Today, the U.S. Department of Labor finalized rules enabling states to establish retirement savings programs, while proposing new rules to allow some larger cities to create plans of their own. Today’s announcement will ensure that millions more Americans are able to save for retirement at work and better prepare for their golden years.
The President firmly believes Americans should be able to enjoy a secure and dignified retirement after a lifetime of hard work. That’s central to middle class economics. While Social Security is and must remain a rock-solid benefit that all Americans can rely on, the fact remains that too many Americans reach retirement age without enough savings to supplement their Social Security checks. In fact, fewer than one third of individuals aged 65 to 74 have any savings in a retirement account, and those that do have a median savings balance of just $49,000.
This Administration has proceeded on two tracks to help ensure that all Americans are prepared for retirement. First, we’re protecting workers’ savings so that families who have done all the right things can enjoy a dignified retirement. To that end, this spring, we made real progress protecting workers’ savings when the Department of Labor finalized rules requiring financial planners to provide advice that is truly in their clients’ best interest. These rules will help minimize conflicts of interest that cost savers an estimated $17 billion each year.
Second, we’re making it easier for workers to save for retirement in the first place. Right now, about one third of all workers do not have an opportunity to save for retirement through their employer. Today’s final rule facilitating state retirement savings programs fulfills a commitment the President made last year and marks a major step towards ensuring that every American can save for retirement at work. Eight states – California, Connecticut, Illinois, Maryland, New Jersey, Oregon, Massachusetts, and Washington – have already passed laws creating their own retirement savings arrangements. The states have taken action, even while Congress has failed to move forward on the President’s proposals to automatically enroll workers who don’t have access to workplace savings plan in an individual retirement account (IRA). Today’s rule will clarify the status of existing state efforts, and will enable more states to create their own programs. The Department is also publishing a proposed rule that would allow some larger cities to establish their own retirement savings programs.
These state-level efforts will go a long way toward giving more Americans a secure retirement. For example, in just Maryland and Connecticut alone, almost one and a half million people who were previously unable to save for retirement at work will now be automatically enrolled in a retirement account. If every state created a retirement savings plan like these, tens of millions more Americans would be able to save for retirement at work.
Today’s announcement is another example of this Administration’s commitment to helping state and local governments support working families in areas where Congress has refused to act. While Congress has failed to raise the federal minimum wage – though it has been almost a decade since the last minimum wage law was passed – eighteen states and the District of Columbia have raised their minimum wage since the President called for an increase in 2013. And thanks to today’s announcement, more states will be able to take action to help their citizens better prepare for retirement.