Last year, our study on America’s workforce showed that over one-third of workers from small businesses say that their employer is “not helpful at all” in terms of retirement planning and that one in eight workers are not offered any type of retirement plan from their employer. This leads to retiring later and a “do it yourself” retirement for many workers. But these retirement security issues aren’t going unnoticed and policy makers at the state and federal level are taking a closer look at the issues around retirement security and proposing solutions.
At the state and city level California, Illinois, and Oregon all have programs that enroll employees automatically into individual retirement plans with low-cost mutual funds. This automatic enrollment occurs for employees whose employers do not offer retirement plans. New Jersey and New York City are expected to enact similar programs this year as well as Maryland, Connecticut, Vermont, Virginia, Missouri, and Seattle.
Employees are able to opt-out of these programs, but automatic enrollment removes a key barrier for pre-retirees and their employers to make sure they are prepared for retirement. The state level involvement helps protect workers who don’t have employer help, which is one of the most important factors in being prepared for retirement.
Automatic enrollment isn’t just staying at the state level but is also making its way to Congress. Representative Richard Neal (D-MA) is expected to reintroduce a bill that would require businesses with more than 10 workers to offer a retirement plan that automatically enrolls their employees. Representative Neal is the chairman of the House Ways and Means Committee and first introduced the bill in 2017.
Sharing the Burden
Another retirement trend we are watching is multiple employer plans (MEPs) which are attractive to small and mid-size businesses. These proposed plans are gaining momentum as they allow businesses to share the costs and administrative burden in creating retirement plans for their employees. As we saw through our study, the larger the employer size the higher the likelihood that their employees aren’t only educated about retirement but are looking forward to their golden years. MEPs provide a solution for smaller and mid-size companies that don’t have the same resources as larger companies to help their workers prepare for retirement. These plans have historically gotten attention at the highest level of government with President Trump issuing an executive order on expanding retirement workplace plans, with a focus on MEPs, in 2018.
Regardless of what happens on Capitol Hill, there are steps you can take to make sure you are prepared for retirement. One of the most important things you can do is to make sure your portfolio is balanced. Retirement portfolios are balanced when the portfolio is made up of products designed to offer different benefits and balance risk. Fixed indexed annuities (FIAs) offer guaranteed lifetime income which is an important part of any retirement portfolio. To see if an FIA could be a good fit for you, use our check list and other free resources focused on getting you ready for retirement.
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