Small Business -- and State Governments -- May Rescue Your Retirement

NEW YORK (TheStreet) -- Half of Americans employed in the private sector work for small businesses. That means many workers simply don’t have access to retirement plans. Big firms lure talent with tax-advantaged savings plans like 401(k)s -- and even match workers' contributions, while neighborhood businesses often lack the means to provide such benefits.

But now, the small-business backbone of the economy is slowly rising to the occasion, often with the assistance of state governments.

Here's one such example from the state of Washington: The Small Business Retirement Marketplace, signed into law last week by Washington Governor Jay Inslee, will provide an estimated 1.5 million residents in the state with access to workplace-based retirement accounts.

“Employers do not have to do anything but deduct and forward the money -- the same way they handle taxes,” said Rep. Larry Springer, a co-sponsor of the state legislation, in a press statement. “We know people are very unlikely to save for retirement if they are not offered a plan through work. The Small Business Retirement Savings Marketplace will allow more workers access to a safe, easy and affordable way to retire in dignity.”

Washingtonians will be able to defer a portion of their pay automatically to an IRA or another savings plan, and the accounts will be portable, enabling workers to take their benefits with them as they move from job to job. Employers will also have the option to match as much as 3% of employees contributions.

Small businesses often don't have the information and resources available to find the right retirement savings plan for their employees, and this program will provide easy access to low cost, low fee options that are fully portable and provide the same investor protections available to private investors," said Marin Gibson, Securities Industry Financial Markets Association managing director, in a release.

The retirement marketplace has come into focus with a new national initiative of AARP called Work and Save. The nonprofit advocate for senior Americans estimates that 57 million U.S. workers have no access to a workplace retirement savings plan.

Social Security is a critical piece of the puzzle but never meant to be the sole source of retirement income for retirees,” said Doug Shadel, state director for AARP in Washington state, in a release. “Yet, 43% of today’s retirees rely on Social Security for 50% or more of their retirement income. The average benefit of $1,300 per month is simply not enough income to ensure people can live independently as they age.”

Illinois passed the first such program in the nation earlier this year. The program is set to be rolled out in 2017 -- potentially affecting 2.5 million private-sector employees in the state. The Secure Choice Program also facilitates the creation of savings plans for workers employed by small businesses. And as in Washington state, employers are not responsible for the program’s administration or investments.

Similar state-sponsored “automatic IRAs” are being developed or considered in Maryland, Connecticut, California, Massachusetts, Minnesota and Ohio. The Corporation for Enterprise Development estimated that more than 17 states are now considering sponsoring some form of small business retirement savings plan.

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