It has been my life’s work to help people take control of their finances and gain economic independence. For some people, that means pursuing further education or career training. For others, it’s owning their own home or starting a business. But the foundation of any goal is a savings plan and financial literacy.
It’s no news that Maine’s older population faces unique challenges. One of the biggest is planning and saving for retirement. According to data from AARP, about 46 percent of private-sector workers in Maine – 235,000 people – do not have access to an employer-sponsored retirement savings program. Without a work-sponsored plan, it’s hard to find the time and information needed to navigate saving and investing for the future. In fact, data suggests that people are 15 times more likely to save for retirement when they have access to a payroll deduction plan through their employer.
During my time in the Legislature, I’ve worked to create a program to help more working Mainers plan and save for their golden years. I hear from many young people that they truly don’t know when or even if they’ll have the money to retire. At the same time, I hear from retirees that their fixed income just doesn’t cover all their bills. More than a third of retirement-age Mainers rely solely on Social Security payments, which average just $18,000 per year.
The COVID-19 pandemic has shone a spotlight on the many holes in our safety net, including the lack of a financial cushion created through regular savings. Sadly, too many workers simply don’t have savings to get them through an emergency, never mind provide them with a retirement fund. Nationally, 26 percent of working-age adults have no retirement savings at all.
I’m proud to share that this year in the Legislature, we were able to pass the Work and Save bill into law with overwhelming bipartisan support in both the House and Senate. Under L.D. 1622, which creates the Maine Retirement Savings Program, employers that don’t already offer a retirement savings plan will facilitate their employees’ contributions to a Roth IRA account directly from their paychecks, just like employees of bigger companies with their own retirement plans do. The account will be in the employee’s name and stay with them from job to job, until they’re ready to retire. And because it’s an IRA plan, business owners won’t contribute any of their own funds to their employees’ accounts.
While I was working on this bill, I talked to many small business owners who wanted to offer their workers a retirement savings plan, but they simply didn’t have the money to start one or the time to manage the savings. This new program won’t add any undue burden to these small businesses, but it will give them a real boost. With headlines all over the news about businesses struggling to hire qualified workers, having an extra benefit to offer potential hirees will help employers entice and retain good workers.
There’s even more to celebrate: Over time, the Maine Retirement Savings Program will save taxpayer dollars. Right now, because so many retired Mainers have such a small fixed income, they rely on social safety nets, including state welfare programs, just to make ends meet. According to the findings of a 2017 report from the Margaret Chase Smith Policy Center at the University of Maine, if retired Mainers had just $1,000 more in income from savings per year, the state would save a total $15.6 million per year by 2032. That means more Maine retirees will be living their later years in dignity, and the program will simultaneously take pressure off Maine taxpayers.
This new law is a win for Maine workers, Maine businesses and Maine taxpayers. I’m incredibly proud of the work that went into crafting this program and the enthusiastic support from legislators on both sides of the aisle and across the state. This is an investment in Maine’s future that is guaranteed to pay off.