With the depletion of Social Security looming and inadequate savings among many Americans, five states are testing innovative and controversial new legislation to help people better prepare for retirement. The new state laws could open the door to similar measures in other states — depending on the outcomes of the upcoming election, according to Bloomberg.
Connecticut, Illinois, Maryland and Oregon have all passed laws mandating employers to either offer employees their own retirement plans or connect workers to an adequate state plan. California is also considering a similar law. Retirement experts hope these plans, the earliest of which take effect next year, will help improve Americans' 401(k) plans, according to the report.
Here are five insights about the new laws, and how the presidential election could impact people's retirement.
1. Under the new laws, work-based retirement plans are opt-out, not opt-in. They will require that employees be automatically enrolled in a state-sanctioned retirement plan if their employer doesn't offer one. The self-employed wouldn't be automatically enrolled, but they would have access to a new portable saving option that has been vetted by experts, according to the report.
2. The new laws couldn't come soon enough, according to supporters, as the government estimates Social Security will no longer afford to pay full benefits by 2034. According to Bloomberg, three out of five American households have no money saved in a retirement account, and only about half of private sector employees have a retirement plan from their employer.
3. While Democrats have championed the new state laws, the upcoming election could bring in a wave of Republican lawmakers hesitant to impose such requirements on employers. "Encouraging people to save for retirement is a good thing, but forcing a new mandate and taking over a private-sector industry is not the appropriate role for the state," Conn. Senate Minority Leader Len Fasano (R) said earlier this year, according to the report.
4. AARP, which supports the retirement laws, says it will be pressing state candidates to take a stance.
5. The presidential candidates have barely discussed personal finance. Both Hillary Clinton and Donald Trump have only addressed Social Security, and in mostly vague terms. Mr. Trump said he wants to keep Social Security as is without cutting benefits, while Ms. Clinton proposed a slight expansion of the federal program while raising taxes among the top earners to bolster its finances.