Nearly half of all working Oregonians have no access to an employer-sponsored retirement savings plan. And 26 percent of residents between ages forty-five and sixty-four have accumulated savings of less than $25,000, according to a survey by Oregon AARP.
Left unchecked, this savings shortfall will place a big burden on families—and the state’s economy—as this age group retires in the next two decades.
In an attempt to address this issue, the state legislature recently commissioned a Joint Interim Task Force on Oregon Retirement Savings to investigate and evaluate ways that residents can save more for retirement.
Seeking expert advice on best practices, the task force tapped two University of Oregon faculty members: associate professor of finance John Chalmers and professor of economics Bill Harbaugh.
On July 15, Chalmers and Harbaugh traveled to the Oregon State Capitol to share their research in a presentation titled “Promoting Retirement Savings: What Works and Why?”
Their recommendations? Provide employer-sponsored, target-date funds and implement pretax payroll deductions that are opt-out, rather than opt-in.
Outside companies would manage the funds and employees’ contributions would never mingle with the state’s pension funds or any other state money. The funds themselves would be low-fee and include a mix of assets that would become more conservative as the employee’s retirement date approaches. Employees could choose to stop participating by opting out at any time.
“If the state can help people of modest means to get started earlier in their careers to save for retirement, they can reap huge benefits,” said Chalmers. “The sooner you start saving and investing, the quicker you start compounding.”
For Chalmers, these types of employer-sponsored funds would give employees of all income levels access to the types of savings vehicles from which others already benefit.
“If you’re a wealthy individual, you have plenty of folks that are coming to give you financial advice on how to invest your money,” said Chalmers. “But if you’re a low-income or middle-income person and you are encouraged to start saving money early in your career, that’s going to make a huge difference in your retirement outcome.”
“It’s like good health,” said Chalmers. “With years of healthy savings habits, people can take care of themselves in retirement and put fewer demands on governmental services.”
In September the task force, headed by state treasurer Jim Wheeler, will present its findings to the Oregon state legislature.
Download Chalmers and Harbaugh’s presentation, watch a video of the task force's July 15 meeting, and find out more about the task force’s work in The Bulletin and The New York Times.