State can help Vermonters save for retirement
Most Vermonters do not have a big enough nest egg for retirement. In fact, for many, the nest has no egg at all. And the problem is worst for women and people of color. These were just some of the findings in a report released earlier this year by the Vermont Public Retirement Study Committee.
As Public Assets documented in A Framework for Progress: Investing in Vermont’s people, infrastructure and good government, there are many barriers to saving for retirement. Nearly half of working Vermonters do not have access to an employer-based plan, people often do not enroll in plans on their own, and stagnant wages make it a struggle for many employees to save.
To address this challenge, Vermont has been exploring a state-sponsored retirement plan for the past few years. Eight states have already enacted legislation putting plans in place, and 17 others are exploring the possibility. In January the committee, led by Vermont State Treasurer Beth Pearce and including representatives from the business community, endorsed a state-sponsored retirement plan that would be voluntary for employers and employees and would allow employees to save through automatic, non-taxable payroll deductions.
Vermonters could see a real improvement in retirement security if the state adopted this plan. More than 100,000 Vermonters would gain access to a retirement plan. The benefits of large publicly managed retirement systems like those serving state employees or teachers are clear: They typically have lower fees and get better returns on their investments than individually managed accounts.
And increased economic security in retirement for individuals is good for the state. Instead of falling into poverty and needing additional public services as they age, financially secure retirees boost the economy by increasing the tax base and consumer spending.
Vermont and other states are taking steps to address the retirement savings problem despite the U.S. House’s recent action that would undermine these efforts. The state can and should continue to move ahead with this plan to make it easier for Vermonters to save for retirement. This is a classic example of government stepping in to correct a market failure that is hurting Vermonters.
Enacting the recommendations of the Public Retirement Study Committee is a low-cost, high-return way to improve the lives of thousands of Vermonters. The Legislature should act this session to advance the development of Vermont’s state-sponsored retirement plan.
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