A new survey reveals most Illinois residents participating in the state’s Secure Choice retirement program give it positive reviews.
The study, released by Pew Charitable Trusts, provides an early look at the retirement plan launched in 2018 the state treasurer facilitates. Secure Choice automatically enrolls workers at Illinois businesses with at least 25 employees that do not currently offer a retirement program. Employers do not have to match the contributions.
“The program seems to work for participating employees,” said John Scott, director of The Pew Charitable Trusts’ retirement savings project. “Their experience appears to be satisfactory. And the program makes a significant number of the workers feel more financially secure.”
In the survey, 62% of respondents say they’re satisfied with the program compared with just 5% who were dissatisfied. Scott says the ease of participation has been a key.
“It’s not hard to do, but human behavior tells us that people are procrastinators. This works,” Scott said. “It gets people into the savings system and gets them to do something that they would like to do, but they just don’t do it. It overcomes that inertia that a lot of us have.”
Employees are automatically enrolled with a default 5% contribution rate. Employees can adjust their contribution level or may opt-out entirely at any time. Scott says communication is key to make sure there are no surprises.
“There is a fear that money is being taken out, especially for low to moderate income workers,” Scott said. “I think that states like Illinois are very sensitive to this, and they’ve tried to do a good job of marketing and outreach and communication. I think these results show that it is paying off.”
Secure Choice uses a Roth IRA account as an investment vehicle. That means contributions are made with after-tax dollars and withdrawals in retirement are tax-free. Investors also may withdrawal contributions penalty-free at any time
“It could be that workers are thinking both that money is available to me if I have a financial emergency before retirement, but it’s also there for the long-term,” Scott said. “One thing that I’m really interested in delving into the future is understanding this dynamic between short-term and long-term savings within these programs.”
Research by Pew indicates the burden on businesses to execute the program also appears to be lighter than initially expected.
“We thought people aren’t going to call a 1-800 number [for help],” Scott said. “They’re going to complain to their manager or to the business owner if they have a problem. So that’s why we asked that question and 80% said none or just a few [questions].”
More than 100,000 workers and 6,400 employers take part in the Secure Choice program across the state.
May 1, 2022 at 08:12AM