State treasurer: Lack of retirement savings could mean future crisis

A large portion of Americans have little to no retirement savings, and state officials are concerned about an impending “retirement crisis” in several decades when current workers reach retirement age.

“If we are not on the right side of this issue, we are going to have major strains on our state treasury and we are going to have major challenges within communities to meet the essential needs of retirees,” said Washington State Treasurer Mike Pellicciotti, who was in Port Angeles on Aug. 9 for a listening session on retirement security.

One of the panelists, Cathleen MacCaul, advocacy director at the AARP Washington, said many people have no retirement savings, or insufficient savings to cover their costs in retirement, even with Social Security.

“About half of American households have no savings at all in any retirement account,” MacCaul said. “You have half of the population that is not saving.”

Pellicciotti and a panel of experts are conducting a series of listening sessions across the state to determine the biggest barriers people encounter in saving for retirement and what the state might do to address the issue.

The meeting at Peninsula College on Aug. 9 was the third that Pellicciotti and his team had, and three more are planned in other parts of the state.

Following the discussions, Pellicciotti said the information gathered will be coalesced into a report and presented with recommendations to the state Legislature with possible policy options.

“It’s a multi-pronged challenge,” Pellicciotti said. “There’s a need for folks to be aware of the importance of retirement.”

“There is a need to make it easy for folks to be able to save for retirement, and it is important to recognize that, for a lot of folks, they’re just trying to get by every day and they’re not in a position to save for retirement,” he added.

Not making enough to be able to save for retirement was one of the issues raised during the feedback portions of the meetings.

About two dozen people attended the meetings, one of whom was Colleen McAleer, executive director of the Clallam County Economic Development Council.

“A living wage for our county is $55,000,” McAleer said. “But the median, meaning half are below, half are above, in the private sector is $36,700. So that means those people cannot even afford the basics.”

Several attendees also commented that financial literacy and educating young people about the importance of retirement savings should be made a part of school curriculums.

Others noted it can be difficult for small businesses — which make up a large part of Clallam County’s employers — to provide retirement benefits in addition to sufficient wages.

According to the Georgetown University Center for Retirement Initiatives, 19 states and two cities have programs where employers automatically enroll their employees in an individual retirement account or IRA, but Washington doesn’t have that policy statewide.

Washington state does have a retirement marketplace similar to the health care insurance marketplace established under the Affordable Care Act. That marketplace, run through the state Department of Commerce, helps connect small business owners or individuals with privately-run retirement accounts vetted and overseen by the state.

A bill to establish an auto-IRA program was introduced in the state Legislature this year, but it was unable to pass during the last session.

Pellicciotti said the listening sessions weren’t created with any specific policy goal in mind, but recommendations will eventually be made to the Legislature, hopefully within the next year.

“In a lot of ways, Washington is behind other states in trying to address the situation,” Pellicciotti said.

“Part of our presentation today was outlining the fact that dozens of other states have development mechanisms that allow people to set up retirement accounts for themselves,” he added.

“Washington does not have anything like that. I don’t know if that will be what is ultimately proposed and recommended to the Legislature, but what I can say is, compared to other states, Washington is behind the times in needing to address this issue.”