Anyone who’s lived paycheck to paycheck knows that it’s easier to save if you have a payroll deduction option.
If the money comes out of your paycheck before you get a chance to spend it, you’re more likely to save.
I have lived paycheck to paycheck, and don’t think I would have any money saved for retirement if my employers didn’t take the money out for me.
The problem in Hawaii and across the nation is that too many workers — about 215,000 in Hawaii and 55 million across the country — cannot save for retirement at work. Many of them work for small businesses who find it too complicated, time-consuming and expensive to offer retirement savings programs to their workers, even though many of them want to provide a way for their employees to save for retirement.
It’s just common sense.
If we can make it easy for workers to save for retirement, more people will save, and everyone wins. Small businesses benefit because they can offer their workers access to a savings program that will help them retain good employees. Taxpayers benefit because as savings rise, the demand for government-funded social services will decrease as fewer kupuna retire broke. Most importantly, workers and their families win because they will have a chance to build a secure retirement – to enjoy and afford time with their grandchildren, travel, and avoid falling into poverty.
Suppose we don’t get more people to save. A recent Econsult Solutions study estimates that state taxpayers will spend $1.72 billion over 20 years for government services like health care for workers who reach retirement age without adequate savings. In other words, $1.72 billion is the cost to all of us for doing nothing.
Other states are tackling the retirement crisis head-on. Oregon, California, and Illinois have set up automatic IRA programs that have so far helped 440,000 workers save more than $410 million. Connecticut and Maryland are scheduled to launch this year, and several other states are not far behind.
Senate Bill 3289 SD2 would set up a similar retirement savings program in Hawaii. The program would be a public-private partnership like the college 529 savings plans in all states, including Hawaii. The state would be responsible for passing legislation to create the retirement savings program and setting up a board to oversee the operation. But experienced private financial services companies invest the funds and hold the money in individual accounts that belong to the worker and stay with them if they change jobs.
Oregon’s program, the first in the nation, has been in operation since 2017. Roughly 70% of workers offered a chance to save at work open retirement savings accounts. Even lower-income workers participate when they are offered an easy way to save. The average amount saved each month is $166, and the average income of covered workers is less than $29,000 a year. In California, a higher cost of living state, participants save an average of $150 a month, and the average income of covered workers is $25,000.
The main opponents of SB 3289 are insurance and financial companies that have had decades to go after this portion of the market, and they haven’t done so.
In a Tribune-Herald article last month, Honokaa florist Alison Higgins said she can’t find anyone to help her provide access to a savings program for her workers. Other small business owners have told us similar stories. That’s one of the reasons why eight out of 10 small businesses that we surveyed support a state-facilitated retirement savings program as proposed in SB 3289.
This bill, SB 3289SD2, has passed the Senate and crossed over to the House of Representatives. A companion bill died in the House because our representatives did not act.
This is unacceptable. Urge your representative to hold hearings on SB 3289 and pass the bill. Go to action.aarp.org/hawaiisaves. Doing nothing is not an option.
Keali‘i Lopez is the state director of AARP Hawaii, a nonprofit, nonpartisan organization dedicated to empowering Americans 50 and older to choose how they live as they age. Her career spans more than three decades and includes executive and leadership positions in government, nonprofit and business organizations.