Men and women across Connecticut are working hard to build a better future for themselves and their families. But too many have no access to a retirement savings plan at work, especially if they work for a small business. AARP is working to ensure Connecticut employees have an option to grow the savings they need to take control of their future through automatic payroll deductions via their employers.
Soon, a new easy way for workers to save for the future will be available. The Connecticut Retirement Security Program, a program that was signed into law in 2016, and will begin in 2018, will provide the more than 600,000 people in Connecticut without a workplace retirement savings plan an opportunity to build a secure financial future for themselves and their families.
The program requires all Connecticut businesses of five or more employees with no pension or 401(k) plan to allow employees to save for retirement through payroll deductions into private IRA accounts at no cost to the employers. It will be voluntary for employees, who will be automatically enrolled but have the ability to opt out, and employers will not be required to match contributions.
Access to an employer-based retirement plan is critical for building financial security later in life. Significant numbers of workers at all levels of earnings and education do not have the ability to use payroll deductions to save for retirement. The lack of ability to participate in an employer-provided retirement plan spans all levels of education and earnings, and cuts across all groups.
The average retirement savings for American households approaching retirement is $12,000. Three-quarters of Latino households have less than $10,000 saved for retirement, compared to one-half of white households. This is mainly due to the fact that in the private sector, Latinos have 42 percent less chance of having a retirement plan compared to whites.
There is an estimated $7 trillion retirement savings deficit among older Americans in the United States, according to data from The Center for Retirement Research at Boston College. The program will help cut into the huge gap between what exists for retirement and what is needed, as well as reduce the reliance on state-funded social safety net services in the future.
AARP Public Policy Institute studies show people are 15 times more likely to save for retirement if they can do so through a payroll deduction program at work. In addition, the AARP Public Policy Institute found that between 2018-2032 Connecticut could save over $90 million if lower income retires save enough to increase their retirement income by only $1,000 a year.
There are many hardworking middle-class workers in Connecticut who are headed into retirement financially unequipped. Connecticut is taking a leadership role in addressing the retirement savings crisis that stretches across America. We are one of a few states, such as Oregon and Maryland, to provide opportunities for people to save for retirement at work.
You decide how much to save, and your money stays with you, even if you switch jobs. Learn more at www.aarp.org/CTRetirementSecurity.
Nora Duncan is the state director for AARP Connecticut.