AARP Oregon supports retirement security legislation

 

AARP Oregon supports a better way to achieve retirement security in Oregon. We are endorsing HB 2960 that is currently being considered by the Oregon State Legislature.

A secure retirement seems like a distant dream for too many Oregonians. Social Security is the foundation of retirement security both here and nationwide. In Oregon alone, its benefits keep hundreds of thousands out of poverty, but for most people, Social Security’s average benefit of about $1,200 a month does not provide enough for a comfortable retirement. That is only about $14,400 a year. Economic security requires both Social Security benefits and sufficient additional savings to supplement them. Oregon and our nation face a serious problem if a large proportion of our workforce remains unable to save for retirement through an employer-related payroll deduction plan.

The lack of savings – and the opportunity to save at work through payroll deduction – is where the problem lies. National data from the non-partisan Employee Benefit Research Institute (EBRI) shows that in 2013, 51 percent of workers aged 45-54 had less than $25,000 in total savings and investments. These are people between 10 and 20 years from retirement. Among workers aged 55 and above, those within 10 years of retirement, 43 percent had less than $25,000 in total savings and investments.

Access to workplace savings is essential

It is not that people don’t want to save or cannot save. They do. The problem is often the lack of access to a convenient savings plan, and the inability to understand the many savings options that exist.

AARP Public Policy Institute research shows that about 642,000 Oregonians between the ages of 18 and 64 – that is about 47.6 percent – are employed by a company that does not offer a pension or retirement savings plan. The Oregon number is slightly better that the 51.1 percent national figure.

Those without an employer-based plan

In theory, everyone without an employer-based plan could save in an IRA, but only about 1 out of 20 actually does so regularly. In addition, payroll deduction is viewed as very important to encouraging retirement savings by people at every income level. It is much easier for people to save regularly if their savings are deducted from their paycheck before they receive it. Otherwise, the press of immediate bills tends to crowd out savings for longer term goals.

In addition, behavioral research shows that when people are faced with an important decision where they are uncertain what to do, they do nothing. This inertia factor is especially present in financial decisions like retirement savings.

On the other hand, when employees are presented with a plan at work that is structured in a way that provides guidance, they take the opportunity to save. This is true at all income levels. A Boston College study on why lower income people are less likely to save showed comparable take up rates between income levels. 86 percent of those with incomes under 300 percent of the poverty line participated in a retirement savings system or pension if they were offered one and eligible compared to 95 percent of those with higher incomes.

We at AARP Oregon support HB 2960 for these reasons.

• These easy, portable retirement savings accounts would give 642,000 hard-working Oregonians a more secure, independent retirement.
• These accounts will make it easy for Oregon’s workers to save through a simple payroll deduction into a privately-managed individual retirement account.

• Research shows individuals are 15 times more likely to save for retirement if they can do so through their job.
• Giving workers a simple way to save for retirement will mean fewer Oregonians will rely on government safety net services, which in turn saves taxpayer dollars.
• The ability to offer a plug-and-play retirement account is a significant benefit that will help small businesses attract and retain talent, giving them a competitive boost.

There is no time to waste in helping Oregonians save for the future. We urge legislators to vote for this important bill for Oregon's future.