SAVING for retirement early and often is part of the common financial wisdom. But those nest eggs aren't always enough.
Some baby boomers like
''That wiped out my savings and added new debt,'' said Ms. Clay, 54, of
''But it is now underwater, and eating away what savings I have left,'' she said.
Such stories have caught the attention of officials who worry that financially unprepared seniors could become a big drain on state and federal coffers.
With more and more retirees at risk, 17 states are examining simple, low-cost plans that would allow workers to direct pretax money from their paychecks to a retirement account. The plans would be an alternative to the Obama administration's new myRA workplace savings mechanism, which also offers a payroll deduction option for workers.
While the plans would not roll back the clock for baby boomers like Ms. Clay or Ms. Perrin who are retired or near retirement, they would help the next generation of savers bolster their nest eggs. Ms. Clay told a recent
The state proposals, like the federal plan, aim to lower the barriers to savings — such as minimum contributions, fees and investment knowledge. Those have helped stymie savings and contributed to a situation in which more than half of the country's older households are at risk of being unable to afford food, medicine or utilities, according to
But state-sponsored savings plans face opposition. Local insurance agents, financial planners and bankers argue that savings vehicles already are plentiful, and any new options would only wind up directing savings to financial service behemoths rather than keeping them local.
''So many decide not to participate, or take the money out early,'' said
''The cellphone or the next new car are the competition,'' added
Other opponents warn that state involvement will create another budget crisis like those in states with underfunded public employee pension systems — and the state will be liable for any shortages.
''We need to do more to educate people about saving for retirement,'' said
Advocates for the savings plans point to the long-term trends.
Corporate pensions are rapidly disappearing, and many people have no access to a 401(k) or other workplace savings plan. About 2.5 million people in
And household savings rates are skimpy. More than 38 million people — roughly 45 percent of working-age households — have no retirement savings at all, according to the
''The retirement savings shortfall could have profound impacts on strained state budgets,'' said
''I wish I had had paycheck savings so I didn't even see the money,'' said Ms. Richardson, who supports a payroll deduction. ''My brother-in-law had the opportunity and when he died, the money he set aside really helped my sister.''
The plans that states are considering all look a little different.
The federal myRA operates more like an individual retirement account, and is capped at
Most states are looking at plans that would not guarantee returns or protect principal. Generally, the automatic payroll deduction savings programs will be for employers that do not already offer 401(k) accounts or company pension or savings plans. If employers offer the state's plan, they will not have to match worker contributions.
Administrative expenses would be capped at 0.75 percent, and paid from the money pool so there would be no cost to the state. The savings would be the property of the workers, who could carry the account to a new job and could decline if they did not want to participate. The legislation passed the state's
''People save more, if they can, through their job,'' said
''Retirement savings was once seen as a personal choice,'' said
|Copyright:||(c) 2014 The New York Times Company|
|Source:||New York Times Digital|