Retirement reality

American workers must learn how to save

A new survey of households by the Federal Reserve Board reveals startling facts about Americans’ financial security, or lack of it. Nearly a third of workers have no retirement savings.

Forty percent say they never plan to retire, or at least that they intend to work as long as possible. Some states are taking sensible steps to help their residents save for retirement, at little or no cost to taxpayers, and their actions are worth watching.

Research shows that automatically diverting a portion of employees’ paychecks to retirement savings, while giving them the ability to opt out, dramatically increases the number of workers who save. Yet few employers offer such plans, instead requiring workers to opt in to retirement savings. Many companies don’t offer low-paid workers any retirement plans.

President Barack Obama is urging Congress to approve legislation that would automatically enroll workers in Individual Retirement Accounts if they do not qualify for employer-sponsored plans. The proposal would offer a small federal match on savings for low- and moderate-income families. Predictably, Congress isn’t moving.

An automatic savings plan would improve the lives of millions of Americans and reduce dependence on Social Security and other entitlement programs. California is launching a program that will divert 3 percent of workers’ earnings to retirement savings unless they opt out. Illinois and Oregon are considering similar measures.

Some politicians propose expanding Social Security benefits by closing tax loopholes for wealthy Americans. That option, however appealing it might seem, is politically unattainable right now.

But helping workers retire on their own earnings is a low-risk compromise that lawmakers should explore. The cost of inaction, to retirees and all other taxpayers, would be far greater.