Retirement security is dependent on people saving for their future, but millions of Americans lack access to an employer-provided savings plan. Research shows that workers are 15 times more likely to save for retirement if they can do so through payroll deduction; many small businesses, however, are unable to offer retirement benefits because of high startup costs and a lack of administrative capacity.
Nationally, 56 million workers—nearly half of the private sector workforce—don’t have retirement benefits at their workplaces. This lack of access to workplace savings not only impedes workers’ ability to plan for their financial future; it also places the burden on taxpayers. A recent study by The Pew Charitable Trusts quantified the costs of insufficient retirement savings both nationally and in Massachusetts. Pew found that insufficient savings results in decreased household spending and increased demand for social assistance programs, placing an even greater burden on a shrinking tax base.
But there’s good news: Even small savings now could help offset the impact of this projected shortfall. If each Massachusetts household saved just an additional $2,585 a year—about $215 a month—they could erase the additional $13.9 billion burden on taxpayers and prevent any decreases in their own standard of living in retirement.
Earlier this year, lawmakers introduced the Massachusetts Secure Choice Savings Program Act (H. 998 and S. 624) to create an automated savings program that would make it easier for businesses to help workers save for retirement. The bill would create an individual retirement account (IRA) program—at no cost to employers—that would automatically enroll workers who don’t have access to employer-based retirement benefits. Businesses with more than five employees that don’t currently offer a retirement savings plan would be required only to facilitate the program by enrolling their workers and processing payroll deductions. Businesses could stop facilitating the program at any time by adopting an employer-sponsored plan, such as a 401(k). Workers participating in the program would always control their contribution level and could opt out at any time.
If Massachusetts enacts this legislation, it will join 15 states that have passed similar secure choice bills: California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Minnesota, Nevada, New Jersey, New York, Oregon, Vermont, and Virginia. As of August 2023, more than 715,000 savers in the seven states with active programs had already amassed nearly $1 billion in assets.
For workers:
For employers:
For taxpayers:
Go to Massachusetts Secure Choice to learn more.