At Work

From California, a Better Way to Retire – The New York Times ❓❓❓

Lets just admit it and move on; many Americans are incapable of deciding anything for themselves, making prudent life choices or doing much else … at least that’s true in the eyes of our political leaders. But you know what, it is true … sadly😟

Mention privatizing Social Security and all hell breaks lose. But allow government to take hold and hire people to manage your money for retirement and it’s okay. 

And yet, retirement prospects are about to improve for the 6.8 million employees without retirement coverage who work in California for businesses with five or more workers. Next week, the California Legislature is set to vote on a plan, nearly four years in the making, to automatically enroll most uncovered workers in individual retirement savings accounts.

Employee advocates are confident the measure will pass, and Gov. Jerry Brown is expected to sign it. When that happens, Californians will gain more security — and the rest of the nation will gain a national model for promoting retirement savings.

Under the plan, uncovered employees would have up to 5 percent of pay deducted from their paychecks, unless they opted out. Those contributions would be pooled and managed by investment professionals chosen by the state through a bidding process. The plan, called the California Secure Choice Retirement Program, would be overseen by a board of public- and private-sector leaders, appointed by the governor and the Legislature in 2012, when the legislative effort first got underway.

Source: From California, a Better Way to Retire – The New York Times

When I started writing this I was simply going to criticize state action such as described above. Exactly how much of our private lives do we intend to turn over to government? I still think Americans should be expected to exercise far more personal responsibility than they do, but what do I know, I’m just an old white male from another time.  

According to info from T Rowe Price via Life Health Pro, Just getting started — filling out the paperwork to enroll in an employer’s retirement plan — is an obstacle. When left to their own devices, just 30 percent of young workers get around to signing themselves up for their 401(k) plans. More than half of workers in their 30s, 40s, 50s and early 60s voluntarily take this step.

Many companies have started automatically signing up workers for 401(k)s. Employees can decline to participate, but the idea is that very few will bother. According to T. Rowe Price’s data, this is working. Among 20-something workers, 84 percent go along with being auto-enrolled in a 401(k) plan.

So, many workers won’t sign up on their own and if signed up automatically won’t bother to cancel that enrollment. The ultimate inertia 😳 But it gets worse. Those who don’t cancel their auto enrollment also don’t change the contribution level and as a result while enrollment is up, the percentage of pay being saved is down 🤑

Clearly we need to deal with a generation largely oblivious to its future financial needs, but however we deal with that, a little coordination might be nice. What we don’t need is each state going in its own direction while the federal government does the same. 

We haven’t even given a chance yet. 🤑 But as reported by US News, as of July 2016 only 10,000 Americans have signed up for myRA, which was announced in January 2014 and finally launched in November 2015; Obama’s big achievement to promote retirement savings.


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