It’s common for employers to offer a retirement plan as part of their benefits package to attract employees, but many employers do not provide these plans at all, or only to certain employees. in fact, nearly 50% of American workers who are employed in private industry do not have an employer-sponsored retirement plan. These workers must rely on their own savings and/or Social Security benefits when they retire. According to some reports, more than 1 million Massachusetts workers are in this situation.
Typically, these sources are not nearly enough to pay for essentials throughout retirement. Researchers say economic trends are making this problem worse. By 2040, they say, many retired households will see an annual income shortfall of nearly $11,000.
Obviously, this kind of shortfall leads to a host of problems for the individuals involved. Perhaps less obviously, it also presents problems for taxpayers as a whole, because these unfortunate people need government assistance. In fact, economists say that if trends continue this could cost Massachusetts nearly $14 billion between 2021-2040.
New retirement proposal
Massachusetts lawmakers have proposed a new program to help remedy these problems, and a major study of the proposal found that the proposal could do a lot of good.
The Massachusetts Secure Choice Savings Program Act, currently before the state legislature, would create an IRA program for eligible workers, and wouldn’t cost anything to their employers. Unlike many retirement plans, it could allow the workers to withdraw money from their accounts if they suffered an emergency before the retire.
The Pew Charitable Trusts and Boston College’s Center for Retirement Research recently published a report on the proposal. Researchers compared the Massachusetts plan with similar programs in other states, and determined that it could lead to the creation of 600,000 new retirement accounts within 15 years. This would significantly reduce the number of households who lack sufficient resources for retirement.
Planning for retirement and beyond
It’s too early to tell if this proposal will become law, or what impact it may have if it does. For now, the research study can serve as a reminder that many of us can’t rely on our employer-sponsored retirement plans to see us through our retirement years. It’s up to us to make sure we have the resources we need, and it’s up to us to try to make sure we have assets to pass on to our loved ones after we are gone. Professionals with experience in elder law and estate planning can help workers assess their options.