On August 6th, State Comptroller Kevin Lembo and State Treasurer Denise Nappier convened the first meeting of the Retirement Security Board. PA 14-217 established the Board and marked the first in the nation public investment of funds ($400,000) to lay the foundation for a state-sponsored retirement savings plan for private sector workers (who do not participate in any other type of employer sponsored retirement savings plan). The Board will meet monthly researching and designing a self-sustaining public retirement plan.
Why is this important? In short, older adults of today and tomorrow are not prepared for their future financial needs due to a variety of factors.
Social security, personal savings and private pensions had been the proverbial 3-legged stool for financial security in the “golden years.” Today, Social Security is facing actuarial and policy threats, personal savings are low and traditional pensions are disappearing from the private workforce.
Social Security: A few years back, our Commission partnered with the Permanent Commission on the Status of Women and Wider Opportunities for Women, Inc. to measure the economic security of older adults in Connecticut. According to Connecticut’s Elder Economic Security Index, the average Social Security benefit leaves a single female renter approximately $12,000 below the amount needed for economic security in Connecticut.
Savings: Further, a recent study found that 1/3 people in our country between 45 and 54 had saved nothing specifically for retirement. Additionally, data for the Long-Term Care Needs Assessment shows that 40% of people in Connecticut have saved nothing for their future long-term services and supports needs and another 20% have said they can only afford $10,000 toward the needs. This, of course, means that most people will not be able to afford their care needs and will have a greater likelihood of relying on Medicaid and/or other publically funded programs.
Employer sponsored retirement plans: New models rely less on defined benefit (traditional pensions) and more on defined contribution such as 401(k)s. Further, many workers now find themselves without access to any kind of workplace retirement plan.
According to the Schwartz Center for Economic Policy Analysis, employer sponsored retirement plans in Connecticut fell from 66% in 2000 to 59% in 2010 with only 50% of workers utilizing them. Downward trends are significant for workers across all age and race demographics and economic categories with low-income workers at the lowest level of opportunity.
It is imperative that we continue to pursue initiatives that can help people experience economic security in their later years. The goal of the state-sponsored retirement savings plan is to give workers the tools to be able to save for their own retirements. To that end, join us in informing, supporting and following the work of the Retirement Security Board, by attending their meetings and/or regularly checking its website for updates.