Next Avenue: More states are offering auto-enrollment retirement plans, and they seem to be working

Given that 57 million Americans work for employers that don’t offer a retirement savings plan, it’s no wonder that by 2035, roughly 20 million retirees may be living in poverty, according to the National Institute for Retirement Security.

For workers without access to employer-sponsored retirement programs, many states are stepping in to encourage workers to start saving.

“When we look at the workforce today, we have half of our private sector workers who go to work every day, and they don’t have access to a way to save for retirement,” said Angela Antonelli, executive director of Georgetown University’s Center for Retirement Initiatives, which has urged policy makers to adopt state-sponsored retirement savings programs since 2014.

States encourage savings

Programs like Illinois Secure Choice work with businesses that don’t offer retirement savings plans, such as a 401(k) or pension, to deduct after-tax cash from each paycheck to set aside in a Roth IRA.

Auto-enrollment retirement savings programs automatically sign up employees but give workers the option to opt out if they choose. Participants can contribute up to 10% of their wages to savings.

When Illinois rolled out its program in 2018, it only required employers with 500 or more employees to participate, but by November, companies employing as few as five workers will be required to adopt the plan.

Illinois is not alone in creating mandatory savings programs for its workers. To date, 19 states have adopted retirement savings programs with more likely to join them. Since 2016, one to two states each year, on average, have begun similar programs Antonelli said. In 2023, Minnesota and Nevada joined their ranks. Rhode Island and Michigan could adopt similar programs in 2024.

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Social Security surprise

An aging population with inadequate retirement savings programs poses a serious challenge for states and the federal government, which could be left with a $1.3 trillion obligation to support retirees with no income besides Social Security, according to a 2023 Pew Charitable Trusts report.

The average Social Security retirement benefit for Americans retiring in 2021 was $1,754 a month, or a little over $21,000 a year. That was only about half the real median personal income in the U.S. that year, according to data from the Federal Reserve Bank of St. Louis.

“Clearly, the cost of doing nothing is too high,” Antonelli said.

On average, workers enrolled in auto retirement savings programs save $100 a month, which adds up to more than a quarter of a million dollars if done consistently over 40 years, according to the Center for Retirement Initiatives.

Related: ‘I don’t have a trust fund or generational wealth to fall back on’: The investment gap and how people of color can save for the future.

Most workers stay enrolled

“So you know, that can add up to some more money that helps to supplement Social Security. So it’s absolutely worth absolutely worth doing,” Antonelli said.

Antonelli added that these programs support efforts to reduce the retirement savings gap since most beneficiaries are single women and people of color.

Programs in participating states administer more than $1 billion in assets, Antonelli said. She added that 70% of the workers who are auto-enrolled into a state-sponsored retirement savings program choose to stay in and not opt-out.

While all states can benefit from auto-retirement savings programs, larger states have a higher population of savers to share administrative costs of the program.

States support each other

With scaling for size in mind, some states have partnered with others to pool their efforts to keep costs down. On Aug. 11, Maine joined Colorado’s state-sponsored employer retirement plan, a move that will reduce costs for both states.

Before the introduction of Colorado SecureSavings, over 40% of the western state’s private-sector workforce, nearly 940,000 workers, did not have access to a retirement savings plan through their employer.

Since August, over 100,000 workers have signed up, including 450 who are self-employed, and 12,300 employers have registered, said Sheena Kadi, communications director and public information officer for the Colorado Department of the Treasury.

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Employers join program, too

To date, Colorado SecureSavings has collected $16.5 million in retirement savings, she added.

“For Colorado, we’re not necessarily a large state by population,” Kadi said. “So we know that states with even smaller populations simply can’t afford to start up their own state-run retirement savings program. The costs would just be astronomical.”

One of the key benefits of cross-state partnerships is that the retirement contributions stay with the employee, not the employer, meaning that a resident who moves from one participating state to the other can easily take their funds with them.

“We hope folks don’t want to leave Colorado,” Kadi said. “But if they do, and they move to Maine, that’s a seamless transfer to those partnership states.”

Rachel Leland is a Houston-based freelance writer covering personal finance, wellness and other lifestyle topics. 

This article is reprinted by permission from, ©2023 Twin Cities Public Television, Inc. All rights reserved.

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