Someone knows someone – or is that someone – who has not saved enough money for retirement. Social Security average annual benefit at $15,580 in New York State is not going to pay all the bills.
Retirement savings is virtually nonexistent for many working people. This is especially true for minorities. Roughly 67 percent of Hispanic workers, about 52 percent of African-Americans and 60.5 percent of Asian-Americans lacked access to an employer-provided retirement plan, according to the AARP, New York.
This is where the New York State Secure Choice Savings Program comes in. The program is proposed in Gov. Andrew M. Cuomo’s executive budget and should win bipartisan support in the Senate and Assembly.
Here’s how it would work: Employers that do not already offer retirement savings plans could opt in to the program, though they would not be required to do. Employees would automatically be opted in, but can opt out of the savings plans. That’s tolerable, but it would be better if workers had to opt in, rather than out.
In any case, employers should make sure to explain to workers their rights to stop this automatic savings plan. Investments would be through a Roth IRA and would be portable, important for young workers who will likely have numerous jobs throughout their careers.
Some people cannot afford even small savings. Someone struggling to pay the bills may not feel she has a penny to spare. For those able to participate, the program offers an easy option. According to AARP, workers are 15 times more likely to save for retirement if money is automatically deducted from their pay.
More than 3.5 million private sector workers in New York lack access to a retirement savings account through their employer. That’s more than half of the private sector workforce. These many individuals with no self-funded safety nets are likely to need public support.
AARP is promoting the program as a way for employees to save money. Employers could buy in with negligible cost. The program would be administered by the New York State Deferred Compensation Board.
The board would design, administer and oversee a retirement savings plan for employees of private businesses within 24 months of the bill’s enactment. The program would be supported through an administrative service fee on the investments made by enrollees capped at .75 percent of the total investments.
This bill must be implemented in the fiscal year 2019 executive budget. The fund could then receive collected payroll deductions for investment, giving more workers a chance to save in the work place.