Between higher prices at the grocery store and rising housing costs, our state and residents are facing multiple significant economic challenges. One persistent, yet often overlooked, challenge is that many Pennsylvanians struggle to save for retirement—which also affects our state’s economy and taxpayers.
October is National Retirement Security Month, designated by Congress to raise awareness about the importance of saving for retirement. The data tells the story: Nearly 51% of the general population is worried that they’ll run out of money when they’re no longer earning a paycheck. A recent survey found that 70% of retirees wish they had started saving earlier. And millions of workers – including 2 million in Pennsylvania – cannot save for retirement through their employer. These workers include the baristas at your local coffeeshop, your hairdressers and auto mechanics, and countless employees of small businesses who are the backbone of our state’s economy.
Insufficient retirement savings don’t just hurt workers; small businesses and taxpayers are affected, too. For example, research shows that workers are 15 times more likely to save for retirement if they can use a payroll deduction at work. But many small businesses are unable to offer this benefit because they can’t afford the high startup costs – and lack the administrative capacity to manage a retirement saving program. This puts Main Street businesses in Pennsylvania’s small towns at a disadvantage, because they can’t offer the same benefits as large companies.
As for taxpayers in the commonwealth, workers’ insufficient retirement savings increase the pressure on public assistance programs, reduce tax revenue, and decrease household spending by retirees. The price tag for Pennsylvania taxpayers comes to $15.7 billion over the next 15 years – more than $1 billion every year.
States throughout the country are coming up with innovative solutions to these problems. More than a dozen states and cities have created automated savings programs, also known as auto-IRAs, that provide millions of Americans with access to savings. Auto-IRAs are no-cost, user-friendly retirement benefits that help taxpayers and small businesses, and they’re carried out through simple payroll deductions for participating employers and workers.
Pennsylvania could soon join other states that are helping employees save for retirement. The General Assembly is currently considering legislation to create Keystone Saves, an automated savings program that will give workers in the commonwealth an easy way to build their retirement savings – and serve as a cushion against financial emergencies and rising inflation.
Additionally, by increasing personal savings, Keystone Saves will ease the burden on taxpayers to fund costly government programs for workers that are unprepared to retire. Remember that $15.7 billion price tag in increased public assistance that stems from insufficient retirement savings? By enabling Pennsylvanians to save as little as $25 a week, Keystone Saves would help eliminate the need to spend that money on public assistance programs, keeping our state budget fiscally sound.
People are getting behind this initiative. To help make Keystone Saves a reality, and galvanize support for this innovative auto-IRA program, more than 50 Pennsylvania businesses and civic groups have come together to create the Keystone Saves Coalition.
Building a secure retirement is an individual responsibility, but many individuals face obstacles to saving. So, in the spirit of National Retirement Security Month, state lawmakers need to know that they, too, have an important role in ensuring that the people of Pennsylvania are financially ready for retirement. It’s up to them to pass Keystone Saves and help all working residents save for a secure future. In doing so, they’ll help keep individuals on the path to a secure retirement – and our state on the path to fiscal health.
John Scott directs The Pew Charitable Trusts’ retirement savings project.