40 Million More Americans Could Save for Retirement by 2040 with National Universal Access to Retirement Savings Options

Lauren Mullins, Senior Director of Communications

Georgetown University Center for Retirement Initiatives research finds significant economic and fiscal benefits if employers are required to offer some or all employees a payroll deduction IRA or 401(k) plan

Washington, D.C., December 15, 2020 — National universal access policies could dramatically close the retirement savings access gap for millions of employees and provide larger annual incomes for retirees, according to new research from the Georgetown University Center for Retirement Initiatives (CRI) in collaboration with Econsult Solutions, Inc. (ESI) and supported by a grant from the Berggruen Institute’s Future of Capitalism program.

The CRI study examined several options for providing universal retirement savings access, including the effect of variables such as the type of account (payroll deduction Roth IRA or Roth 401(k)), exemptions for certain small employers, and voluntary versus mandatory employer contributions. These approaches would result in significant expansions of access and participation among the estimated 57.3 million private sector employees who are not offered any workplace retirement plan today. Modeling suggests that these approaches would increase the number of workers saving for retirement in the year 2040 by 28 to 40 million (depending on the chosen design features).

“Addressing the retirement savings crisis can be done in a simple, cost-effective way using private sector solutions paired with a national requirement for employers to provide options to their employees,” said Angela M. Antonelli, Executive Director of Georgetown’s CRI. “Millions of American workers would benefit from universal access to Auto-IRAs, 401(k)s, or other savings arrangements.”

The research demonstrates the importance of workers beginning to save early through easy access to savings options. A young worker with a modest income who simply follows default savings choices for 40 years could generate as much as $14,320 and, if Congress would enact a refundable Saver’s Tax credit, as much as $21,300, per year in additional income at retirement. Under these models, the total retirement savings in the United States would grow by between $1.4 trillion and $1.9 trillion in the year 2040.

“The range of options reviewed in the study gives policymakers a roadmap to create solutions that work for most employers and their employees,” said Ethan Conner-Ross, Senior Vice President of ESI. “The analysis shows that retirement outcomes can be improved for millions of Americans workers simply by expanding existing savings options to a larger number of workers.”

The benefits of increased retirement savings go beyond individual savers and their families. The study found that universal access to retirement savings would add $72 to $96 billion to US GDP growth in the year 2040. Addressing the retirement savings crisis at a national level will also reduce the fiscal burden on government agencies that already face increased financial challenges because of the pandemic. Under the baseline Auto-IRA scenario considered, federal and state budgets could expect to see an annual savings of $8.7 billion in 2040 by reducing assistance needs for retirees without sufficient retirement income.

“Pioneering efforts by individual states requiring employers to provide their employees with access to ways to save proves that offering simple, low-cost savings options will increase the number of workers who are saving and the size of their retirement nest eggs,” explained Antonelli, referring to policies implemented recently in states such as Oregon, California and Illinois. “Our research shows how expanding universal access to the national level can make a profound difference in individual lives and the broader economy in a relatively short period of time.”

The Center makes its research reports publicly available. This report can be found on the CRI website or by contacting Lauren Mullins at 202-550-5999 or Lauren.Mullins@georgetown.edu for additional information or media requests related to this report. This press release can also be found on the CRI website.

About the Georgetown University Center for Retirement Initiatives

The Center for Retirement Initiatives is a research center of the McCourt School of Public Policy at Georgetown University, one of the top-ranked public policy programs in the nation. Through its academic reputation and ability to engage with policymakers, business leaders and other stakeholders, the McCourt School attracts world-class scholars and students who have become leaders in the public, private and nonprofit sectors.

About Econsult Solutions, Inc.

Econsult Solutions, Inc. (ESI) is a Philadelphia-based consulting firm providing businesses and public policymakers with analytical services at the intersection of the public and private sector.  ESI’s government and public policy practice combines rigorous analytical capabilities with a depth of experience to help evaluate and design effective public policies and to benchmark and recommend sound governance practices.

About the Berggruen Institute

The Berggruen Institute works to reinvent institutions to meet this century’s upending transformations of how we live, work, interact, and govern. We bring together the brightest minds and insightful voices from across cultural, political, and disciplinary boundaries to explore the fundamental questions of our time. Our objective is enduring progress for people and societies across the world.

This study continues the Berggruen Institute’s efforts to develop bold policy strategies to reverse inequality and stagnation in a transforming economy. Future research collaborations with the Georgetown CRI will comparatively analyze the impacts of currently active retirement programs at the state level.