State-Sponsored Retirement Plans: Know Your Workplace Retirement Saving Options
For anyone who has been following the news, America’s impending retirement crisis is certainly nothing new. The death of pension plans, lack of financial literacy and increased life expectancy all contribute to the increasing deficit of American retirement savings.
In fact, 42% of Americans have less than $10,000 saved for retirement, according to a recent survey by GOBankingRates. This won’t even come close to covering retirees’ basic necessities. In a 2017 analysis, Fidelity found that a 65-year-old couple retiring today would spend an average of $275,000 throughout retirement on out-of-pocket healthcare expenses alone.
Employers want to fulfill their responsibility of looking after employee well-being by helping their workforce prepare for retirement, but finding the right solution can be challenging. Consequently, many small to mid-sized businesses choose not to offer any option, and millions of American workers continue to lack access to an employer-sponsored retirement savings plan.
What is the government’s response to the retirement crisis?
To respond to this looming financial crisis, states have begun introducing legislation that requires employers without private-sector retirement plans to auto-enroll their employees in state plans. A state-sponsored retirement plan allows an employee to make voluntary contributions to his or her account through payroll deductions.
We agree that our country’s lack of retirement readiness demands action, and generally, we support the intent behind state-sponsored plans. However, the one-size-fits-all approach included in these plans may not afford small business owners the flexibility they need or provide the greatest benefit to employees.
What do small businesses and their employees want?
We recently surveyed small businesses, as well as employees without access to a retirement savings plan at work, to find out what they want. According to the 2018 Millennium Trust Small Business Retirement Survey1:
88% of employees think a retirement plan is an important factor when choosing a new employer.
About two-thirds of small businesses think they are not large enough to offer a plan or that offering a plan is too costly.
Only 23% of small businesses had researched retirement savings programs other than a 401(k).
Despite a general lack of awareness regarding plan options, one thing small businesses do know about retirement plans is that they would prefer a retirement savings option run by a private sector financial firm (71%), compared to their state government (15%) and federal government (14%).
With new legislation potentially requiring employers to offer retirement plans, Millennium Trust wants you to have the power to choose. This is why we developed Workplace Savings Solutions for small businesses when a 401(k) or a similar plan is not the right fit.
Workplace Savings Solutions lets employers automatically enroll employees into their plan, escalates deferrals every year and offers investment fiduciary services – all at an affordable cost. This means employers can focus more on running their business and less on administrative tasks.
Learn more about how Workplace Savings Solutions can help your business.
Workplace Savings Solutions_______________________________________________________________________________
1The Millennium Trust Small Business Retirement Survey was commissioned by Millennium Trust company, and conducted by CITE Research (www.citeresearch.com). The online survey was conducted among 500 decision makers at companies with less than 150 employees that do not offer any type of retirement savings option, and 500 employees who are working full-time at employers with no retirement savings option. The survey, one of the first of its kind to be conducted exclusively with employers that do not offer retirement benefits, was fielded between September 28 and October 8, 2018.
The material in this blog is presented for informational purposes only. Millennium Trust Company performs the duties of a directed custodian, and as such does not sell investments or provide investment, legal or tax advice.