Giving Compass' Take:

· AEI's Andrew G. Biggs explores retirement savings and expands on the negative impact of forcing low-income workers to save more for retirement. 

· What are some things Biggs points out about saving for low-income workers? What is the goal of saving for retirement? How can low-income workers maximize their savings but keep the same federal benefits they have now? 

· Check out this article about building an inclusive US retirement system to learn more


It’s a fact: low-wage workers don’t save much for retirement. States are aiming to fix that. But here’s a question: is it really a problem that needs to be fixed? How hard should we push the poor to save for retirement?

Bureau of Labor Statistics data show that 75% of workers in the upper half of the salary distribution — those who earn at least $36,000 on a full-time basis — participate in a retirement plan. Among workers in the bottom quarter of the wage distribution, with average salaries of about $24,000 per year, only 25% participate. That’s a big difference.

States like California, Oregon, Illinois and Connecticut are rolling out so-called “auto-IRA” programs, which would automatically enroll employees whose jobs don’t offer a retirement plan into a Roth Individual Retirement Account. Employees could choose not to participate, but otherwise they’ll have 3% to 5% of each paycheck automatically deposited in their IRA. Nobel-prize winning behavioral economist Richard Thaler, whose research helped inspire auto-IRAs, writes, “There is no coherent argument against these state plans.”

I agree that everyone should have the opportunity to save for retirement. But it is far from a no-brainer that lower-income Americans need to save more. In fact, there are a number of good arguments against it. And if we push low earners unnecessarily to boost their retirement savings, that leaves less money for everything else.

But first we need to get something straight: retirement saving isn’t about making yourself rich in retirement. In reality, retirement saving is about being able to maintain your pre-retirement standard of living once you stop working. And most Americans, including low earning workers, seem able to do that.

Read the full article about saving for retirement by Andrew G. Biggs at AEI.