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Northern Regional Policy Workshop & Community Trainings Gaston Caperton Center, Fairmont State University - July 22, 2014 TED BOETTNER SEAN O’LEARY ANGELA.

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Presentation on theme: "Northern Regional Policy Workshop & Community Trainings Gaston Caperton Center, Fairmont State University - July 22, 2014 TED BOETTNER SEAN O’LEARY ANGELA."— Presentation transcript:

1 Northern Regional Policy Workshop & Community Trainings Gaston Caperton Center, Fairmont State University - July 22, 2014 TED BOETTNER SEAN O’LEARY ANGELA VANCE

2 OVERVIEW The Retirement Problem – Retirement Income Deficit - $6.6 trillion – 38.3 million working-age households (45%) have no retirement account assets – 4 out of 5 working households have saved less than 1 year of income for retirement – The median retirement savings balance for households nearing retirement is only $12,000 – Leading causes of poverty among elderly – Lack of retirement assets a potential drain on future budgets

3 Why aren’t workers saving for retirement? Most workers lack access to workplace retirement plans. Only 43% of WV’s private sector workforce is included in a workplace retirement plan Source: WVCBP analysis of American Community Survey data (3-year average). Universe: private sector workers in West Virginia

4 Low-wage workers are less likely to have workplace retirement plans Source: WVCBP analysis of American Community Survey data (3-year average). Universe: private sector workers in West Virginia

5 Small businesses are less likely to have workplace retirement plans Source: WVCBP analysis of American Community Survey data (3-year average). Universe: private sector workers in West Virginia

6 Young workers are less likely to have workplace retirement plans Source: WVCBP analysis of American Community Survey data (3-year average). Universe: private sector workers in West Virginia

7 West Virginia’s retirees rely heavily on social security Source: WVCBP analysis of American Community Survey data (3-year average). Universe: population aged 65+ in West Virginia Social Security makes up 44% of average senior income in WV, with an average monthly benefit of $1,300.

8 Roadblocks to retirement security Access to a workplace plan is second only to having a job as the most important factor in building retirement security. But with 350,000 workers in WV without a plan, the current system isn’t working.

9 Roadblocks to retirement security Small businesses are charged much higher administrative costs than large employers. Administrative costs for employers with fewer than 50 participants average 0.43% of plan assets, compared to 0.22% for larger employers. Small employers are also more likely to face higher investment fees.

10 Roadblocks to retirement security Small balance accounts are less profitable, and therefore less marketed and pursued by providers. Tax incentives designed to encourage saving favor workers with higher incomes. Consumers often face multiple, confusing options, making it difficult to make an informed decision

11 Expanding access to retirement savings through VERA A state sponsored system of Voluntary Retirement Accounts could make it easier for workers to save for retirement, and for businesses to offer benefits. Legislation introduced in 2014 would have established a VERA program in West Virginia.

12 Benefits of VERA WV, through the Treasurer’s Office, would provide a selection of low-cost investment options. The state would also serve as a resource in assisting in enrollment, contributions rules, and investment performance. The state’s role in VERA would be similar to its current role in the Smart 529 program.

13 Benefits of VERA By pooling participants, the state can use its leverage to offer affordable, low-cost plans. VERA can be run at no costs to the taxpayers, with start-up costs recouped from fees. The state would also not be responsible for investment gains or losses.

14 Conclusion Thousands of West Virginia’s workers aren’t saving for retirement. Most workers lack access to easy and affordable retirement plans. VERA offers a practical way to meet an unfulfilled need in the market, ensuring that all workers in West Virginia have access to affordable retirement savings options.


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