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Retirement options dwindle, and states step in. But should they?

Whether it's the reality of living paycheck-to-paycheck, or just plain procrastination, more than a third of all Americans say they have nothing saved for retirement.

With fewer companies offering pension plans, and the number of companies offering employees 401(K) programs decline, more and more workers could find themselves on their own in their golden years. Less than half of private sector workers have access to retirement plans at their workplace, a state of affairs that is making state governments step in.

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"States are moving because the feds won't," Teresa Ghilarducci, economics professor at the New School told CNBC's On The Money in an interview.

"The idea is that if the federal government isn't going to do something and everybody in cities and states knows there's going to be a retirement crisis," Ghilarducci added, "the states said, 'we should do something.'"

'Public private partnership'

Pension Benefit Guaranty Corporation, Washington.
Source: Pension Benefit Guaranty Corporation
Pension Benefit Guaranty Corporation, Washington.

More than 20 states are developing retirement savings plans for workers who don't have plans at work. Meanwhile, legislation for state-based private retirement plans has already passed in Illinois, Oregon and Washington State.

Illinois's plan will start in 2017. The state would require businesses with at least 25 employees but no employer-based retirement plan to participate, but workers can opt out at any time. Illinois will automatically deduct 3 percent from workers' paychecks into a state-run investment pool.

Some observers, however, argue that forcing retirement plans on the private sector is not the best method.

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"We can all agree that Americans can do a better job at saving for retirement, but lack of options is not the issue," said Andy Blocker, executive vice president of public policy and advocacy at the Securities Industry and Financial Markets Association (SIFMA).

"We don't want to create fifty new state retirement plans, especially when the (pension) plans that exist currently in states are nearly one trillion dollars underfunded," he told CNBC.

Blocker added that SIFMA is not in favor of many of the new state-run programs, but the "best example" would be Washington state's plan, which he called a "public-private partnership."

Federal option

Washington's program will have a marketplace with a digital portal to locate private sector plans, in addition, employers can provide up to a 3 percent match of workers contributions.

However, Blocker says people have to "get in the habit of saving, " adding that "people today are not saving mostly because they have competing financial needs, and they don't think that extra dollar (investment) is going to do a difference."

Yet both Blocker and Ghilarducci acknowledged a downside problem with individual state plans. What happens when workers cross state lines and move between states? That answer has yet to be found.

Another retirement saving option is a federal one. Last week, the Treasury Department launched nationally, "myRA", a government–backed Roth IRA for workers who don't have access to a work-based retirement savings program.

Ghilarducci told CNBC that the government plan "has been described as a little bicycle with training wheels." She called it a "public option for people who don't want to pay high fees with 401k's."

Under the rules of myRA, first announced by President Obama in 2014, individuals who earn less than $131K (and couples earning less than $193K) can contribute up to $5,500 a year ($6,500 if over age 50). The program has no fee, no minimum investment or risk of money loss, but when the account reaches a maximum of $15K in value, it must be moved to a private Individual Retirement Account.

Ghilarducci, however, noted a flaw in the myRA plan. "The employer doesn't provide any match for it, and the tax subsidies don't help low income people," she said. Treasury views the myRA program "not so much as a retirement vehicle, but a way for households to have a little bit of rainy day funds."

Blocker said the organization supports myRA , adding that the "great thing about myRA is there are no barriers to entry." Since it is national and not state-based, "it's very portable," he added.

Blocker stated that the real issue is "more awareness," getting people to "know about the options that are out there," as well as "the importance of saving for retirement."

On the Money airs on CNBC Saturday at 5:30 am ET, or check listings for air times in local markets.