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Retirement savings forced 

Oregon has become the latest state, that’s state, to force most employers to offer a state-run Roth IRA. Workers will automatically be enrolled at 5% of earnings unless they opt out.

According to Market Watch: The U.S. isn’t even in the Top 10 (of countries with best retirement security) That’s in part because the highest-ranked countries — Norway, Switzerland and Iceland are Nos. 1, 2 and 3 respectively — all have a strong three-legged retirement stool for citizens to rest on, says Edward Farrington, executive vice president of retirement strategies in the U.S. for Natixis Global Asset Management.

imageWait a minute, the US has a multitude of retirement savings vehicles. First, many employers, including all state governments, offer some form of retirement savings vehicle even while many small employers do not. But the federal government already has in place the my myRA and other vehicles as well. There are plenty of tax-favored ways for Americans to save.  Why do we need more government intervention?

While it is true the traditional pension plan has nearly disappeared, it is also true the majority of Americans never had such a benefit. The US has the three-legged stool in place. It’s an employer plan or self-funded tax advantaged retirement vehicle, Social Security which delivers 40% or more income replacement for the average worker and personal savings.

img_0100-1The average incomes in the above countries are not significantly different from the US while they have a higher cost of living. So what is the real problem? Perhaps it’s things like the US household savings rate is half that in the EU country area.

As usual,  politicians are aiming at the wrong target and ignoring what typically is the primary cause of most of our social related problems; lack of personal responsibility and poor, short-term life choices.

We can have all the gimmicks and savings vehicles we want. Nothing will change until we change our culture and people accept that savings comes first and ones standard of living is then based on what is left … no exceptions. 

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1 reply »

  1. Our constitutional system allows a state to mandate action. So, a state can create its own Social Security system – if it wants to. Similarly, a state can create its own health care system (Vermont tried that and failed) – if it wants to.

    What’s the stated goal? The stated goal is to force certain employers (not all), to force certain of their employees (not all) to make a decision on whether to contribute to a Roth IRA. This is a Democrat concept. If the Republicans mandated this exact same action, Democrats like Elizabeth Warren, Bernie Sanders and others would all say it is a sop to the big banks and insurance companies and investment firms to raise assets under management and fees paid to those “big bad corporations”.

    It suggests that access to a retirement savings vehicle is the problem. It is why the mandate is for employers who do not sponsor a retirement plan – but not for all Americans (even for other Americans who have access to an employer sponsored plan but don’t save).

    As Dick notes above, access is not the problem – the IRA has been around in one form or another since 1982! Every American worker with wages has been eligible to open an IRA every year since 1982!

    So, if you are so concerned about retirement preparation, why not mandate enrollment in every plan you have access to?

    And, ease of enrollment is not the issue either. Consider the most recent failure, brought to you by the Obama Administration, the MyRA. Anyone reading this words have a MyRA?

    So, obviously, the Oregonian legislature is gutless. They don’t have the courage of their “convictions”. If the Oregon legislature, and implicitly or explicitly, Oregon taxpayers (ballot initiative, etc.) want to levy a tax and provide a level of old age benefits – they can do so.

    Once they do, Oregonians can then vote to remove those folks if they disagree, or, in the alternative, vote with their feet and remove themselves from the state.

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