Researchers estimate savings plan would increase retirement savings for over 400,000 Oregonians
Portland, Ore. – On Wednesday, researchers from the Northwest Economic Research Center (NERC) at Portland State University released a new report that details the growing retirement savings crisis in Oregon and projects the impact that a state-sponsored retirement savings plan would have.
Researchers estimate that over 400,000 Oregon workers could participate in a new state-sponsored retirement plan. If those new plan enrollees earn returns that are comparable to those received by current retirees, their combined income from these plans would exceed $2 billion dollars per year.
The report also found major disparities in access to retirement plans between workers: 63-68% of employees at firms with 500 employees or more are participating in retirement plans while only 11% of employees at firms with 11 or fewer employees participate in a plan.
PSU researchers predicted that higher income among retirees would lead to statewide economic benefits from higher consumption spending and decreased reliance on public resources.
“We found that many Oregonians who work for smaller firms don’t have access to retirement plans at work and aren’t saving as much as they need to be for retirement,” said Tom Potiowsky, director of the Northwest Economic Research Center. “Our research estimates that over 400,000 Oregonians could participate in a state-sponsored retirement plan if it were offered. We also found that participation in this kind of plan would be make a real difference for Oregon’s future retirees – providing them with thousands more in annual retirement income from retirement savings programs.”
Lack of sufficient retirement savings is rapidly becoming a major economic emergency that threatens to Oregon’s economy. According to the National Institute on Retirement Security, 45% of Americans have no savings for retirement, putting their economic security at risk. Having access to a retirement plan at work helps people save for retirement, but only 43% of firms in Oregon offer retirement plans to employees.
In order to promote retirement savings in Oregon, the state legislature is considering legislation that would create a state-sponsored payroll-deduction retirement savings plan that would be made available to workers who are not otherwise offered one by their employers.
A PDF version of Retirement Security in Oregon is available online: http://www.pdx.edu/nerc/sites/www.pdx.edu.nerc/files/Retirement%20Security%20Final%20Report.pdf
Economic impacts of a state-sponsored retirement plan
NERC researchers estimated that over 400,000 of the state’s workers could be expected to participate in a state-sponsored retirement savings plan. If those new plan enrollees earn returns that are comparable to those received by current retirees, their combined income from these plans would exceed $2 billion dollars per year.
Benefits to Oregonians would be widespread. For the bottom 25 percent of income-earners, four times as many people would be expected participate in savings programs. The top 25 percent of income-earners who start saving could receive an average of $29,785 in additional annual retirement income.
The study found clear disparities in opportunities for retirement savings between people of different income levels, sex, races and ethnicities, in Oregon. A state-sponsored retirement savings plan would eliminate disparities in access, and thereby reduce disparities in saving opportunities.
Small businesses may benefit the most from a state-sponsored retirement plan
NERC researchers found that retirement plan access and participation varies significantly based on the size of a business. Employees of larger firms are more likely to have access to plans, and more likely to participate in available plans. Many small businesses want to offer retirement plans to their employees, but don’t an HR department to manage and administer a plan.
The result is a major disparity between workers: 63-68% of employees at firms with 500 employees or more are participating in retirement plans while only 11% of employees at firms with 11 or fewer employees participate in a plan.
A state-sponsored plan would make it easy for small business owners to offer retirement plans to their employees – they would only need to add a line item to the monthly pay stub.
The Northwest Economic Research Center is based at Portland State University in the College of Urban and Public Affairs. The Center focuses on economic research that supports public-policy decision-making, and relates to issues important to Oregon and the Portland Metropolitan Area. NERC serves the public, nonprofit, and private sector community with high quality, unbiased, and credible economic analysis.
About the Report Authors
Dr. Tom Potiowsky is the Director of NERC, and also serves as the Chair of the Department of Economics at Portland State University. Dr. Jenny H. Liu is NERC’s Assistant Director and Assistant Professor in the Toulan School of Urban Studies and Planning. The report was researched and written by Jeff Renfro, NERC Senior Economist. Research support was provided by Marisol Cáceres and Peter Husleman, NERC Research Assistants. This report was completed with assistance and input from Daniel Morris, Our Oregon Research Director, and Jessica Eden, Research Assistant.