Too Many Workers Retire into Poverty

During last night’s State of the Union address, President Obama said we must do more to help Americans save for retirement. In Illinois, the need is clear:

  • Over 2.5 million private sector workers in Illinois do not have access to a retirement plan through their employer.
  • More than 1 in 3 retirees rely on Social Security for at least 90% of their income, making them unable to meet their basic needs.
  • Low-income workers, particularly those in the service industry and those working part-time, are even less likely to have access to this important savings tool.

Since President Obama’s first term, he has included funding for an Automatic IRA program in his proposed budgets. The program would provide workers, who don’t currently have access to a retirement savings account through their employer, the opportunity to save. The program would automatically enroll workers into the savings program – depositing a small percentage of their salary each month into their accounts through a payroll deduction.

Treasury Initiative

However, in the face of Congressional inaction, President Obama is looking to address the growing retirement crisis through Executive measures. During his address, President Obama announced plans to work with the Department of Treasury to build a “MyRA” plan – as in My Retirement Account

New information on MyRA reveals that it would be structured like a Roth IRA account, but, as a new type of savings bond, investments would be backed by the federal government so the account never depreciates in value. Entry into the account would be low with a required initial minimum investment of $25 and a $5 minimum for subsequent contributions, automatically deducted through a paycheck. Another benefit of MyRA is that there will be no tax penalty if funds are withdrawn. As a starter account, once a MyRA grows to $15,000 it is rolled over into a privately run individual retirement account. Participation in the program will begin as voluntary as employers can choose to offer the program to their employees.

While this may be a positive step, President Obama’s remarks made it clear that MyRA would not go far enough to stem the retirement savings crisis saying “if this Congress wants to help,….offer every American access to an automatic IRA on the job, so they can save at work just like everyone in this chamber can.”

Making a Difference for Illinois Workers

What we need is a comprehensive program that expands access for the most number of workers. In Illinois we are advocating for a solution to this looming retirement crisis as Illinoisans face a great and increasing risk of retiring into poverty.

The Illinois Secure Choice Savings Program (SB2758) will give every worker access to a retirement savings account and the opportunity to build a financially secure future. Here’s how it works:

  1. Workers without access to an employer sponsored retirement plan are automatically enrolled in the program with a 3% deduction from each paycheck.
  2. Assets in individual accounts are pooled and professionally managed.
  3. Accounts are portable, so workers continue to accrue benefits as they move from job to job.

Support efforts at the state level to expand access to this vital savings tool. Add your organization to our list of supporters: TAKE ACTION NOW

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