With half of workers lacking access to workplace retirement plans, several states are leading the charge to create their own Individual Retirement Accounts.
So-called Universal Voluntary Retirement Accounts would be a low-cost option to an IRA combining a state's existing retirement system with professional fund management. The buying power and influence wielded by a state would help reduce costs and complexities that prevent many small businesses and non-profits from starting retirement plans.
The Economic Opportunity Institute, a nonprofit public-policy center in Washington state and a member of the national Economic Analysis and Research Network, is a proponent, describing the plans as critical for small-business competitiveness. Workers would benefit from easy-to-manage payroll deductions, a pre-selected menu of investment options and a retirement plan that can move from job to job.
According to the EOI, two out of three low-wage workers and one in four high-wage workers lack access to a retirement plan in the U.S. In 2007, 80% of private-sector workers in businesses with fewer than 25 employees didn't participate in a pension plan. Even in companies with 500 or more employees, 43% lacked coverage.
Several states, including California, Rhode Island, Connecticut, Massachusetts, Virginia, Washington, Michigan, Maryland and West Virginia, are considering creating Universal Voluntary Retirement Accounts.