Missouri to Launch New Retirement Savings Program in 2025

When Missouri launches its new state-facilitated retirement savings program this year, it could give hundreds of thousands of workers the opportunity to save through their jobs.

The Show-Me MyRetirement Savings Plan—slated to begin by September—is aimed at businesses with 50 or fewer employees. If a company signs up, its workers will be automatically enrolled into a 401(k) that is tied to payroll deduction, unless they opt out. Missourians who are self-employed are also eligible.

The program is voluntary, so education and marketing will be key to its success, says former state Rep. Richard Brown, a Democrat from Kansas City who co-sponsored the legislation creating Show-Me.

“I started saving for my retirement from the first day I graduated from college,” says the 61-year-old retired schoolteacher. “I’m prepared. Unfortunately, a lot of people in Missouri and throughout the United States are not.”

About 42 percent of Missouri’s private-sector employees ages 18 to 64—roughly 945,000 people—lacked access to a retirement plan through their jobs in 2022, according to data from the AARP Public Policy Institute.

The smaller the employer, the less likely its workers had access to a plan. Some small businesses say the administrative costs can make it difficult for them to offer a retirement plan.

AARP Missouri is urging lawmakers to include funding in the state budget this year to help with implementation and outreach to eligible participants.

AARP will also work with statewide, regional and local business associations and other groups to promote the program through news coverage, ads, social media, human resources professionals and other outlets.

Boosting financial security

The goal is to stave off an impending crisis of retirees who have little—or nothing—to rely on beyond Social Security, says Jay Hardenbrook, advocacy director for AARP Missouri.

One in five Americans age 50 and over have no retirement savings, while more than half worry they won’t have enough money to support them in retirement, according to a 2024 AARP survey.

“We really are starting to run into these folks in their 50s, getting closer to retirement age, who haven’t saved really anything for retirement,” Hardenbrook says.

As of January, there were 20 states that had enacted state-facilitated retirement savings programs, according to the Georgetown University Center for Retirement Initiatives. Seventeen states require employer participation, while Missouri is one of three with voluntary programs.

Missouri’s program also differs from those in other states in that it will enroll workers in a 401(k), instead of an IRA.

Former state Rep. Michael O’Donnell, a Republican who represented part of St. Louis County and sponsored the bill in the state House, says 401(k)s offer higher contribution maximums, greater opportunity for makeup deposits later in life and a way for employers to offer a match.

The maximum 401(k) contribution for 2025, set by federal law, is $23,500 for individuals. People 50 and over can contribute an additional “catch-up” amount of up to $7,500, while the catch-up contribution limit for those 60 to 63 is $11,250. The limit on annual contributions to an IRA is $7,000, while the IRA annual catch-up limit for those 50 and over is $1,000.

The state treasurer’s office, with oversight from a nine-member state board, will choose a range of investment options and a private company to manage the funds. Employees will pay the costs associated with their individual plans.

The expense to employers is uncertain at this time, but pooling businesses from across the state should help reduce costs, O’Donnell says.

Savings for the state

It took five years for proponents to win passage of the retirement program legislation. Potential savings to the state was a “huge selling point” in garnering support from lawmakers, O’Donnell says.

A study commissioned by the Pew Charitable Trusts estimates that insufficient retirement savings could cost Missouri more than $3.4 billion in taxpayer-funded services, such as Medicaid and food assistance, from 2021 to 2040.

Even if the new plan attracts only a portion of eligible participants, it will be worth it, O’Donnell says. “If we set folks up for better retirement success, that potentially could save the state a whole lot of money,” he says.

To learn more about the new program, go to aarp.org/mo.

Sarah Hollander, a freelance writer and former daily newspaper reporter in Cleveland, has written for the Bulletin for 15 years.

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New State Income Tax Exemptions Now in Effect

As the 2024 tax filing deadline approaches, don’t forget that there are new rules regarding Social Security and public pension income.

Missouri no longer taxes Social Security income for those 62 and older. The same goes for Social Security disability benefits for any age.

Public pension recipients—such as teachers, firefighters and government workers—are also now able to deduct up to the maximum Social Security benefit amount for the respective tax year.

Previously, individuals with adjusted gross incomes of more than $85,000 (or $100,000 for married couples filing jointly), paid taxes on part of that income.

The changes are part of a 2023 state law and apply to income starting with the 2024 tax year.

More on Retirement

• AARP Retirement Calculator: Are You Saving Enough?
• How to Save Like a 401k Millionaire
• The 5 Worst Mistakes Grandparents Can Make with Money
  
  Suze Orman on: Investing for Retirement — AARP