Minnesotans save, maybe, a hair more money for retirement than other Americans. But, like every other American, Minnesotans aren’t remotely saving enough to provide for their secure post-work, retirement life. Savings correlate with household income; the more money you earn, the greater the likelihood of adequate retirement savings. Since 72% of Minnesota households earn less than $100,000 annually, retirement savings for most people aren’t coming remotely close enough to meet the projected need.
The solution is simple: save more money. But, turning that simple idea into practice is enormously complicated because saving money for tomorrow always competes with money needed for today. For most Minnesotans living a paycheck or two or three from financial insolvency, today’s bills trump long-term savings.
That has to change.
The Minnesota State Legislature is considering HF2419, the Minnesota Secure Choice Retirement Savings Plan. Sponsored by State Representative Patty Fritz, (D-Faribault). The legislation would create a paycheck-point-of-contribution, state-managed retirement savings plan for Minnesotans that presently have no access to pension plans or workplace retirement savings benefits. An estimated 40% of workers, approximately one million Minnesotans, lack that access. Today, 168,000 Minnesotans age 55-64, have no retirement savings. The need for better, purposeful retirement saving is clear.
This is not a new idea. California is working out the bugs on its new system. It requires employers to allow workers to use their workplace payroll system to directly deposit money into a California-managed savings account while functionally paying no fees or very low fees. Employers are not required to match worker retirement savings contributions.
This is smart public policy. California has every interest in increasing its citizens’ retirement security while decreasing costly public social safety net reliance. It’s called “providing for the common good” and it will leverage millions of small retirement savings investments that benefit the savers rather than big money fund managers.
Retirement savings are best achieved purposefully, drawn from a working life’s worth of contributions. Current savings data tell us how far we’ve come; retirement need projections reveal savings shortcomings. Both make the case for bold action creating a simple but effective retirement savings mechanism laid out in the Minnesota Secure Choice Retirement Savings Plan. The idea is the easy part. Everyone, without exception, agrees that Minnesotans need to save more for retirement. Now, Minnesota policymakers must turn a simple idea into a simple, effective plan.