How will State-Run Auto-IRAs Affect Workers?

Harris

Troske & Yelowitz

To encourage savings among workers without access to employer-sponsored retirement plans, several states have proposed defaulting workers into state-run individual retirement accounts known as Auto-IRAs. Plans such as OregonSaves automatically enroll workers and by default increase their contributions over time. Given low opt-out rates, these policies have the potential to increase retirement savings for workers without access to employer-sponsored plans. Using survey data, we find that over 24 million workers could automatically be enrolled in an Auto-IRA if enacted on a national scale. Nonetheless, these policies have the potential to adversely affect individuals with debt and current financial difficulties who do not actively opt-out. One-third of potentially affected workers hold credit card debt with an average balance exceeding $5,000. Furthermore, approximately 15% of potentially affected workers have difficulty meeting basic needs.

Published: September, 2018

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