The season of spending is wrapping up. So, now, think about saving.
We’re not talking about saving for next year’s holiday gifts.
More than half of all New Yorkers who work in the private sector — about 3.5 million people — don’t have access to an employer-sponsored 401(k). The average household nationwide has just $14,500 saved for retirement. That won’t get them very far.
Help is coming, but it still might be more than a year away from becoming a reality. Earlier this year, the State Legislature approved a state-sponsored retirement plan known as Secure Choice. Employers who don’t offer 401(k) or similar plans could use the program to help employees save by allowing a percentage of their pretax paychecks to be set aside.
New York officials would be wise to look to California, Oregon and Illinois for lessons learned.
California has 20 employers signed up for a pilot of its CalSavers program. However, it is facing a legal challenge from those who think the program violates federal law, saying it’s not entirely voluntary and is equivalent to an employer-sponsored plan, like a 401(k), that would subject it to administrative, compliance and liability costs. New York officials say they’re in the clear, as our legislation makes employer and employee participation voluntary. To help the program work well, they should take best practices from the other programs, such as offering employees choices in investment risk levels and creating a website for the program. And they should avoid the other states’ problems, such as delays in payroll deductions early in Oregon’s program.
New York State officials are setting up a board to address specifics and select an administrator and investment firm to manage the plan. The deadline is April 2020. The state tax department should make Secure Choice a top priority and set up an attractive plan that’s simple for employers and employees. Then market it to them.
If you don’t have a retirement fund, don’t wait until 2020, when Secure Choice becomes available. There are other ways to start now. As you head into the new year, resolve to save for retirement.