Less than three months after Governor Jared Polis enacted Colorado’s Secure Savings Program, Treasurer Dave Young found himself in Aspen touting the benefits of the plan – on track for implementation in October 2022 – which will create an Automatic Independent Retirement Account (IRA) with an opt-out option.
The program, he said, does not target companies that already offer pension plans, but rather those that have at least five employees otherwise without a plan available to them.
“When we start talking about the over a million people here in the state of Colorado who would be affected by this – not all of them are going to stay there, but a lot of them are – it’s a really important work. Young said in an interview last week.
According to a study commissioned by a committee chaired by Young, the answer ‘do nothing’ – that is, if the state does not respond to the fact that about half of Colorado workers currently have no savings. -retirement – would ultimately have a price tag of around $ 10 billion over the next 15 years.
It’s a blow the state budget couldn’t take, Young said.
“I was on the joint budget committee when I was in the House, so I had a pretty thorough review of the budget,” he said, referring to his time at the Capitol in Denver from 2011 until to become treasurer in 2019. “I know for a fact that our budget cannot support this, so something had to be done. We had a recommendation from this task force that I led to introduce a bill to establish a program similar to what we have seen in Oregon, Illinois and California. ”
The idea is focused on simplicity, he said: Many small businesses do not have the legal and financial resources to offer a retirement program to their employees, regardless of their desires. And for many people, the thought of navigating the myriad of IRA and Roth IRA options that exist on their own, without financial education or financial guidance, often leads to choice paralysis and inaction.
As a result, more than 900,000 Colorado workers have no significant retirement savings, Young said.
The idea of this program is therefore to remove some of these barriers and instead allow workers to start at any level of savings they deem comfortable in order to capitalize on the benefits of compound interest, s’ they start young, or started at all.
“We have a board handling this and private sector record keepers and fund managers who will actually handle all the detailed work, so the business owner doesn’t have to worry about that.” Young said. “All we do with them is just allow us to use payroll deduction so that the saver can actually withdraw the money. Again, if they think they can’t afford it, they can definitely walk away. But sometimes you’d be surprised at what you can afford… if you save a little.
And unlike traditional employer-sponsored employment options, the public-private partnership behind Colorado’s Secure Savings Program creates an IRA that’s attached to the individual, so those who stay in the option don’t don’t have to worry about updating accounts every time they change. works.
“So really, there’s no burden on the business other than just allowing us to use payroll deduction. Again, if they have a retirement savings plan, we’re not going to overlay it; we’re just trying to get more people to save, ”Young said.
The idea, he stressed, is to save as many people as possible – there’s no better time than today to start, he stressed – so that retirement becomes a legitimate option for a larger number of people, and for those who were always going to retire, they can do so more comfortably. Social Security creates the defined benefit, but the system is not as well funded as it was originally intended, so it is essential that people can supplement their savings in order to avoid falling into the need for social safety nets. , did he declare.
“I think everyone understands that they want to retire – how to get there is often not clear to people,” he continued. “That’s why we have so many people not saving, because they haven’t really sat down and figured out what my real costs are in retirement?” And when you’re 25, it’s a bit difficult to predict that.