EDITORIAL: ‘Save for tomorrow!’ Keeping Illinois retirees away from the cat dish

Chicago Tribune (IL)

July 27--Whether you'll have to eat Meow Mix in retirement has some public officials concerned. Does having enough money to live on after your final paycheck worry you? We hope it does, but we can't be sure. That's because "How America Saves 2018," the latest iteration of an annual report from the Vanguard Group of mutual funds, suggests that many Americans are saving much less than they'll need to supplement payments from Social Security -- a program that, without reforms, is racing toward insolvency.

Keeping tomorrow's retirees out of possible poverty is, therefore, a serious concern and arising public policy priority. This week Republicans in the U.S. House floated plans for a new kind of universal savings account -- less specialized and less rigid that the current array of college, health and other federal savings plans. That's a potential plus for many Americans, including millions of workers whose private-sector employers offer no pensions or retirement savings plans. For many of those workers, life after career is a crisis waiting to happen.

Illinois alone has between 1 million and 2.5 million such workers -- estimates vary because nobody really knows -- at small companies or among the self-employed. Our mission here is to point these Illinoisans toward a now-unfolding, state-authorized program called Secure Choice. Illinois is one of the first states to implement such a plan. We began supporting Secure Choice in 2014 when state Sen. Daniel Biss, an Evanston Democrat, introduced the enabling legislation. And we're encouraging eligible employers and workers to hop on board now that state Treasurer Michael Frerichs is rolling out the program.

Yes, we too wondered at first about trusting the financially ham-handed state of Illinois to oversee a retirement program. Then we came to understand that "oversee" doesn't let Springfield within arm's length of workers' money. It's deducted from paychecks; state government merely waves at the money as it travels to employees' low-fee accounts at a private-sector fund manager.

Do you work at a family-owned restaurant? Fix cars at a local mechanics shop? Serve a small not-for-profit? Many businesses in those sectors can't afford to offer the 401(k)-style plans that many of us enjoy -- and they certainly can't afford to offer pensions.

So a nudge from government that does not put taxpayers at risk makes sense. Workers start out setting aside 5 percent of each paycheck. They choose a Roth individual retirement account and can manage the money themselves. Employers don't match contributions from employees. Instead they merely set up the deduction process, and the state has made it pretty easy. Once set up, the process is automated and mindless. The state contracts with the money manager who accepts each worker's contribution, and has safeguards in place to monitor investment returns, account costs and portfolios.

To the extent this is a nanny-state program that imposes duties on small employers, the inconvenience is minuscule compared to the good that Secure Choice will perform for workers who otherwise wouldn't save.

No investment comes without risk. These workers will face the same ups and downs as anyone whose retirement depends on investment returns. But it's their money, not taxpayers', and workers can opt out if they don't want to participate.

We hope they won't. Studies have shown that if employers don't offer a retirement program, workers put off saving. By contrast, when workers do have access to a program, many will participate. As the money automatically comes out of their paychecks, they adjust.

And they build nest eggs. Which sound more appetizing than Meow Mix.

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