State-Run Auto-IRAs Could Solve the Retirement Savings Crisis | Global News Avenue

With nearly half of the U.S. workforce, or 57 million people, without access to employer-sponsored plans, the retirement system needs to change, experts say.

An automated individual retirement account (auto-IRA) may be a solution. Automatic IRAs are state-driven retirement plans for workers who do not have a workplace retirement plan, such as 401(k)sautomatically register.

“Half of workers don’t have access to a retirement plan through their employer. If workers don’t save through a workplace plan, they’re less likely to save for retirement,” said Tyler Bond, research director at the National Institute on Retirement Security. “(State-run automatic individual retirement accounts) are designed to close that access gap.”

Workers enrolled in automatic IRAs can have contributions deducted from each paycheck—although employers cannot match contributions. According to the Georgetown Center for Retirement Planning, 17 states currently offer automatic IRAs.

Why do you need an automatic IRA?

According to the recent Apollo Global Management Report, the proportion of the U.S. population aged 65 or older will increase from 18% today to 23% by 2050.

The problem is exacerbated by the fact that many Americans lack adequate retirement savings. The average American 401(k) balance was $132,300 in the third quarter, well below expectations, according to Fidelity data. hope to save when they retire.

“An older population with insufficient retirement assets is going to put considerable pressure on government agencies,” said David John, senior strategic policy adviser at AARP. Auto-IRAs could alleviate some of that pressure.

Additionally, new data from the Pew Research Center shows that automatic IRAs are not crowding out private retirement plans — when some states began implementing automatic IRAs, private employers did not stop offering or adopting their own workplace retirement plans.