“One-third of workers in America have no retirement savings and those who have savings, do not have enough to live comfortably. Of those closest to retirement (age 55-64), one in five has no pension or savings. Near-retirement households with savings have a median account balance of just $14,500. The typical working family has only $3,000 in retirement savings. Retirement prospects for low-income workers are the most dismal: just one in nine has savings in a retirement plan.”
Maine’s baby boomers have begun their relentless march toward retirement, leaving the state’s economy in their wake. Not only do we not have the young workers to take the place of the nearly 200,000 workers who will retire in the next ten years, but those who do retire will earn less, spend less, and demand more services.
One-third of workers in America have no retirement savings and those who have savings, do not have enough to live comfortably. Of those closest to retirement (age 55-64), one in five has no pension or savings. Near-retirement households with savings have a median account balance of just $14,500. The typical working family has only $3,000 in retirement savings. Retirement prospects for low-income workers are the most dismal: just one in nine has savings in a retirement plan.
The reasons for this are clear. Too many Maine workers lack access to employer-provided retirement plans.[1] Fewer employers provide pensions and part-time workers are often ineligible. Declining wages are driving down contributions. And unemployed workers have no options.
Not surprisingly, retirement savings and income levels are closely linked. Working families have far less in savings than wealthier households who hold 72 percent of total retirement savings in the U.S. Stagnant employment growth, the prevalence of low-paying jobs, and a lagging minimum wage all contribute to Maine’s retirement crisis, shrinking both personal savings and Social Security benefits.
Education is also a precursor to a better retirement.Families of college graduates are nearly twice as likely to have a retirement savings account as less educated workers. College-educated households also save more; nearly six times as much as high school-educated households. As Maine continues to lag behind the rest of the nation in the proportion of young people with two- or four-year degrees, our future seniors will struggle more than their parents or grandparents.
This spring, the legislature’s insurance and financial services committee considered a “work and save” bill that would stimulate personal retirement savings. It would create retirement plans for workers through payroll deduction, with funds managed by the state treasurer. The plans, similar to an IRA, would give workers a practical savings option. It would make it easier for small employers to offer retirement accounts. It would also help low-income workers be more secure as they age.
The committee postponed a vote on the bill until next year in order to get input from workers, employers, and private plan providers and to adapt the bill into a solution that will help Maine’s workers save more for their retirement.
But “work and save” is a partial solution to the retirement crisis. Maine policymakers also need to implement economic policies that spur job growth and improve incomes like boosting the minimum wage, funding higher education and worker training, accepting federal health care funds, and investing in infrastructure.
Maine working families deserve a retirement that reflects their lifetime’s hard work and assures their financial security.
[1] See chapter four, Table 4.A.4
