Work and Save

Households at Risk of Financially Insecure Retirement on the Rise 52 percent of households are at risk of not having enough to maintain their living standards in retirement, according to the Center on Retirement Research. 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 Source: Center for Retirement Research, National Retirement Risk Index

Average Household Has $3k Saved The average monthly Social Security benefit in the United States is $1,335, hardly enough for a person to be self-sufficient in retirement. At this rate, one out of two middle class retirees will be unable to afford their basic needs in retirement— like medicine, utilities, and rent. This will cost taxpayers down the line in social services.

Savings Gap Over Time by Ethnicity Source: Urban Institute Calculations from Survey of Consumer Finances 1989-2013 *Source did not provide values on Asian Americans and Pacific Islanders

$1,335 per month Average Social Security Benefit The average monthly Social Security benefit in the United States is $1,335, hardly enough for a person to be self-sufficient in retirement. At this rate, one out of two middle class retirees will be unable to afford their basic needs in retirement— like medicine, utilities, and rent. This will cost taxpayers down the line in social services. Source: Official Social Security Website, Fact Sheet

55 Million Americans Lack Access ERISA introduced 55 Million Americans Lack Access Access dropped steeply in the aftermath of the 2001 recession and then again after 2008 financial collapse. In 2013, access finally started to increase, after more than a decade of decline, to nearly 55%. However, this still means that over 45 percent worked for an employer that did not sponsor a retirement plan in 2013. Workers who lack access to an employer-sponsored retirement plan tend to work for smaller firms, and to be low- to middle wage employees -NIRS Source: NIRS, “The Continuing Retirement Savings Crisis”

The Power of Auto-Enrollment Participation Rates Workers are 15x more likely to save if they are covered by an employer and 18x more likely if they are automatically enrolled. http://www.benefitspro.com/2015/01/20/auto-enroll-doubles-participation-rates Data compiled by AARP’s Public Policy Institute from unpublished estimates from the Employee Benefit Research Institute of the 2004 Survey of income and Program Participation Wave 7 Topical Module (2006 data). See also Brookings' Retirement Security Project and WhiteHouse.gov. Auto-Enrollment Data provided by Vanguard.

Percent of Workers Whose Employer Does Not Offer a Retirement Plan This new analysis gauges the relative performance of the fifty states and the District of Columbia in three key areas: anticipated retirement income; major retirement costs like housing and healthcare; and labor market conditions for older workers. The study is designed to serve as a tool for policymakers to help identify potential areas of focus for state-based policy interventions to improve Americans’ retirement prospects. http://www.nirsonline.org/index.php?option=com_content&task=view&id=683&Itemid=182 30 – 40% 40 – 50% 50 – 60% + 60% Source: AARP’s Public Policy Institute

Access to Retirement Plans in Communities of Color, Nationwide Private Sector Source: NIRS

Budget Consequences According to a recent Utah study, the total cost to taxpayers for new retirees will top $3.7 billion over the next 15 years. This constitutes potential savings for taxpayers if we act now. Additional findings: 18% of retirees in the next 15 years will retire with more debt than savings. A 10% increase in net worth of the 1/3 least prepared for retirement will save taxpayers $194 million through 2030. Source: Notalyis

529’s: A Precedent for State Action Jo Contributions grew by $25 million in 2015 http://www.collegesavings.org/wp-content/uploads/2015/09/FINAL-CSPN-Report-March-15-2016.pdf Source: College Savings Plan Network

Solutions 5 essential ingredients that facilitate adequate retirement savings rates: availability automatic enrollment ease of investment automatic escalation lifetime income streams Action steps: Make retirement plans with payroll deduction available to all workers. Currently, 55 million US employees have no way to save for retirement at work. Increase participation and savings rates by changing the choice architecture of retirement plans, utilizing the findings of behavioral economics

Payroll Deduction Valued Across All Income Levels

Effect of Auto Enrollment on Participation Source: How America Saves: 2013 (Valley Forge, PA: Vanguard, 2013)

A National Movement 2013 Work and Save 2012: Massachusetts passed plan for non-profits California passed feasibility study 2013: Oregon passed study of retirement security

A National Movement: 25+ States Jo 2016 Work and Save Since then, six states have signed legislation into law. 23 states are working on legislation and various states are working on research and feasibility studies. 2014: Minnesota and Connecticut each passed a feasibility study, appropriating $400k for the work Over a dozen states working on this concept nationwide . 2015: Illinois, Oregon and Washington Governors sign new laws Utah Senate and Virginia pass studies unanimously. 2016: New Jersey (D), Maryland (R) and Connecticut (D) Governors sign new laws Utah and California passed bill in one house 25+ states addressing financial security

National Context 2012: Massachusetts passed plan for non-profits California passed feasibility study 2013: Oregon passed study of retirement security 2014: Minnesota and Connecticut each passed a feasibility study, appropriating $400k for the work Over a dozen states working on this concept nationwide 2015: Illinois, Oregon and Washington Governors sign new laws Utah Senate and Virginia pass studies unanimously 2016: New Jersey (R), Maryland (R), Connecticut (D) and California (D) Governors sign new laws Utah and passed bill in one house

Various Models Discussed in States Studying Retirement Insecurity Feasibility Study Marketplace Voluntary IRA Auto IRA ERISA Plans and/or DB features Multi-tier Approach Utah Virginia Vermont New Hampshire Nebraska NYC Philadelphia Minnesota California Connecticut Washington* New Jersey* West Virginia North Dakota Indiana California* Illinois* Oregon* Connecticut* Maryland* New Jersey Kentucky Ohio Colorado New York Arizona Rhode Island Wisconsin NYC Comptroller Massachusetts** Legislation being implemented ** Massachusetts implementing a plan for small non profits Note- double listings are not mistakes, they reflect multiple bills under consideration Updated November 2016

Auto IRA vs. Marketplace Feature Auto IRA Marketplace Model Automatic IRA x Marketplace Can include Requires access to payroll deduction for employees and provides access to automatic enrollment Businesses are only required to provide information to employees and run payroll deduction Provides plug-and-play plan option for small business owners that employers don’t have to manage Optional for employees Employee can chose which plan they want to offer ERISA plan Some, including SIMPLE Fee cap Public Private-Partnership

Small Businesses Support Work and Save Small business owners overwhelmingly agree that retirement benefits help recruit good employees Data from NCPERS

2015 New Jersey Survey or Registered Voters Agree by Political Party Voters Support Work and Save Across Party Lines 2015 New Jersey Survey or Registered Voters Across party lines, eight in ten agree that elected officials should support a retirement saving plan and many would think positively of small businesses that offer a plan Agree by Political Party Democrat 85% Republican 79% Independent/Other 76% The AARP 2015 New Jersey Work and Save Survey was conducted as a telephone survey among registered voters age 35-64 in New Jersey. The survey collected the opinions of New Jersey residents on retirement security, savings options, and proposed state work and save legislation. The survey was approximately 10 minutes in length. The interviews were conducted in English by Precision Opinion from March 19th to April 4th, 2015. The sample utilized a voter list. The margin of sampling error for the sample of 1,000 for New Jersey is +/-3.2%. AARP Polling http://infonet/ivs/rc/econwork/financialretirementsecurity/Pages/default.aspx

National Media Attention State savings plans have continued to garner mass media attention and are quickly becoming a trending issue among the public at large.

Questions? Sarah Mysiewicz Gill Senior Legislative Representative State Financial Security & Consumer Affairs AARP 202-434-3756 sgill@aarp.org @pensionimposble Additional Resources: AARP’s Public Policy Institute State Retirement Savings Resource Center http://www.aarp.org/ppi/state-retirement-plans/