Have you started saving for retirement? According to data from the Employee Benefit Research Institute, the average United States households have less than $25,000 in combined investments and savings. For a country where there is no federally backed IRA program, this is a worrying figure. States that have been disappointed by the lack of Congress support for a centralized retirement program have now decided to take matters into their own hands.
As of 2018, the state of Oregon has been signing up uncovered workers to a state IRA program. This means that any legally employed worker without a 401k plan will now have at least some form of retirement savings.
For now, the state sponsored program is young, but it’s an indication of what other states may choose to do. Retirees without a savings plan can eventually become burdens on society and can negatively impact state finances. By creating a system where there is always a retirement plan available, it will make life more comfortable for retirees, and will create options for those who wouldn’t have otherwise had access to a retirement fund.
Compared to a small business retirement savings plan, the Oregon state backed plan is slightly more affordable, however, the fees are still not quite as affordable as the largest group plans that can be found in medium and large companies.
This is something that the government hopes to address eventually. As more people sign up to the state retirement fund, fees will eventually decrease. Currently, fees are equal to 100 basis points, or 1% of the total investment amount. This is 100 basis points lower than most 401k plans with small businesses.
Retirement Programs, What Are the Fees Used For?
Fees will mostly go towards the infrastructure that is necessary for automatic payroll deductions. The majority of the fee in Oregon will be paid to a third party company that will run the plan on behalf of the government. Oregon is being seen as a proving ground for a state backed retirement fund, and it is expected that the development of similar funds in other states will become more affordable with the learning that is gained in Oregon.
Illinois and California are two other states that will start pilot testing programs in 2018. Massachusetts, Vermont, Washington State, Maryland, and Connecticut are also in the early stages of planning state backed retirement funds.
The interest of state governments is proof that retirement planning is essential for every citizen. If you are yet to start saving for your own retirement, then now is the time to explore options for retirement funds, private savings plans, and other investments.
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