Experts on retirement saving have plenty of ideas for making 401(k) plans work better. But most agree on the top priority: get these accounts into the hands of more people.
Only about half of private-sector workers are covered by an employer-sponsored retirement savings plan at any given time—and that figure hasn’t budged much over the years. The lost opportunity to save at the workplace translates into far too many people retiring with paltry savings or none at all, leaving them reliant only on Social Security in retirement.
But what if we could make retirement savings accounts as universal as Social Security, which covers nearly all U.S. workers? That could be done with a federally sponsored retirement plan that would automatically enroll all workers who don’t have access to a workplace savings plan.
Policymakers and lawmakers have tried to advance such a plan, including:
- The equivalent of a national 401(k) plan, which would feature a matching contribution from the government.
- A national version of the “auto-IRA” plans that have been enacted by 17 states. This would be similar to the 401(k) idea but wouldn’t include a matching government contribution.
In both cases, most employers who don’t offer their own plans would be required to enroll workers in the government option and to make payroll deductions.
In my latest Morningstar column, I explore both of these ideas, and also update the progress on “multiple employer plans,” a sort of shared platform that aims to incentivize participation by reducing administrative and fiduciary burdens for individual small employers.
