Updated with clarification
A national policy to close the retirement savings gap, in which many employers would be required to offer their workers either an individual retirement account or 401(k) plan, could dramatically boost retirement savings for millions of employees and provide larger annual incomes for retirees, according to research from Georgetown University released Tuesday.
Depending on the design features, national universal retirement access policies could increase the number of workers saving for retirement by 2040 by 28 million to 40 million, with participation increasing about 50% to 70% among private sector workers who currently lack access, according to research from the Georgetown University Center for Retirement Initiatives in collaboration with Econsult Solutions, a Philadelphia-based consulting firm.
Policies like automatic enrollment payroll deduction IRAs and voluntary and mandatory employer contribution 401(k) programs could increase cumulative total retirement savings by $1.4 trillion to $1.9 trillion by 2040 and accelerate economic growth, increasing gross domestic product by $72 billion to $96 billion in the next 20 years, the research found.
Currently, there are an estimated 57 million, or 46%, of private sector workers who do not have access to a retirement plan through the workplace, said Angela M. Antonelli, executive director of Georgetown's CRI, during a webinar Tuesday outlining the research.
In recent years, states have been leading the way in getting more workers saving for retirement, Ms. Antonelli said, referencing auto-IRA programs implemented in states like Oregon, California and Illinois.
In looking at the experiences of other countries and states with auto-IRA programs, it's clear that "expanded access can be achieved in a simple, cost-effective way that supports and includes a private market of providers ready and willing to compete to provide options to employers and their workers," Ms. Antonelli said during the webinar.
If talks pick up at the federal level on establishing a national auto-IRA program or something similar, existing state programs can be preserved and work in tandem with the national objective, said Courtney Eccles, Chicago-based director of the $42.8 million Illinois Secure Choice retirement savings program, during the webinar. "I think there is absolutely room to grandfather in our programs and see them as part of that solution," she said.
But for now, "there hasn't been much movement at the federal level to actually enact a program, so I think the states continuing to move forward allows us to keep reducing that access gap in the interim," Ms. Eccles said.