Throughout the nation, more than 10,000 people reach the retirement age of 65 every day. But according to the U.S. Government Accountability Office, approximately 52% of households led by someone age 55 or older do not have any retirement savings at all. In fact, 63% of Americans plan on working after they reach retirement age. Senior financial stress can make those retirement years much harder to enjoy, but a voluntary retirement plan included in Governor Andrew Cuomo’s proposed 2018-19 budget could help millions of New Yorkers establish savings for their golden years.
A recent survey conducted by Nationwide found that 28% of recent retirees say that their lives are actually worse now that they’re no longer working. The main reason? They can’t pay their bills. That’s not surprising, considering that Economic Policy Institute data reflects that most older Americans simply don’t have enough savings to cover their expenses. Their analysis found that the average household led by someone aged 56 to 61 has approximately $163,000 in savings. However, the Bureau of Labor Statistics notes that the average salary for Americans between the ages of 55 and 64 is right around $50,000 per year. Unfortunately, most Americans underestimate the costs that come along with retirement and don’t find out until it’s too late.
Healthcare costs, for example, tend to increase in retirement. A healthy 65-year-old couple might end up spending $400,000 on medical costs (often due to Medicare’s limited coverage), and that doesn’t even include long-term care. And speaking of long-term care, Americans tend to miscalculate those costs, too. According to Age Wave, only 37% of those over the age of 50 think they’ll require long-term care in the future, but in actuality, around 70% will end up needing it. A failure to anticipate those costs can prove disastrous for many seniors.
However, there may be some good news for New York residents. Gov. Cuomo has included a measure, known as the Secure Choice program, into his budget proposal that would allow New Yorkers another way to save for retirement. It’s a completely voluntary program, for both employer and employee, that would establish a retirement savings plan through IRA payroll deductions. Employers would have no responsibility other than adding an automatic deduction line to employee paychecks; they would not need to match employee contributions. Employees, if they choose to take part, would actually own their IRA and could take it with them to any other job. Worker contributions would be managed and invested through the New York State Deferred Compensation Board.
AARP and several other state organizations urged legislative leaders to include Secure Choice in the 2018-19 budget, saying that people with access to retirement savings plans through their workplace are 15 times more likely to save for retirement than those who don’t have this access. All told, it’s estimated that the Secured Choice plan, if approved, could help 3.5 million New Yorkers who aren’t currently able to save for retirement through their jobs. AARP also notes that three-fourths of New Yorkers support the creation of such a retirement savings system.
In the coming weeks, Gov. Cuomo and other legislative leaders will negotiate a final budget for the fiscal year, which begins April 1. Proponents of the plan have lobbied in Albany in an effort to convince lawmakers to keep Secured Choice in the final version of the budget.