In discussing the new Washington Saves program, State Treasurer Mike Pellicciotti effectively distills the issue.
“Nobody is going to accept a 90-year-old living on the street with nothing to eat,” Pellicciotti told The Columbian’s Editorial Board last week. “I want people to be empowered to do what is best for them and to make it as easy as possible.”
That is the impetus behind Washington Saves, which was signed into law last week by Gov. Jay Inslee. The program will make it easier for Washington workers to save for retirement, establishing an automatic Individual Retirement Account for employees who do not have access to savings programs through their work.
Pellicciotti cites surveys showing that two-thirds of millennials are not saving for retirement. Based on the most common definition used by demographers, the oldest millennials are now in their 40s, meaning that retirement is not that far in the future.
Studies also indicate that other generations are not much better at planning for retirement; according to U.S. Census Bureau data, nearly half of Americans ages 55 to 65 have no retirement savings. “It’s no wonder younger generations — millennials and Gen Z — are so economically anxious,” Larry Fink, CEO of investment firm BlackRock, recently wrote to shareholders. “They believe my generation — the baby boomers — have focused on their own financial well-being to the detriment of who comes next. And in the case of retirement, they’re right.”
As Pellicciotti told the Editorial Board, “I think you’d be surprised at how uncommon it is now to have a retirement account.”
Washington Saves will be enacted in 2027 and will be available to workers who do not have retirement plans through their employment. As an IRA, it will not include company contributions; the only requirement for employers will be to add an additional withholding line on a worker’s paystub. It also will allow employees to opt out of the program.
The important part, according to Pellicciotti, is that surveys show workers are 15 times more likely to contribute if direct deposit is available. There is no need to consult a financial analyst and set up a separate deduction program.
Approximately 1.2 million Washington workers do not have access to employee retirement programs — about 43 percent of the state’s private-sector workforce. And a survey last year from Pew Charitable Trust indicates that 72 percent of small-business owners in the state supported a state-facilitated retirement system.
Contributions will be managed by an independent board, and the savings will be portable. “It’s theirs,” Pellicciotti stressed.
In joining 15 states that have similar programs, Washington is targeting a growing concern. According to the Schwartz Center for Economic Policy Analysis, “Up to 40 percent of middle-income workers are at risk of downward mobility into poverty or near-poverty in retirement because of an inefficient retirement system.”
More than half of Americans aged 55 and older say they are not on track to retire, and such economic stress results in increased public expenditures for health care and social safety net programs.
In general, Americans are not good about saving. A capitalist society relies on spending, and media reports routinely measure such spending as an indication of the economy’s resiliency.
But there are long-term benefits to saving. As Pellicciotti said, “Washington Saves will be a cornerstone for wealth building and the long-term financial health for generations of Washingtonians to come.”
