AARP’s mission is to empower people to choose how we live as we age. Financial security is essential to that empowerment.
That is why AARP fights so hard to keep Medicare costs down and to preserve Social Security, and to ensure that people have opportunities to save and prepare for their future.
These days many feel their retirement is under pressure. Social Security was designed only to supplement retirement savings. Pensions, both in the private and public sector, have eroded dramatically. Inflation is putting the squeeze on the ability to save. And thousands of Rhode Island employees have no ability to save for retirement through their work at all.
It’s important to put in place a savings plan that can work for both employees and their employers. This plan has a name: RISavers. It will be a top AARP Rhode Island advocacy priority to pass legislation in the General Assembly to provide employees of small businesses with a choice to save for retirement savings through their employers.
A recent AARP Rhode Island survey found that small business owners in Rhode Island support RISavers as a low-cost, low-risk retirement savings option managed in a public–private partnership by the State of Rhode Island.
Support from small business owners is critical. For many reasons, the smaller the employer, the less likely its workers are to have access to a retirement plan.
- About 40 percent of Rhode Island private sector workers ages 18 to 64 in 2020 were employed by businesses that do not offer any type of retirement plan.
- Over 70 percent of workers at Rhode Island firms with under 10 employees, and about 59 percent at companies with between 10 and 24 employees lack a plan.
- In businesses with under 100 employees, 91,000 workers do not have access to a retirement plan, compared with about 81,000 workers in businesses with 100 or more employees.
You may be surprised to learn that 42 percent of Rhode Island workers with some college and 26 percent with a bachelor’s degree or higher work without the benefit of an employer-provided savings plan. And almost 30,000 employees earning more than $50,000 do not have access to a workplace plan. The need, you can see, crosses many lines.
Here’s how small business owners responded to our survey.
- Close to three-quarters (72%) of Rhode Island small business owners support a privately managed, ready-to-go retirement savings option that would help small businesses offer employees a way to save for retirement.
- Most (81%) agree that state lawmakers should support a bill to make it easier for small business owners to access a retirement savings option for their employees and themselves.
- Most (76%) small business owners in Rhode Island agree that being able to offer a voluntary, portable, retirement savings program helps local small businesses attract and retain quality employees and stay competitive.
- Among the nearly half (46%) of all small business owners who do not offer a retirement savings plan to their employees, most (71%) cite cost as a reason, followed by plan complexity (39%) or being too time consuming to operate (37%).
- Still, among those who currently do not offer a way to save for retirement to their employees, most (72%) would be likely to offer them access to a state retirement savings option if one were available.
Under the RISavers legislation, all private employees (who work for employers with 5 or more employees) would have the option to enroll in an IRA retirement program overseen by the state and managed by a private financial institution.
Employee participation would be completely voluntary, and any eligible employee may opt out of the program, or to increase or decrease their contribution rate at any time. Employees would have a range of choices for how to invest their savings, with a lineup of investment options overseen by the State Investment Commission.
RISavers would not expose employers to any cost, or to any legal or fiduciary liability. The benefit would be portable and stay with employees if they change employers.
It’s time we address Rhode Island’s retirement savings crisis head-on. The benefits of RISavers are clear. Let’s give our state’s workers an important new tool to set the course for their own financial future.
Catherine Taylor is the State Director of AARP Rhode Island