Yesterday the Washington State Department of Commerce launched the new Retirement Marketplace, allowing workers and employers to save for retirement with ease. With over 2 million employees in our state unable to save for their retirement through their employers, this marketplace can be a big help. Almost half of all working age families have no retirement savings, and the workers who do save put away on average far too little to sustain their retirement.
The typical family with retirement savings has $60,000 put away. That’s not as much as it seems. Over 25 years, $60,000 would only disburse $381 per month. If you estimate that you will live only 20 years after retiring, then your monthly stipend goes up to $424. That means too many Americans approaching retirement are on a knife-edge of financial uncertainty. Without Social Security, we would all be headed for the poor house.
That is why it makes sense to enable all workers to save, and to save more, for retirement. In the retirement exchange, workers and employers can choose from several plans. They enable you to put your retirement savings in an IRA or a 401(k). Administrative fees for these plans add up to less than two-tenths of a percent of the value of your account. There is no fee for enrollment, no rollover fee, no annual fees. You can save as little as $20 a month.
It is easy to enroll. I just did, and it took me 5 minutes.
The Washington Legislature has been chewing on how to enable workers to save for retirement for two decades. What started as a more universal approach developed by the Economic Opportunity Institute became the retirement exchange. The exchange won’t solve retirement insecurity for all workers. But it is an important start for workers who can put aside $5 a week for retirement. That’s almost all of us. But no one will tell you it is sufficient. But there is no greater financial tool than the power of compound interest.