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If you live in Illinois, saving for retirement is no longer just a good idea, it’s automatic.
Beginning in 2017, Illinois residents who don’t have a retirement plan at work will be automatically enrolled in individual retirement accounts and have 3 percent of their paychecks funneled into them. Employers with at least 25 employees must offer the Secure Choice program, and workers must opt out if they don’t want to participate.
Administrative costs will be borne by savers, who will be charged up to 0.75 percent of their balances.
The state plan, similar to MyRA that President Obama has pushed nationally, is aimed at helping workers at smaller companies who don’t have access to employer-based retirement plans because of administrative and cost burdens. Lack of access to retirement accounts is considered a prime reason Americans often don’t save enough money to retire.
The average working household has “virtually no retirement savings,” according to the National Institute on Retirement Security. More than 38 million working-age households (45 percent) do not have a 401(k) or IRA. And the median retirement savings balance is just $3,000 for all working-age households and $12,000 for near-retirement households.
Illinois State Sen. Daniel Biss said the plan is meant to help workers “save for retirement with the benefit of a simple product for a low fee.”
The plan could become a model for other state and federal plans, the New York Times suggests.
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Read more here: Will Illinois’ Automatic Retirement Plan Become U.S. Model?