Articles | August 16, 2024

State-Facilitated Retirement Savings Programs and Defined Contribution Plans

Most of today’s state-facilitated retirement savings programs require employers that don’t offer a qualified retirement plan to automatically enroll their employees in an individual retirement account (IRA). These auto-IRA programs — like employer-sponsored defined contribution (DC) plans —help employees build retirement security by encouraging participation and contributions, while facilitating asset diversification and the accumulation of savings.

State-Facilitated Retirement Savings Programs and Defined Contribution Plans

Both state-facilitated auto-IRA programs and DC plans can play important roles in helping to achieve the public policy objectives of enabling retirement security for working Americans and addressing disparities in retirement program coverage among ethnic groups and genders.

In an article recently published by Georgetown University’s Center for Retirement Initiatives (CRI), we examine state-facilitated retirement savings programs and DC plans. With permission from the CRI, you can access the article here.

What you’ll learn

The article:

  • Gives an overview of the U.S. retirement system, including growth in assets, coverage gaps and how auto-IRA programs offered by states and municipalities are helping to close the gaps and address coverage disparities
  • Summarizes in a chart the key features of state-facilitated retirement savings programs and both public sector and corporate participant-directed DC plans
  • Discusses trends in investment menu design, which encompasses the asset categories, number of investment options and investment strategies offered to participants, for state-facilitated retirement savings programs and DC plans
  • Compares the cost structures of state-facilitated retirement savings programs and DC plans
  • Provides relevant data with links to the sources

It’s important that participant-directed savings programs continue to adopt best practices, like offering a disciplined number of investment options that include high-quality target date funds that facilitate diversification across multiple asset classes within one vehicle as the default option, active glide-path management to maximize asset allocation effectiveness and passive management in underlying funds to enable cost-effectiveness.

Looking ahead, both DC plans and auto-IRA programs will increasingly have to consider offering lifetime income options that help provide meaningful retirement income.

Read the Article

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Thank you, Angela M. Antonelli

We are grateful to Research Professor Antonelli, Executive Director of the CRI at the McCourt School of Public Policy. Her input was significant and her contributions to this article were invaluable.

 

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The information and opinions herein provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This article and the data and analysis herein is intended for general education only and not as investment advice. It is not intended for use as a basis for investment decisions, nor should it be construed as advice designed to meet the needs of any particular investor. On all matters involving legal interpretations and regulatory issues, investors should consult legal counsel.

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