Kansas has a retirement problem, and it’s exactly what you think it is.
More and more Kansans find themselves financially strapped as they grow older and Social Security replaces less of a retiree’s income than it once did. Employer sponsored pensions have been replaced by 401(k)s, shifting the risk to employees, who are much less able to assume market risks.
According to the U.S. Census Bureau’s Survey of Income and Program Participation, “Many adults approaching retirement age are not financially prepared to retire: Forty-nine percent of adults ages 55 to 66 had no personal retirement savings in 2017.” It is worse for women: Fifty percent of women age 55 to 66 have no personal retirement savings, compared to 47% of men.
Family budgets and savings are critically low as retirement looms and costs for retirement are increasing. Families are facing difficult decisions about how to support aging parents and grandparents. In fact, according to a study by Pew Research, “In the third quarter of 2020, about 28.6 million baby boomers — those born between 1946 and 1964 — reported that they were out of the labor force due to retirement.”
For Kansas families, this creates quality of life decisions that are painful and demoralizing. As more retirees need long-term care and support, more children are having to take on the role of caregiver, and in some cases having to forgo their own careers to care for aging parents. The looming crisis is compounded as state programs and social services are underfunded and understaffed. In the coming years, more and more individuals will need assistance related to:
▪ Medical issues
▪ Mental health issues
▪ Nutritional assistance
▪ Housing needs
▪ Assisted living needs
▪ Safety and security
With that strain comes the even bigger cost of younger generations being unable to procure similar services they may need, as well as their potential exodus from the Kansas workforce because of their unmet needs here.
While it’s up to the individual to save money responsibly, there is a statewide program that could become one of several beacons to workers considering employment in Kansas. That beacon, that retirement revolution, starts with Work and Save, a program championed by organizations such as the Pew Charitable Trusts and AARP.
Work and Save is a state-sponsored private retirement auto-IRA savings program that many states have enacted. California, Illinois and Oregon have plans up and running with more than 496,000 funded accounts. The value of these accounts is up 16% this year so far, and up about 4.6 times since December 2019. More than 121,000 employers are now registered in state auto-IRA programs. In Oregon, average account balances were more than $1,300 as of the end of May.
These programs offer workers whose employers do not have workplace retirement plans, the self-employed and others who want an easy way to save a convenient way to save. Workers contribute to their auto-IRA through payroll deductions, and continue contributing to the same account when they move to a different job in the same state. A Work and Save program in Kansas would provide Kansans with an easy and automatic way to save for the future through a plan offered by the state but managed by the individual.
Originally, the financial sector was skeptical about Work and Save, but their tune has changed. Many financial firms now support federal legislation to create a national Work and Save program, seeing the increased business opportunities in states where they have been implemented.
Further, people without savings aren’t currently seen as readily accessible investment customers. But with a few years of savings under their belts, they become ideal candidates for financial industry outreach, and more opportunities can be presented for improvements to their savings plans and quality of retirement.
This is an initiative that could provide all Kansans more dignity and security during their retirement years. As nearly 50% of our population has already not saved for retirement, this program would go a long way in reducing strain on social services and allowing employers to recruit and retain the employees our state so dearly needs.
With phenomenal job growth on the horizon, we are obligated not only to cultivate those precious new jobs, but also to do everything we can to keep supporting small business, Main Street Kansas and every individual who works for those employers.
Any amount saved for the future is a win for Kansas and its continued economic development. Work and Save is just one of the ways we can support the positive growth of our state while also planning for the quality of life of every worker going forward.
Lynn Rogers is Kansas State Treasurer. He co-authored this with Kathleen Kennedy-Townsend, a retirement security advocate and adjunct professor at Georgetown University.