Saving for retirement can be difficult and complex. It’s even more difficult for the more than 2 million Pennsylvanians who don’t have access to retirement plans through their employers. This makes saving challenging even for the most disciplined. Yet failure to save for retirement has a broader effect on society, costing Pennsylvania taxpayers $14.3 billion in social spending over 15 years and depriving the state of $1.4 billion in tax collections.
When workers have the option to participate in workplace savings programs, they are 15 times more likely to save for retirement than when they save on their own through the open market. That’s why a large, bipartisan group of Pennsylvania legislators, supported by state Treasurer Stacy Garrity, are sponsoring the Keystone Saves Act, which would create an automatic individual retirement account savings vehicle for employees of businesses of five or more people.
To help raise awareness of the bill, The Pew Charitable Trusts’ John Scott joined Garrity and AARP’s senior retirement savings legislative representative, Jessica Eckman, in a panel discussion on the PCN-TV cable news show Focus on Aging Adults in April. Scott directs Pew’s retirement savings project; AARP and PCN are sponsors of the show.
The panel highlighted the challenges workers face in trying to save for retirement and the hurdles small businesses encounter in providing savings options for their employees. The experts highlighted how hard it is for workers in particular jobs—such as hairstylists and barbers, truckers and mechanics, waitstaff and bartenders—to save on their own. Panelists also discussed the difficulties small businesses face in competing for talent with larger employers, which have savings option available to them at little to no cost.
Keystone Saves would operate similarly to established savings programs in Pennsylvania, such as the state’s highly successful 529 College and Career Savings Program. Businesses back Keystone Saves as a way to support their workforce. In addition, Keystone Saves would require employers to only supply a worker census and process a deduction elected by the employee. Workers can save as little or as much as they can afford. The program is voluntary, and employees may exit the program at any time if they choose. They can also withdraw money without penalty in the event of an emergency while continuing their payroll deductions to help rebuild their savings.
The show concluded by noting that saving for retirement is a nationwide struggle for millions of Americans but that automatic savings programs in other states such as Oregon, Illinois, and California have proved successful. Keystone Saves would bring Pennsylvania in line with other states that are supporting their businesses, employees, and taxpayers with this common-sense, no-cost, flexible, and portable tool.
Desiree Hung works on The Pew Charitable Trusts’ retirement savings project.