What are the Potential Benefits of Universal Access to Retirement Savings?

In Collaboration with Georgetown University McCourt School of Public Policy, Center for Retirement Initiatives.

What are the Potential Benefits of Universal Access to Retirement Savings?

An Analysis of National Options to Expand Coverage

The Center for Retirement Initiatives (CRI) at Georgetown University engaged ESI to assist the Center in developing an analysis of national options to expand retirement savings coverage. The CRI study examines how characteristics such as account type (payroll deduction IRA vs. 401(k)), the employers required to participate, and default levels of employee contributions and any employer contributions will drive access, savings, asset growth, and retirement income over time. The approaches analyzed would result in significant expansions of access and participation among the estimated 57.3 million private sector employees who are not offered any workplace retirement plan today.

Modeling was undertaken on several policy scenarios, selected based on the range of state programs and national proposals, to under their impacts on retirement savings participation, savings, and government expenditures and revenues. Regardless of the model selected, the study concludes that the benefits to savers, retirees, and the nation’s fiscal and economic well-being can be enormous.

Depending on the design features, a national approach to universal access to retirement savings which would require some or all employers to offer their workers either an IRA or 401(k) could:

• Increase the number of workers saving for retirement in the year 2040 by 28–40 million, with participation from about 50–70% of private sector workers who currently lack access;
• Help a young worker with a modest income who starts saving early and follows savings defaults for 40 years to save enough to generate as much as $14,320 in additional annual income for retirement, increasing to $21,300 in annual income if eligible to take advantage of a refundable Saver’s Credit;
• Increase cumulative total retirement savings between $1.4 trillion and $1.9 trillion by the year 2040; and
• Accelerate economic growth, increasing national GDP by $72 billion to $96 billion in the year 2040.

This report draws from the experience of other countries and from the early state-facilitated retirement programs in the U.S. to make the case that universal access to retirement savings options can be achieved in a simple, cost-effective manner with private market providers ready to compete to offer options for workers.