When it comes to a secure retirement many Kentuckians are in danger in part because they lack access to a retirement account at work that can help them save, new research by the Kentucky Center for Economic Policy shows.
Some facts from the report:
- 48 percent of Kentucky private sector workers ages 25 to 64 work for an employer that does not offer a retirement plan. That is approximately 566,780 Kentucky workers.
- Those with the most limited access to a workplace retirement plan are low-wage workers and workers at small businesses. 67 percent of Kentucky private sector workers with incomes under $25,000 have an employer that does not offer a retirement plan. 83 percent of employees at businesses with less than 10 people did not have access to a retirement plan at work and 67 percent at firms with between 10 and 49 employees.
- Too many Kentucky seniors are overly reliant on Social Security in retirement. With an average monthly benefit of $1,243 it's not enough to get by on alone -- yet Social Security is the only source of income for 35 percent of Kentuckians age 65 and over who receive the benefit and makes up at least half of total income for 69 percent of Kentuckians in this group.
"Retirement security is a real concern for hundreds of thousands of Kentuckians and without that security, they end up in poverty in their later years or relying on family members or state resources to make ends meet," Ashley Spalding, author of the research and a policy analyst at KCEP, said. "A solution would be for the state to sponsor a new retirement plan for those who don't have access to one at their work place."
More than 25 states have considered proposals to study or implement such retirement plans, and a number have already taken steps to set up such plans, including California and Connecticut. With nearly 50 percent of Kentucky's private sector workers currently without access to a retirement account at their job, it's important our state follow suit, Spalding said.
A proposal in Kentucky's 2015 General Assembly would have created a retirement plan for employees at businesses that do not already offer one to their employees. Employees would have the option of participating in the retirement plan by having a portion of their paycheck invested in a Roth Individual Retirement Account (IRA). Once the state set up the retirement plan, it would be financially self-sustaining, and the role of employers is largely limited to setting up the payroll deduction for participating employees.
"Given the rapid growth in Kentucky's aging population and a declining share of businesses offering retirement plans, the problems of retirement security will only get worse if not addressed. It's important lawmakers and the governor take this matter seriously," she said.
You can read the full report here.
The Kentucky Center for Economic Policy is a non-profit, non-partisan initiative that conducts research, analysis and education on important policy issues facing the Commonwealth. Launched in 2011, the Center is a project of the Mountain Association for Community Economic Development (MACED). For more information, please visit KCEP's website at www.kypolicy.org.