WASHINGTON—The Pew Charitable Trusts commended the Rhode Island General Assembly for passing a retirement savings bill, becoming the 17th state in the country to pass an automated savings program. The legislation (SB 2045, HB 7127) establishes the “Rhode Island Secure Choice” program for workers who lack access to an employer-sponsored retirement plan, automatically enrolling them into an individual retirement account (IRA) in which a portion of their wages would be set aside every pay period.
Pew research has found that in Rhode Island and nationally, retirement savings shortfalls could lead to increased pressure on public assistance programs; reduced tax revenue; and decreased household spending by retirees, all while shifting the growing fiscal burden to a shrinking population of working-age taxpayers. In Rhode Island, more than 172,000 people work for employers unable to offer retirement benefits. Pew found that insufficient retirement savings could lead to $456 million in increased state spending from 2021 to 2040. Data from all 50 states shows that unless more workers gain access to retirement savings options, there will be a combined $1.3 trillion in increased federal and state spending to fund public assistance programs from 2021 to 2040.
Similar retirement programs—variously known as “auto-IRAs,” “work and save,” and “secure choice”—have been enacted in California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Minnesota, Nevada, New Jersey, New York, Oregon, Vermont, Virginia, and Washington. Although some of the state programs are still in their infancy, more than 800,000 savers in the eight states with active programs have already amassed over $1 billion in assets since 2017.
Desiree Hung, an officer with The Pew Charitable Trusts’ retirement savings project, issued the following statement:
“Research shows that workers are 15 times more likely to save for retirement if they can use a payroll deduction. Rhode Island Secure Choice is an innovative and practical solution, with no costs to employers, that will address the savings challenges that Rhode Island workers face in this economy.
“When workers are financially secure, they are better able to withstand financial emergencies and more likely to save for their future. What’s more, they are less reliant on taxpayer-funded government programs: Our research shows that expanding access to workplace retirement benefits in Rhode Island will save the state’s taxpayers more than $456 million over 20 years.
“Rhode Island Secure Choice is a win for workers, employers, and taxpayers. We applaud the Rhode Island General Assembly for making this a reality.”
Founded in 1948, The Pew Charitable Trusts uses data to make a difference. Pew addresses the challenges of a changing world by illuminating issues, creating common ground, and advancing ambitious projects that lead to tangible progress. Learn more at pewtrusts.org.