About two million private sector workers in Pennsylvania — more than 40% of the workforce — don’t have access to an automatic retirement savings plan from their employers. The resulting retirement shortfall is expected to cost Pennsylvania about a billion dollars in social services every year over the next 15 years.
Keystone Saves, a program now being considered by the state legislature as HB 2156, would offer a cost-free retirement savings option for workers whose employers don’t offer such plans. A variety of private organizations, including AARP, the United Way and the Pew Charitable Trusts support it. So does a broad-based, bipartisan coalition, including Republican state Treasurer Stacy Garrity, Democratic state Rep. Michael Driscoll of Philadelphia and Republican state Rep. Tracy Pennycuick of Montgomery County. A variety of Pittsburgh-area legislators from both parties have co-sponsored the bill.
According to the Keystone Saves’ supporters, workers are 15 times more likely to contribute to a retirement account if it is offered through their job, as opposed to setting up an IRA themselves. Visualizing the future is hard, and understanding how even small contributions early in life can generate big rewards later isn’t always intuitive — all the more so when you’re simply trying to make ends meet in the here and now.
Retirement? When you’re 20-something and trying to make rent? When you’re 50-something and trying to pay the mortgage and put your kids through school?
Wealthier Americans have access to professional financial planners who can do all the heavy lifting for them. The fact that advanced degrees and certifications are required to do this planning well shows just how complex it can be.
Keystone Saves would allow employers who can’t afford or manage a retirement system on their own to opt into a cost-free state-facilitated system, similar to existing 529 Education Savings Accounts. All employers would have to do is provide a list of participating employees to the state and process a simple payroll deduction. Keystone Saves would do the rest, putting the money into a simple, portable IRA for workers.
The program would not discourage employers from offering their own retirement plans, for two reasons. First, companies with already-existing retirement plans won’t be eligible. Second, since employers don’t contribute to Keystone Saves, many companies will still want to lure workers with more generous employer-match plans.
We urge the legislature to pass Keystone Saves quickly. Pennsylvania workers and the future state economy need it.