A new study shows that Arizona could save $89 million over the next 15 years if it set up a system of state-based retirement savings accounts.
Researchers from the University of Maine found that if current low savings rates persist, a significant portion of future retirees will be forced to rely on basic support programs funded by taxpayers such as Medicaid, SSI and food and housing assistance.
David John, the senior strategic policy adviser at the AARP Policy Institute in Washington, D.C., says they also found that far fewer retirees would need those programs if the state helped them save just $1,000 more per year.
“In Arizona, between 2018 and 2032, the state itself would save $89 million in reduced costs to state taxpayers,” he said.
An estimated 1.3 million Arizonans work at companies that do not offer a 401(k) retirement savings option.
AARP Arizona is seeking a sponsor for a bill to create what’s called a Secure Choice program, where the state would offer to deduct money from people’s paychecks and then pay a private investment firm to manage the retirement accounts.
However, there has been opposition from the financial services industry, which is concerned that these low-cost savings platforms could put their higher-fee products at a competitive disadvantage.
Dana Marie Kennedy, state director with AARP Arizona, says the state should make it as easy as possible to save for retirement.
“People just aren’t saving enough to prepare for retirement,” she said. “Social Security alone isn’t enough to really retire on. If it’s automatically taken out of their paycheck, they’re more likely to save money.”
Five states are in the process of implementing a Secure Choice program, including California, Oregon, Illinois, Maryland and Connecticut. However, a proposal currently before Congress, House Joint Resolution 66, would make it harder for states to set up these types of state-based savings accounts.
Public News Service – AZ