Michigan’s Secure Retirement Program Can Help Workers Build Savings

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Michigan’s Secure Retirement Program Can Help Workers Build Savings

Although most Americans save for retirement through employer-provided retirement plans, nationwide nearly half of workers in the private sector lack access to retirement savings at work. In Michigan, as many as 1.5 million workers—or 42% of the state’s private-sector workforce—are in this category.

With many employers, including small businesses, unable to provide retirement benefits because of high startup costs and a lack of administrative capacity, Michigan must grapple with a key question: What happens when residents don’t have enough money to retire?

By 2040, vulnerable older households in Michigan will face an average income shortfall of $9,030 per year. TWEET

From 2020 to 2040, the ratio of older households to working-age households in Michigan will increase by 45%. TWEET

Lack of savings will lead to $11.2 billion in increased state spending from 2021 to 2040. TWEET

Adopting an automated retirement savings program would help Michigan address these critical issues. Earlier this year, lawmakers introduced legislation to create the Michigan Secure Retirement Savings Program (H.B. 5461). Such a program would make it easier for Michigan businesses to help workers save for retirement by creating individual retirement accounts (IRAs) and automatically enrolling workers who don’t have access to employer-based benefits—all at no charge to employers. Businesses would simply enroll their workers and process employees’ payroll deductions, and workers would always control their contribution level and could opt out at any time; no one would be required to participate. If Michigan were to enact such a program, it would join 15 states that have established similar programs to help workers save.

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Features of a Michigan Secure Retirement Savings Program:

  • It’s an easy-to-use, no-cost retirement benefit that employers can provide to their employees.
  • It’s not mandatory for workers, so savers can opt out at any time.
  • Participants can withdraw their contributions at any time, tax- and penalty-free.
  • Workers always own their IRAs; the state and the employer have no claim on workers’ contributions.
Fact Sheet

MI Retirement Plan Would Help 1.5M with Financial Security

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Fact Sheet

Retirement security is largely dependent on people saving money through a plan provided by their employer, but millions of Americans lack access to this important benefit. Research shows that workers are 15 times more likely to save for retirement if they can use payroll deduction, but many small businesses are unable to offer retirement benefits due to high startup costs and a lack of administrative capacity.

Selective focus on detail of 10 dollars banknote.
Selective focus on detail of 10 dollars banknote.
Article

$334.3 Billion Shortfall Due to Insufficient Retirement Savings

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Article

Although most Americans save for retirement through employer-provided plans, 56 million private sector workers lack access to such an opportunity to save at work. Many employers, particularly small businesses, find themselves unable to provide retirement benefits because of high startup costs and limited administrative capacity. And that leaves state governments grappling with a critical question: What happens when their residents don’t have enough money to retire?

Visit the retirement savings project home page for more information on Pew’s work on retirement savings.