A growing number of states are trying to make it easier to retire by helping workers access individual retirement accounts through automatic payroll deductions.
This year, 17 states are weighing legislation to create state-sponsored IRAs that would allow workers in small businesses to use automatic payroll deduction contributions to pad their retirement savings, according to the Pew Charitable Trusts.
The goal is to provide more savings options for the 55 million workers in small- and medium-sized businesses who do not have access to retirement plans with automatic payroll deductions.
Citing research from the AARP's Public Policy Institute, Pew says employees who have access to automatic payroll deductions at their jobs are 15 times more likely to build retirement savings.
While 17 states debate new proposals, 10 states already have these plans in place, according to the Georgetown University Center for Retirement Initiatives.
In 2019, California became one of the first states to launch this type of retirement plan, following in the footsteps of programs in Oregon and Illinois.
Three more states are beginning programs in 2022. Connecticut unveiled its program earlier this month. Maryland launches its own plan in June, and Colorado will kick off a program in October. Virginia, Maine, New Jersey and New York also have programs in development.
In Pennsylvania, state Republican Rep. Tracy Pennycuick and state Democratic Rep. Michael Driscoll have co-sponsored a bill to introduce this type of IRA program in their state.
In an interview with Pew, Pennycuick acknowledges that there are many IRA products on the market. But she contends that if the state takes on the administrative responsibilities, small businesses on the fence may be more likely to offer the automatic payroll deduction option to their employees.
A good plan is essential to building a strong foundation for retirement. For more, check out “4 Simple Steps for a More Comfortable Retirement.”