Debate: Do State Auto-IRA Programs Benefit Taxpayers?
In today’s fluid situation where taxpayers frequently move between states and change jobs, we need a federal-level rule that provides retirement income security regardless of the taxpayer’s state of residency.
Bloink: Hundreds of thousands of American taxpayers today participate in retirement plans only because of state-mandated auto-enrollment features. By making retirement planning options mandatory at the state level, we’re educating taxpayers about their options and needs.
We’re also making participation easy because these taxpayers aren’t required to seek out a financial institution to sponsor independently established IRAs.
Byrnes: Yes, state-level programs do have the effect of educating taxpayers who may otherwise be unaware of their retirement planning options, but we must be focused on a more widely impactful federal level program that will give taxpayers the tools they need by making retirement savings options mandatory at the federal level.
These state-sponsored IRAs simply don’t offer the same level of benefits provided by workplace plans.
Bloink: What the states are doing with these auto-enrollment IRAs is having a profound impact on the retirement security landscape. Auto-enrollment combined with payroll deduction features make it easy for employees to save for retirement when their employers choose not to provide robust retirement savings options.
Auto-enrollment IRAs also offer significantly higher returns than those that taxpayers can expect from a typical bank account. These programs essentially level the playing field, especially for lower-income taxpayers who are the least likely to have access to a valuable employer-sponsored retirement savings program.
Byrnes: Countless Americans today continue to rely on the federal Social Security program as their primary source of anticipated income during retirement. For many, those benefits are simply not going to be enough. We’re also talking about the employees who are the least financially able to fully fund their own retirements.
These state-facilitated programs may offer benefits, but they are no match for a fully operational nationwide employer-based retirement savings system, especially when em]ployer matching contributions, which are not available under the state-run programs, are considered.
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