire with one in three saying they are very concerned about their workers not having enough money saved to cover health care or living expenses. Three out of four small business owners said that as taxpayers, they were concerned about people who haven’t saved enough ending up on public assistance programs.
An AARP study estimated that Hawai‘i taxpayers would save $32.7 million in social service costs over ten years if workers saved enough to generate an additional $1,000 a year in retirement income. The combined state and federal savings would be $160 million in Hawai‘i.
“It is especially important for women to save, statistically we’re at a disadvantage to men,” Watanabe said, noting that women workers are more likely to retire in poverty than men. “Other states have implemented programs that are successful. I think we need to implement that here too for our employees.”
The AARP Hawai‘i Small Business Owner Survey was conducted with 452 small business owners or company decision makers with one to 100 employees in Hawai‘i between Octovber 2-30, 2018. The margin of error is plus or minus 4.6 percent.