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Growing older without retirement savings is precarious for retirees and costly for the state’s taxpayers. To provide safety net supports for the more than 170,000 Rhode Islanders without retirement savings could cost taxpayers nearly a half-billion dollars in the long run.
Fortunately, there is another choice. One that not only will provide a more secure retirement for tens of thousands of Rhode Islanders and their families, but also would make our nonprofits and small businesses stronger and more sustainable.
The solution is to pass the Secure Choice Retirement Act, a voluntary, automated savings plan that would be publicly available to all Rhode Islanders who lack access to a retirement savings account via their employer. The benefits, simply put, are too big to ignore.
Studies show employees who have access to a retirement plan through payroll deduction are 15 times more likely to save for retirement than those who do not. However, many of our small businesses and nonprofits cannot offer retirement benefits because of high startup costs and a lack of administrative capacity. In a recent survey of local nonprofits, less than half indicated they offer retirement benefits. This issue also severely exacerbates worker recruitment and retention issues.
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If passed, the Secure Choice Retirement Act would make access to retirement benefits universal for all Rhode Islander workers. The savings plan accounts will be fully portable, employee-funded, and without cost to our small businesses and nonprofits. This means even the smallest microenterprise and nonprofits that operate with few employees can offer competitive and vital retirement benefits.
Passage of the act also will accelerate closing the racial wealth gap. More than half of BIPOC families in Rhode Island are at risk of having zero savings for retirement. But as we see in other states, similar programs are creating access to savings for hundreds of thousands of households.
According to The Pew Charitable Trusts, most Americans – when given the chance – will save through their workplace if they don’t earn a lot. State automated saving programs are seeing nearly 70 percent of eligible workers participating. In the private sector, Vanguard data shows 60 percent of workers making $30,000 or less participate in an employer retirement plan if one is available to them.
As capacity building organizations committed to helping our neighbors achieve their social and economic potential, we help Rhode Islanders start and grow for-profit and “social profit” businesses every day. We see firsthand the talented, dedicated employees who make these small organizations successful. And they deserve to not only provide for their families today, but to also be secure in their retirement tomorrow.
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The Secure Choice Retirement Savings Plan Act will further financial security and self-sufficiency. It can help break the cycle of generational poverty and increase the resources available to those Rhode Islanders who will follow us. More than 20 states, including neighboring Connecticut and Massachusetts, have pulled the policy lever and now offer publicly available retirement savings for workers without this benefit through their job. Right now, Rhode Island has the same opportunity, and we need to seize it.
Nancy Wolanski is the director of the Alliance for Nonprofit Impact at United Way of Rhode Island. Kristina Contreras Fox is the director of policy for Rhode Island Black Business Association.