State-sponsored retirement savings programs could be a lifeline for US workers

I love to read stories like this. Pie in the sky I call it written by someone who has little idea of what they are talking about. Start with the phrase “low-income families and households of color” Why doesn’t low income suffice to describe those who struggle with financial shocks. Are they saying solid middle class households of color can’t handle their money? I hope not, that’s an insult.

What they are saying, of course, is that workers are not very smart. Anyone so motivated can walk into a bank, set up an IRA with direct deposits from their pay or accounts. Your own auto-IRA. Oh yeah, you may need a bank account.

By the way a similar scheme was tried at the federal level under the Obama administration, it was a flop and then discontinued.

On one hand we see a problem linking health insurance to employment, but doing so for saving for retirement is okay?

I’m trying to figure out the connection between insufficient retirement income and “lower employment” I would think the effect would be the opposite.

Tax and penalty free? Perhaps they mean free of state taxes, but taking money early from an IRA is not tax and penalty free at the federal level.

For millions of Americans, an unexpected expense or a sudden loss of income can severely impact their household’s balance sheet. In fact, each year more than half of U.S. households experience at least one financial shock, such as a major medical bill, and many are unable to cover those expenses. These financial shocks can be even more difficult for low-income families and households of color, who often have fewer resources to cushion against financial adversity.

Some people withdraw money from their retirement savings to make up the difference. Retirement savings, of course, are important not just as a last-resort source of income to pay for unanticipated expenses: Their primary purpose is to help employees prepare for their retirement. Yet millions of workers, and at least one-third of private sector employees, don’t even have access to retirement plans at their jobs.

One innovative way to solve this problem: the growing number of state-facilitated retirement savings programs.  These programs, known as auto-IRAs, allow employees to automatically contribute their own earnings to an individual retirement account (IRA) through voluntary payroll deductions and can be a vital lifeline for workers. They can also ease a state’s financial burden, which ultimately benefits taxpayers.

Consider Pennsylvania. A 2018 study found that employees’ insufficient retirement savings have led to every county in the Keystone State experiencing increased public assistance costs, reduced tax revenue, decreased household spending and lower employment.

The price tag for Pennsylvania taxpayers of these savings deficiencies? An estimated $15.7 billion over 15 years. Now, forward-thinking Pennsylvania policymakers are working in a bipartisan manner to pass Keystone Saves, a state-facilitated retirement savings program.

If passed, Keystone Saves would give more than 2 million private sector workers access to an auto-IRA plan. Participants could withdraw their voluntary contributions at any time, tax-and penalty-free — especially helpful in an emergency.

Source: State-sponsored retirement savings programs could be a lifeline for US workers | TheHill

I don’t now how the catch phrase, low-income is defined here, or why it’s relevant to the story because truly low income workers [**] may not have the wherewithal to use an IRA in any case.

It all boils down to individual motivation and responsibility- like most things in life.

[**] The easy answer is to defer to the U.S. government: The term “low-income individual” means an individual whose family’s taxable income for the preceding year did not exceed 150 percent of the poverty level amount. In the U.S., that’s roughly $19,000 (it’s slightly higher in Hawaii and Alaska). Mar 18, 2021


  1. What I love is the estimate of $15 B in added PA spend to fill gaps from failures to save. I can solve that by setting a threshold of personal financial responsibility. It may not prompt savings, but if not, it will prompt relocation.

    Another example of poorly designed public assistance that instead of reducing the number of claimants ….

    I love how they are spending “government” money, not taxpayer money.

    Liked by 1 person

  2. Unfortunately, there is a vast segment of our population that is not “money savvy”. I’ve discussed this many times with my brother who is a 35 year Walmart backroom employee.
    From day one, he understood the concept that despite very low wages that if you saved a minimum of 6% to get the equal 6% 401k match, that was a good deal.
    Too good to pass up.
    Yes, take home pay, at $94 was slightly less than take home pay at $100 if you opted to save 6% to get the full 6% match. At the time, employees could also buy company stock at reduced rates. My brother did not take advantage of that until several years later(to his chagrin) and that program no longer exists.
    Wal-Mart average wage in 2020 was $14.76/hour according to USA Today and after much bad press, now up to $16.40/hour as of September, 2021 per Bloomberg. But much lower in 1987 when my brother started at Walmart, so many people simply say I can’t afford to earn $94 now. I must have the $100. It would be an extremely minor adjustment to live off the $94, but many do not participate. There are 30+ year employees that NEVER participated. Shocking what they left on the table over the years.
    The automatic enrollment now is a better approach but for too many, their retirement may be non existent…que the greeter with his oxygen tank. Many low income people simply can’t envision a life without financial struggle, so they shoot themselves in the foot even when viable options are available.

    Liked by 1 person

  3. The study reads like they tried to put all the buzzwords into one sentence. Then they imply that poor people of color are too stupid. If they can figure out how to get welfare cards, bus passes, driver’s licenses then these people can save money if they are able or want to save. Maybe if they stop pandering to them and treat them with respect and offer some financial education instead, they can help themselves. Nobody going to voluntary sign up for programs that they don’t understand. There are plenty of ways to save now.

    Liked by 1 person

  4. The Keystone Saves program sounds like another effort to solve a problem that can’t be solved. It promises retirement money as well as current funds for large expenses all from the meager savings by folks who can’t save much at all. Good luck to them.

    Liked by 1 person

    1. If “For millions of Americans, an unexpected expense or a sudden loss of income can severely impact their household’s balance sheet.”, then the millions are not saving. It is a spending problem! Can’t save if you spend everything you make. And expecting government to solve the spending problem of Americans, is like letting the fox into the hen house. Government has the same spending problem as those millions of Americans.

      Liked by 1 person

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