New retirement safety net: Forced savings?

Surveys show that 40 percent of baby boomers have virtually nothing saved for retirement and most people making less than $40,000 have no retirement plan through their jobs.

Illinois is testing a fix.

This summer or fall, the state will launch the Illinois Secure Choice Savings Program. Workers who don’t opt out will see an automatic withdrawal from each of their paychecks. The funds will be pooled and stewarded by a professional management firm.

The goal is to ensure workers with modest incomes will still have some form of retirement savings, even if they don’t have access to a plan through their work – or if they lack the discipline to save for themselves.

TRENDPOST: States are facing a wave of elderly too poor to retire but also possibly not well enough to earn a livable income. California and others are mulling similar rescue plans and will watch how Illinois’ pilot project develops. As in Illinois, the politics surrounding state-forced retirement plans will be sticky, but practicality will overcome ideology in most places.

Comments (6)

Money deducted regularly from a paycheck before an employee receives it is not missed by that employee after a short while. Workers get used to it and adjust to it. There are several deductions that get made from my paycheck weekly, one being a national saving scheme (KiwiSaver)similar to the one mentioned in this article.

April 28, 2016 Anonymous

It may sound like a good idea in theory, but I hate having to pay superannuation in Australia myself. It may be good for those who can’t manage money and need to be spoon fed, but for people that want to do what they please with their own money it sucks. Why not make it optional and include a small incentive aimed at lower income earners?

If you’re trying to buy a house, underwater with your bills, need to pay for car repair, or want to invest in solar panels etc, you wouldn’t want thousands of dollars of your money locked away which you can’t use when you’re not even 30 years old!

I certainly wouldn’t want my money in fiat currency, in today’s economy with currency wars, and governments, private firms going into administration everywhere.

April 29, 2016 Anonymous

It does give you an option to opt out and depending on how much your actually earning per week, I expect many will opt out or have very little actually taken out each week. Its a good idea for the younger worker but anyone near retirement, well its probably too late. Hopefully those older folks had something put away on their own. Or intend to be working longer.

April 30, 2016 Anonymous

How does this kind of plan help those who are already in retirement with only SS. and no savings? This is not a “fix” for that. Ultimately they will be taking money, once again, from the poor and middle class to support the program. What if the government “borrows” the money like they did to the SS Trust Fund? They will pervert the idea and the poor will get poorer and the rich will get richer. “And so it goes.”

May 27, 2016 Anonymous

SR:

Ashton: Imagine for a moment superannuation was optional – how many people would voluntarily pay it? Once you’ve drawn down on that money for a multitude of legitimate reasons at the time, all of a sudden the 30 year old is turning 50 and realises that time goes fast and they have no savings.

Compulsory Superannuation is not a perfect system. If you are paying superannuation then you are making a contribution beyond your employers contribution. In Australia employers pay the contribution. It appears on your pay advice so you can see how your salary is being apportioned. You never really had it to spend.

I’m a lot closer to retirement than you Ashton, I don’t have a lot of super but what I have wouldn’t exist if I had access to it. It’s meant having to work harder to pay for the unexpected bills but the long term benefits far out way the short term solutions.

June 1, 2016 Anonymous

I have to echo chiro85 and Ashton on this one. There are so many problems with this idea, ranging from adding more levels of unnecessary beurocracy which must be funded to encouraging bad fiscal responsibility. If volentary, then it is basically no different then a private service, so that’s fine if its self-funded. But seriously, who would trust bankrupt institutions with a long legacy of rapidly acting to rip people off?

Lets not forget that there are two theories for pensions: funded and unfunded Almost all start as funded when set up and is litterally what is described above, a forced savings program. They all move to become unfunded tax-based once the government “borrows” all of the money so the money you saved your whole life is gone.

Again, if voluntary and self funded then fine, but history shows govs. tend to expand and make mandatory.

July 25, 2016 Anonymous

New retirement safety net: Forced savings?

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