Personal Finance

Crafting a better retirement for small business workers

Key Points
  • More than 50 percent of workers ages 18 to 64 don't have access to a savings plan.
  • Oregon is offering a program that is the first-of-its kind in the country.
State of retirement
State of retirement

Putting your savings strategy on autopilot is one sure-fire way to make certain that you're regularly stashing away money for retirement.

Financial advisors often suggest contributing to your 401(k) or other retirement savings plan at work as the first step in building your nest egg.

Yet many Americans don't do that. In fact, 20 percent of working Americans are failing to save any of their income – and one in six blame their job, according to a new study from Their lack of saving is not necessarily because they're undisciplined. It simply may take more effort than they're willing to give.

One of the obstacles: Their employer doesn't offer a 401(k). Employees would have to set up a retirement account on their own through a bank or investment firm.

About 57 million Americans have no access to a retirement savings plan through their employers, according to AARP. That's more than 50 percent of workers ages 18 to 64. Most of them — roughly 32 million — work at small businesses with fewer than 100 employees.

Oregon, along with other states, aims to decrease those numbers — by offering a retirement savings program that is the first of its kind in the country. Employees at small businesses throughout the Beaver State are being offered the chance to stash away a portion of their pay through a government-sponsored retirement plan, called "Oregon Saves."

The program requires employers who do not offer a 401(k) to automatically deduct 5 percent of an employee's wages after taxes and send it to their individual retirement account, or IRA. Workers can contribute a maximum of $5,500 a year. The plan is managed by the state and workers must opt-out if they don't want to participate. So far, many being given the chance to participate are doing it.

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"We have about 5,500 people actively contributing to accounts at this point ," said Tobias Read, Oregon's state treasurer. "There are about 20,000 in the process, and we expect 1 million people who could potentially participate."

Chris Smyrl is a 32-year-old tap room manager at Reach Break Brewing in Astoria, Oregon.

He is now contributing 5 percent of his pay to his plan — it's the first time he has ever saved for retirement. "It's something that's always in the back of your mind ... and say 'Oh, I can always do that later,'" he said. "Now it's 'later.'"

How much do you need to retire?
How much do you need to retire?

It's an opportunity that Reach Break Brewing owner Josh Allison, 35, is proud to offer to employees at his budding brewery.

"You spend time a lot of energy working with people, developing relationships and they become family,' Allison said. "And you want the best for them, you want them to provide for themselves later in life."

Payroll deduction increases participation

Workers are 15 times more likely to save for retirement when they have a payroll deduction program through their employer, according to AARP's Public Policy Institute. And, a new AARP national survey found that 80 percent of private sector workers ages 18 to 64 support state-sponsored public-private partnerships designed to help employees save money for retirement.

Critics say there is too much paperwork and is too time consuming for companies that already offer 401(k) plans to show that they comply with the new legislation governing a state-sponsored retirement plan.

One thing the savings plan allows us: People will be able to view this as a long-term career rather than a stepping stone.
Josh Allison
owner,  Reach Break Brewing

Yet, more states are following Oregon and have enacted legislation for their own retirement plans, with Illinois and California expected to roll out plans this year. At least two dozen states are in the progress of examining or implementing legislation to offer government-sponsored retirement plans.

Small business owner Josh Allison says these plans are a great perk not only for employees but for smaller employers as well.

"We don't have assets bigger corporations and companies do as far as recruitment packages," he said. "One thing the savings plan allows us: People will be able to view this as a long-term career rather than a stepping stone."

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