Some workers left out from retirement savings plans

It's been well-documented that Americans, on average, haven't saved nearly enough for retirement.

Some, though, are a lot better off than others. And that may have to do with a wide gap in access to a retirement savings plan at work.

That disparity was described in detail in an analysis released Wednesday by The Pew Charitable Trusts, about access and participation in retirement savings plans.

Overall, the retirement savings shortfall has been well-documented. A recent report from the Government Accountability Office found that among those who have saved, their nest eggs are small; the median amount is about $104,000 for households with members aged 55 to 64 years old and $148,000 for households with members 65 to 74 years old.

If invested in an inflation-protected annuity, those savings would generate just $310 and $649 per month, respectively, according to the GAO.

But millions have nothing to fall back on in retirement beyond a federal Social Security check. Among households with members aged 55 or older, nearly 29 percent have neither retirement savings nor a traditional pension plan, the GAO found.

That may be because many of them — more than 30 million, by Pew's estimation — don't have access to a retirement savings plan at work. The data, drawn from federal sources, show wide demographic and geographic gaps in access and participation in the saving plans.

A lot depends on where you live. The share of workers in Wisconsin who can save for retirement at work, through a pension or 401(k) plan, was more than 20 percentage points higher than in Florida.

There were also big differences in access from one industry to the next.

More than two-thirds of workers in manufacturing jobs had access to a retirement savings plan at work, and more than six out of 10 participated, the Pew analysis found.

That contrasts with about a third of leisure and hospitality industry workers who have access to a plan; less than a quarter participate.

Higher income workers are more likely to have access to a work-based retirement savings plan.

So are higher-educated workers.

Nearly 70 percent of workers with a bachelor's or advanced degree have access to a retirement savings plan at work. For those with less than a high-school diploma, less than 30 percent have access to an employer-sponsored plan.

And the retirement savings gap splits along racial and ethnic lines, the Pew researchers found.

Some 63 percent of white, non-Hispanic workers have access to retirement savings plans at work, compared to 56 percent for black, non-Hispanics and just 38 percent for Hispanic workers.

To help fill some of those gaps, the White House announced a rule last month that will help states set up retirement savings programs for the millions of people who don't have access to plans at work.

So far, eight states have started or are looking into legislation to set up retirement accounts for employees who otherwise can't save for retirement. California was the latest state to do so, when the state assembly last month approved the Secure Retirement Saving Program, taking it a step closer to becoming law.

Other states working on similar plans include Connecticut, Illinois, Maryland, New Jersey, Oregon, Massachusetts and Washington.

The Labor Department also announced a proposal to expand the rule to cover a limited number of larger cities and counties.

Federal law, specifically the Employee Retirement Income Security Act of 1974, has deterred many states from proceeding with similar payroll-deduction IRA programs. That's because it was unclear how these state plans would have been subject to ERISA, which is the regulatory framework that governs traditional 401(k) plans.

In its analysis, Pew also surveyed medium and small businesses about their retirement savings plans.

Those who offered them said a plan helps attract and retain good workers. Those who didn't gave multiple reasons, including a belief that workers prefer higher salaries over increased benefits.

Some were also skeptical about state-sponsored plans, saying they weren't sure how well states were prepared to administer the plans. Employers who now offer retirement plans said they would not drop plans if a state program were made available.