Michigan Retirement Savings Program Can Build Retirement Savings for Millions of Workers

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Michigan Retirement Savings Program Can Build Retirement Savings for Millions of Workers

Although most Americans save for retirement through employer-provided retirement plans, nationwide nearly half of workers in the private sector lack access to retirement savings at work. In Michigan, as many as 1.5 million workers—or 42% of the state’s private-sector workforce—are in this category.

With many employers, including small businesses, unable to provide retirement benefits because of high startup costs and a lack of administrative capacity, Michigan must grapple with a key question: What happens when residents don’t have enough money to retire?

By 2040, vulnerable older households in Michigan will face an average income shortfall of $9,030 per year. TWEET

From 2020 to 2040, the ratio of older households to working-age households in Michigan will increase by 45%. TWEET

Lack of savings will lead to $11.2 billion in increased state spending from 2021 to 2040. TWEET

Adopting an automated retirement savings program would help Michigan address these critical issues. Such a program would make it easier for Michigan businesses to help workers save for retirement by creating individual retirement accounts (IRAs) and automatically enrolling workers who don’t have access to employer-based benefits—all at no charge to employers. Businesses would simply enroll their workers and process employees’ payroll deductions, and workers would always control their contribution level and could opt out at any time; no one would be required to participate. If Michigan were to enact such a program, it would join 15 states that have established similar programs to help workers save.

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Features of Michigan Secure Choice:

  • It’s an easy-to-use, no-cost retirement benefit that employers can provide to their employees.
  • It’s not mandatory for workers, so savers can opt out at any time.
  • Participants can withdraw their contributions at any time, tax- and penalty-free.
  • Workers always own their IRAs; the state and the employer have no claim on workers’ contributions.
Tatiana Contreras, manager of Call Your Mother bakery in the Barracks Row community, prepares coffee on January 3, 2023 in Washington, DC. Barracks Row is a residential neighborhood filled with local business and restaurants, and is named after the oldest Marine corps in the nation.
Tatiana Contreras, manager of Call Your Mother bakery in the Barracks Row community, prepares coffee on January 3, 2023 in Washington, DC. Barracks Row is a residential neighborhood filled with local business and restaurants, and is named after the oldest Marine corps in the nation.
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A new study finds that Americans’ insufficient retirement savings will significantly affect every state and the federal government over the next 20 years, resulting in increased public assistance costs, reduced tax revenue, decreased household spending and standards of living, and lower employment.

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$334.3 Billion Shortfall Due to Insufficient Retirement Savings

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Although most Americans save for retirement through employer-provided plans, 56 million private sector workers lack access to such an opportunity to save at work. Many employers, particularly small businesses, find themselves unable to provide retirement benefits because of high startup costs and limited administrative capacity. And that leaves state governments grappling with a critical question: What happens when their residents don’t have enough money to retire?

Visit the retirement savings project home page for more information on Pew’s work on retirement savings.